"I got nothin'..."

TransCanada hopeful despite no customers - Anchorage Daily News

In what has to be the most depressing development in years (for those of us hoping for an Alaskan pipeline project, anyway), TCPL CEO Tony Palmer acknowledged that his company has to date been unable to reach any firm deals with potential shippers on its AGIA-supported pipeline project.

Though there was a hail-Mary-like attempt to spin this back on the state (Palmer suggested that if the state of Alaska established a clear tax structure and dropped its litigation against Exxon over the Point Thomson leases that prospects would improve), this is very likely the death-knell for this current iteration of an Alaska Highway gas pipeline.  Even to a rank outsider like me, it's clear the political will isn't there to move this forward, and it's really hard to see circumstances come together to do so in the foreseeable future.

Palmer made this rather apocalyptic admission before the Alaska State Senate Resources Committee in Anchorage this morning.  He was also extremely evasive with legislators who asked for clarification on just how close any pending deals might be.  Palmer claimed that such information would fall under the category of trade secrets and refused to disclose further, much to the frustration of the committee.

I can sympathize with the lawmakers this time.  Given what the state has already committed to this project under the AGIA program (spearheaded by none other than Sarah Palin during her abbreviated term as Alaska's governor), I can understand their desire to know more than what TCPL is telling them.  By putting up the cash that they did, the state became a business partner.

Cheap shale gas may not be as abundant as its promoters claim (and I honestly don't believe that it is), but clearly the market for natural gas is now being seen as staying depressed for the long term.  The conspiracy theorist in me wants to believe that shale has been deliberately overplayed in an attempt to scare Alaska into accepting unfavorable terms, but even if that were true we'd never know.

I can think of one scenario that might save this project, and that's if President Obama were to decide that such a megaproject would be a worthwhile economic stimulus during the current downturn.  It's not impossible, but I wouldn't hold my breath on that one, especially with the optics.  If the US federal government was seen investing in subsidizing such a major energy project (particularly one that mostly runs through Canada), many voters would throw a fit.

Is there an upside?  Maybe, on a couple of fronts... The efforts to build in-state lines in Alaska will likely now proceed full-bore.  It's not even out of the question that TCPL might "pre-build" an in-state leg that would anticipate further construction south later on (Foothills Pipelines, TC's predecessor on the project constructed a huge "pre-build" leg for this project in southwestern Alberta back in the 70s and 80s).

It's hard to say what the impact might be on the Mackenzie Valley line; on one hand, the prospect of a delay on the Alaska side might just make the Mackenzie project more viable (since Delta gas wouldn't have to compete with Alaska gas for more than just a few years), but on the other hand, it strengthens the Canadian federal government decision not to directly support the project; the feds can easily point to the Alaska project and say "See?  Even with tens of billions in government loan guarantees, that one STILL couldn't get off the ground..."

The optimist in me sees a chance for Canada to capitalize on an opportunity to steal a march on the Americans and put an infrastructure in place for exploration in the Beaufort.  Whether we choose to--or can even afford to--remains in question.

WTF?

Shell wants out of Mackenzie pipeline project - North - CBC News

An odd development, to be sure. And my first response is... huh? Shell has been in the Mackenzie Delta for decades, and has invested billions of dollars in bringing product to market from there.

Shell's press release says that following a regular global portfolio review, they've decided to put their resources "elsewhere".

I'll admit to some pessimism in light of this announcement; it's the big guys with the large economies of scale (and large pieces of the integrated market) that stand to make the most money off this mega-project. It's hard to see this as anything less than a total lack of faith in the project as it's currently structured. I REALLY hope there's someone out there who wants this.

And I also really want to hear some reason to be optimistic over this.

Mackenzie pipeline decision coming soon: official - North - CBC News

Wow

Mackenzie pipeline decision coming soon: official - North - CBC News

I know there's an awful lot of skepticism, but I still think the fix is in. It's gonna happen.

