TransCanada gas pipeline bid gets boost in Alaska

By Yereth Rosen

ANCHORAGE, Alaska (Reuters) - TransCanada Corp's (TRP.TO) proposal to build a $26 billion natural gas pipeline from Alaska to Alberta got a big boost on Friday after Gov. Sarah Palin said it was the only bid out of five to meet Alaska's requirements.

"We're ecstatic to have a project sponsor that's willing to build a pipeline on terms that benefit Alaskans, because we've never had this before in all these years of talking about commercializing Alaska's North Slope gas," Palin said at a news conference.

Palin said the state rejected four other bids on the project because they failed to meet all state requirements. These bids included China's Sinopec (SNP.N) (0386.HK) and California's AEnergia LLC.

A 60-day public-review period will now ensue, followed by another round of review by the Palin administration. If the TransCanada proposal passes, it goes to the legislature for approval, officials said.

Alaska launched its competitive-bidding strategy after decades of frustration over failure to develop the North Slope's natural gas amid staggering costs and an uncertain U.S. market for the fuel.

A deal negotiated by Palin's predecessor, Frank Murkowski, and the major Alaska oil producers -- Exxon Mobil (XOM.N), BP (BP.L) and ConocoPhillips (COP.N) -- collapsed after being widely criticized as a giveaway to the oil giants.

The North Slope has about 35 trillion cubic feet of proven gas reserves, enough to supply the United States for a year-and-a-half at current consumption rates. It is believed to hold several times as much in undiscovered reserves.

TransCanada's proposal would connect Alaska gas with its Alberta system, where supplies can be shipped on to Eastern Canada, the U.S. Midwest and Northeast, as well as California.

Palin and state officials said they were impressed with TransCanada's commitment to an "aggressive" development schedule; a pledge to hold an open season to solicit shippers within 15 months of state approval; and a pledge to consider a shorter, all-Alaska liquefied natural gas option if problems emerge with building a line through western Canada.

The Canadian portion of the project would be built under Canada's Northern Pipeline Act, which the company believes gives it the exclusive right to construct such a pipeline, said TransCanada spokeswoman Cecily Dobson.

"We look forward to working with the state for a successful conclusion of the process," Dobson said. "We'll follow the state's process as we move forward through the 60-day review and the submission for legislative approval."

Up until 2005, Alaska gas producers like BP Plc (BP.L) and pipeline firm Enbridge Inc (ENB.TO) had pressed Ottawa to say whether there could be a competing bidder for the Canadian portion. Little has been made public on the matter since.

Palin said a separate proposal from ConocoPhillips, issued outside of the AGIA process, is still under review. But she said that plan, touted by the company in advertisements and on a Web site, fails to meet some key state requirements.

She said the administration would release comments "very soon" about the ConocoPhillips plan, which has "substantial pieces that are missing."

A major sticking point is ConocoPhillips' request that state taxes be fixed for decades. Marty Rutherford, deputy commissioner of natural resources, and state Revenue Commissioner Pat Galvin criticized CononcoPhillips' request for long-term fiscal guarantees.