Parnell terminates state's AGIA contract with TransCanada

A much-criticized 2010 agreement between the State of Alaska and TransCanada Corp. to pursue a large North Slope natural gas pipeline is now in the past.

Gov. Sean Parnell signed documents June 17 terminating the contract with TransCanada, negotiated under the state’s Alaska Gasline Inducement Act, or AGIA.

This sets the stage, Parnell said, for a larger joint-venture agreement with the pipeline company and North Slope producers BP, ConocoPhillips and ExxonMobil.

The new partnership is focused on a large gas pipeline from the North Slope and a large plant to export liquefied natural gas, or LNG, at Nikiski,

TransCanada and the state, as well as the producers, were originally focused on an all-land pipeline to Alberta but the development of abundant shale gas in the Lower 48 ended that project, for now.

TransCanada has accepted the termination as a step toward the larger LNG export agreement, state Natural Resources Commissioner Joe Balash said.

The next step is for the parties to sign the joint-venture agreement spelling out responsibilities and cost-sharing to ramp up the next phase of the process, which is expected to include preliminary engineering and design and getting a more specific estimate of costs.

Balash said discussions surrounding these issues have been going on for months and he saw no reason for the agreement and associated documents to not be signed. The state itself will be a signatory to the part of the agreement on the LNG plant through the Alaska Gasline Development Corp., a state corporation that would hold the state’s 25 percent share of the plant.

Both ExxonMobil Corp. and BP are ready to sign, spokeswomen for those companies said June 17. TransCanada spokesman Shawn Howard, by email to the Associated Press, said his company has resolved its issues with the joint-venture agreement.

Howard declined to say what those issues were, saying they were part of the discussions between parties that he could not discuss publicly.

ConocoPhillips spokeswoman Natalie Lowman said there were still “open issues” that needed to be resolved from the company’s perspective. Lowman did not specify the issues, saying negotiations are confidential.

She said by email to the Associated Press that the company continues to support moving the project forward and all parties were “working closely to bring these agreements to closure.”

State officials expect the Joint Venture Agreement to be signed before July 1, said Elizabeth Bluemink, spokeswoman for the state Department of Natural Resources.

The 2010 AGIA contract with TransCanada had become a thorn in the side for Alaskans because it obligated the state to pay` $500 million in subsidies to the pipeline company for its efforts to put together a pipeline project on its own. The contract provided for the state to pay 50 percent of TransCanada’s costs until an “open season” in 2010 and 90 percent of its costs after 2010.

The Lower 48 pipeline effort was unsuccessful and led eventually to the larger effort now underway focused on a LNG export project, but not before the state had paid TransCanada $300 million under the AGIA deal. Any future refunding obligation is voided, however.

The AGIA contract also limited the state’s ability to pursue alternative gas projects, mainly a smaller in-state gas pipeline that could be built if the larger project does not move forward. Those limits are now also lifted.

Signing of the new Joint Venture Agreement will launch a Pre-Front End Engineering or Design phase for the pipeline and LNG project, although parts of the pre-FEED are already underway, Balash has said previously.

The pre-FEED will generate updated cost estimates for the project, now estimated at between $45 billion and $65 billion. The new estimates are expected to be available in late 2015, the commissioner said.

The Associated Press contributed to this article.

11/21/2016 - 3:49pm