Now, the "proponent" that suggested this could happen so soon is Bob Reid, the head of the Aboriginal Pipeline Group, and that particular "proponent" is really the least likely to actually make anything happen.

Former Prime Minister Joe Clark does make some good points, though, about all the stars lining up.

Better Living Through (Petro-) Chemistry

Another bitumen bonanza - Oilweek

A thought-provoking piece that serves as a strong reminder that gas isn't the only issue here; liquids are a big part of the equation, too.

Interesting point #1:

"I question the long-term sustainability of the gas supply," [chemicals task force industry representative Val Mirosh] says. "There´s no question the [gas] resource is massive, but pockets of shale gas are sporadic. On the other hand, we don´t have to worry about the long-term supplies of natural gas [and off-gases] in Alberta."

So pockets of shale gas are seen as "sporadic", huh?

Interesting point #2:

Gas from the Mackenzie area of Canada´s North would add another 15,000-20,000 barrels a day of ethane after the first leg is built, and much more in the future.

Both projects are planned for several years from now, but Mirosh says an industrial strategy focused on the petrochemicals sector must look at long-term supplies as well.

So, there are long-term interests in Arctic gas aside from the Oil Sands and the consumer gas market.

Hmmmm...

And Then There Was One...

BP-Conoco ends bid to build Alaska gas line

She's dead. Frankly, I'm surprised it took this long.

The Denali joint venture between BP and Conoco seemed like a longshot to begin with, and more of a protest against the AGIA process than anything else. An expensive protest at that, considering the $165 million spent on it. There is some small chance that the Denali venture has some assets that could be of use to a successful proponent.

That leaves the TCPL (oops, "TC-Alaska") project as the only one running now. And given the skepticism of many, it's hard to tell just how healthy that one is, too. The upside for TC is that they are now the ONLY one with an actual project.

As skeptical as many are, I still think there's an outside shot here. Shale gas is abundant, sure, but I continue to doubt it's quite as abundant as promoters would like us to think. The market WILL tighten.

The End of the Beginning

Mackenzie pipeline OK'd by cabinet, energy board - Business - CBC News

The Mackenzie Valley Natural Gas Pipeline project has passed its most significant regulatory hurdle: it has been approved by Canada's energy regulator and federal cabinet.

While local permitting would still have to be granted for actual construction, the project itself has been given it's most important regulatory green light. This comes after an extended review period; the Joint Review Panel examining the project took years longer than originally scheduled before it issued its final recommendations last year.

According to this CBC item, the project currently carries a projected price tag of CDN$16.2 billion, up considerably from the $5 billion estimates when the project was reactivated about a decade ago. This difficult hurdle prompted proponent Imperial Oil to request an extended timeline for committing to build; the proponents have until the end of 2013 to decide if they will proceed with the project.

As of right now, I suspect there's some quiet but frenzied lobbying going on. The producers want to establish a "fiscal framework" for the project with the assistance of the Canadian federal government. Specifically, given the US$20 billion+ in loan guarantees that have been offered to anyone who agrees to build an Alaska Highway pipeline, the proponents of the Canadian project are looking for something similar. Given that Canada has a minority government, and that an election is fairly likely this year, I doubt we'll see much in the way of open discussions on the matter for a while.

Even so, this has been a long time coming, and is cause for enthusiasm, if not outright celebration.

Building Concerns over Shale Exploration

Diesel Use in Gas Drilling Cited as Violation of Safe-Water Law - NYTimes.com

As much as northern pipline critics want to point to vast stores of shale gas in North America, it's clear that this practice still has a few hurdles to pass.

In a nutshell, US lawmakers are becoming increasingly concerned with the use of a variety of chemicals used in the "fracking" process that frees gas from otherwise unreachable formations. In many cases, this is of little consequence, but since these chemicals include diesel fuel, toluene, benzine, and other toxins, concern is building that groundwater may be affected.

Congress has already given the EPA a mandate to regulate this kind of drilling, and that will likely happen sooner rather than later.