Alaska officials say gas line on track for 2018

ANCHORAGE, Alaska, Nov 3 (Reuters) - As long as energy companies participate in 2010's open season for a massive, yet-to-be-built Alaska gas pipeline, TransCanada Corp TRP.TO will be on track in its plan to construct the project and start delivering to U.S. markets by 2018, Alaska officials said Tuesday.

Even if energy producers’ gas-shipping offers are contingent on fiscal concessions that do not exist, the open season will have been a success as long as TransCanada wins enough interest and confidence to continue work on the 1,700-mile Prudhoe Bay-to-Alberta mega-project, the officials said.

An open season that leads immediately into financing and project sanction is not a “litmus test” for TransCanada’s success, said Alaska Revenue Commissioner Pat Galvin.

“They’re looking for a level of commitment necessary to say, Is this project worth investigating further?’” Galvin said at a news conference.

For the state, any shipping offers, no matter what conditions are attached, “will produce us with a window into the types of things that need to be addressed to make this project successful,” he said.

TransCanada, which earlier this year joined in a partnership with Exxon Mobil Corp XOM.N, one of the three major North Slope oil producers, is the state's preferred pipeline sponsor and holder of a state license issued last year under the Alaska Gasline Inducement Act, or AGIA.

The act, pushed by former Gov. Sarah Palin, authorizes the state to provide up to $500 million in funding to TransCanada and forbids the state from entering into gas pipeline negotiations with any competing sponsors.

In return, it obligates TransCanada to hold an initial open season next summer, among other commitments.

By the time the 90-day open season starts next July, TransCanada should have a firm estimate of the project cost and construction details, said Mark Myers, the state’s AGIA coordinator. TransCanada had initially estimated the cost at $26 billion, but other estimates range as high as $40 billion.

It will be up to TransCanada and the oil companies with leases to the North Slope natural gas supplies to determine whether next year’s shipping commitments are meaningful, Myers said.

“The success or failure of this open season is between these commercial parties,” he said.

Galvin and Myers made their comments at a news conference in which they released a biannual progress report on the AGIA-licensed pipeline project. That report was mandated by the state legislature, where there is growing skepticism about the gas pipeline’s prospects and the state’s AGIA strategy.

Through fiscal 2009, which ended June 30, TransCanada had spent $17.5 million on the project, with $5 million of that expected to be reimbursed by the state under terms of AGIA, according to the progress report..

By the end of fiscal 2010, when the 90-day open season will be launched, TransCanada and new partner Exxon will have spent over $142 million on the project, according to the project report.

A prominent critic of the state’s gas pipeline strategy, state Rep. Jay Ramras, disputed state officials’ claims about TransCanada’s progress.

“They are acknowledging, one year before the general election, that the open season is going to be a failure, and then they’re trying to qualify it by lessening the degree of failure,” said Ramras, a Fairbanks Republican who has launched a 2010 campaign for lieutenant governor.

“They are absolutely, explicitly telling us that it’s going to fail. They are just trying to elevate the quality of the F.”

Ramras said any commitments of natural gas into the proposed pipeline will conditional on what North Slope producers have termed “fiscal certainty” a stable regime for natural gas production taxes.

“A successful open season is when gas gets nominated and we don’t have fiscal certainty as a Chinese wall between these commitments to ship gas,” he said.

Competing with the TransCanada project is a similar proposal called Denali that is being sponsored by ConocoPhillips COP.N and BP BP.L, the other two major North Slope oil producers. That project is underway outside of the AGIA process.

The Denali group is expected within days to release a similar progress report, Ramras said. (Editing by Christian Wiessner)