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
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.
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