Department of Natural Resources Commissioner, Tom Irwin, and Department of Revenue Commissioner Patrick Galvin released the Alaska Gas Inducement Act (AGIA) Findings and Determination of the natural gas pipeline project on Thursday. The project was proposed by TransCanada Alaska Company, LLC and Foothills Pipelines Ltd. (TC Alaska) to the State of Alaska.

After analyzing the proposal, Irwin concluded that it merits issuance of the AGIA license because it maximized the benefits to Alaskans.

"This plan puts Alaskans first," Governor Palin said during a press conference.  "Everything we asked for in AGIA to protect Alaska's interests is in the TC Alaska project.  In fact, because of the competitive process, TC Alaska's proposal is a better proposal than we'd even hoped for and everything in its proposal is binding and enforceable."

The TC Alaska application proposes a 48-inch diameter, mostly buried pipeline that would run 1.715 miles from Prudhoe Bay to Aberta Canada. The Alaskan section will make up approximately 750 miles of that total.

Currently the TarnsCanada Corporation operates 36,000 miles of natural gas pipeline in North America, all of which was constructed by the company. In a press release issued by Governor Sarah Palin's office, the goal of the pipeline is, "TC Alaska's project will provide positive economics to the state and federal governments, the major North Slope producers and to TC Alaska."

"We spent months reviewing the TC Alaska project and there are many reasons why this project stands above other proposals and deserves to receive the AGIA license," DNR Commissioner Tom Irwin said.  "Among the reasons: benchmark timelines ensuring the gasline project moves forward, expansion opportunities and lower tariffs which protect and ensure Alaskans' economic opportunities and long-term careers, and distance-sensitive rates which ensure more affordable gas for Alaskans.  But the one thing that makes this project stand out above anything else is that each and every commitment by TC Alaska is binding and enforceable.  Taken together, this project will ensure Alaska's future for decades to come."

Also included in the press release are TC Alaska's list of commitments, and listed below are some of those commitments:

·         Benchmarks. TC Alaska has committed to enforceable benchmarks.  For example, TC Alaska will hold an open season and file for regulatory permits by certain dates.  Alaska has never seen enforceable timelines in any previous gasline plan.

·         Reasonable transportation rates. TC Alaska has committed to providing transportation through its pipeline at reasonable transportation rates, or "tariff."  A low tariff not only increases the netback for Alaska, but it encourages long-term exploration and development by newer players on the North Slope.

·         Distance-sensitive rates for Alaskans. TC Alaska has committed to "distance-sensitive" rates for Alaska's gas.  TC Alaska's proposed distance-sensitive rates ensure that Alaskans will pay just the costs incurred to ship gas from the North Slope to one of the five off-take points within Alaska, unlike today where Alaskans pay the competitive price on the world markets.

·         Expansion capabilities. TC Alaska has promised to expand its pipeline system on reasonable terms.  Expansion is a key component, especially for smaller and newer gas producers on the North Slope to get our gas to market.  Making this line expandable to accommodate new gas discoveries means more exploration and development, and finally opens up the North Slope basin.

·         LNG Y-line offered. TC Alaska has offered to construct a "Y line" from Delta Junction to an LNG processing facility in Prince William Sound if shippers express sufficient demand for that project as the work on the overland project progresses.  Approving the TC Alaska project will enhance the likelihood of a successful "Y line" LNG project.

·         Bullet line to Southcentral. A smaller "bullet line" from the North Slope to Southcentral Alaska will not interfere with the TC Alaska project.  Rather, moving both projects forward simultaneously could produce unique synergies.  There are adequate supplies of natural gas to fill both pipelines.

·         Spur lines to Alaskans. Committing to five off-take points along the main line, the TC Alaska project also offers the potential for construction of spur lines that will make natural gas available as a source of energy to communities throughout the state.

"Competition spurred this incredible proposal," Governor Palin said.  "TC Alaska knew that it had to create an attractive plan which was good for Alaskans in order to win the bid.  They succeeded.  And it means that Alaska's gas will make it into our homes and America's homes sooner."

"The dollars generated by the TC Alaska project take your breath away," Revenue Commissioner Patrick Galvin said.  "Reading the expert reports that are part of the AGIA Findings and Determination leads to only one conclusion - the TC Alaska project will provide extraordinary profits for all project stakeholders, including the producers."

Galvin added, "Alaska's current fiscal system, including natural gas production taxes, are not an impediment to the profitability of this project.  The $500 million matching contribution to TC Alaska is a prudent investment for the state, with a potential return of billions and billions of dollars.  Rejecting the TC Alaska project in favor of the producers' project would provide the state with no certainty on forward movement, nor result in an effective open-access pipeline.  The state's interests are best protected by encouraging the producers to join the TC Alaska project."

The release goes on to conclude that the $500-million investment, "secures a gasline that maximizes the benefits to Alaskans.  The benefits more than outweigh the $500 million investment and cannot compare to the billions producers have asked for in fiscal certainty."

However the state and TC Alaska face some fierce competition. Just one day before the AGIA applications were due, ConcoPhillips publicly discussed its own plan to construct the Alaska Gas Pipeline (Denali Proposal). The project would be a joint venture between Conoco and BP, who would build a 2,000-mile underground pipeline that would run all the way to the lower 48, that is if an extension would reduce transportation costs.

The other challenge posed by Conoco, is the fact that they can begin construction now, and seek and demand fiscal terms later. According to the press release, "Based upon the previous gas pipeline terms negotiated by the Denali proponents, those fiscal terms could cost the State of Alaska more than $10 billion."

For more information on the application read the full press release here, or listen to the Governor's conference here.