TransCanada says bill may violate license

JUNEAU -- The company behind a major natural gas pipeline project in Alaska said Monday a proposal to set up a deadline to prove the project is viable might violate the terms of the state's contract with the company.
TransCanada Corp., which is working with Exxon Mobil Corp. to advance a project, said in a written presentation to the House Finance Committee that the bill would "unilaterally" change the contract and undercut efforts to build a line.
TransCanada's Tony Palmer declined comment pending his testimony before the committee, which was expected later Monday.
In 2008, TransCanada was awarded an exclusive contract to advance a pipeline project under terms of the Alaska Gasline Inducement Act, a centerpiece of then-Gov. Sarah Palin's administration. The law was held out as a way for Alaska to move toward a long-hoped-for line, with the state promising to pay up to $500 million in costs to advance a project even though there were no guarantees a line would ever be built.
While TransCanada has not missed any official deadlines, it did miss a self-imposed target for securing agreements with gas shippers at the end of last year, and lawmakers are getting antsy. Since the act's passage, the U.S. has gone through a recession, gas prices have been low and companies have had to weigh the competitiveness of Alaska's gas against, say, North America shale.
House Speaker Mike Chenault said Alaskans need to know as soon as possible whether the project is a sound investment. He said it's important both in terms of knowing whether the state is putting good money after bad and ensuring the state doesn't miss out on other options if this one fails.
The bill that he and other Republican House members are supporting sets a July 15 deadline for TransCanada to show proof to Gov. Sean Parnell's administration that it has firm transportation shipments. A Chenault aide, however, suggested that be changed to precedent agreements, the agreements TransCanada is currently in the process of negotiating.
If TransCanada fails to show proof, the bill would presume the project uneconomic for purposes of triggering an abandonment clause in the law. The clause allows for the project to be abandoned if both parties agree it is not economical. If there's disagreement between the administration and TransCanada on the economic viability, the issue would go to arbitration.
The Legislature cannot trigger the clause. That would have to come either from the administration or TransCanada.
The bill puts the onus on the administration to refute any presumption the project has failed. Rep. Mike Hawker, R-Anchorage, and another of the bill's sponsors, said the idea is for there to be a dialogue between the administration and Legislature, which must approve any funding requests for the project.
Reimbursements so far have topped $36 million, with another $73 million in reimbursements expected by June 30, according to Chenault's office. The governor has requested $160 million for the upcoming fiscal year.
Democrats on the House Finance Committee questioned whether the state was breaching its contract by setting a new deadline. A legislative attorney who helped draft the bill said the bill was merely a fact-finding effort.
But Rep. Les Gara, D-Anchorage, said the bill seems to give the state greater authority to back out. He believes it will kill efforts to see a pipeline through.