As we reported Wednesday night, Exxon Mobil is in talks with TransCanada to join its project to build a long-awaited natural gas pipeline off the North Slope. This would be one of the largest construction projects ever, a 1,700-mile line running from Prudhoe Bay to major pipeline hubs in Alberta, Canada.
Alaska Gov. Sarah Palin told Fox News there would be big news about the pipeline next week, likely a reference to what we’ve been told would be the announcement sometime around Wednesday. But a formal announcement could come as early as today, so stay tuned.
| This lonely oil pipeline in Alaska may soon have company. (Al Grillo/AP)
1. In 2006 former Alaska Gov. Frank Murkowski signs a natural gas pipeline deal with Exxon Mobil, BP and ConocoPhillips in a closed-door process that many say was too generous.
2. Palin comes to office in part by riding a wave of discontent over such back-room dealings.
3. She cancels the old deal and through an open bidding process grants a state license and $500 million in incentives to pipeline giant TransCanada to do the project.
4. Conoco launches its own project, BP joins in, Exxon says it will assess both projects.
A TransCanada/Exxon deal (assuming it truly gels) doesn’t necessarily mean smooth sailing for that project from here on out, says Doug Reynolds, a professor of economics at the University of Alaska, Fairbanks.
“Nothing will be built until there is a contract — often called fiscal stability — between the state and the producers,” Reynolds told us in an e-mail. “This has to be true for Exxon because they held out the longest on the last contract and so are seemingly the most vehement about having such a contract.”
The source that confirmed the talks for us said much the same thing, that Exxon will want firm numbers on royalties, taxes etc. from the state before moving forward, so there’s still a lot of ground to cover.
A few other items Reynolds mentioned, which might belong in the realm of “conspiracy theory”
• The TransCanada deal “could just be a neat little delay tactic on the part of Exxon” to hold up construction until natural gas prices come back up (although it would be many, many years before gas would start flowing even if all the stars aligned perfectly today).
• It could also be a way to bolster Palin’s stature, make it look like there’s real pipeline competition, get Palin to commit to a presidential run and clear the way for a new Alaskan governor who doesn’t play such hardball with the major producers. Seems like a lot of trouble to go through for a very unsure outcome, however.
And if you need a little reminder of just why it’s so hard to build and operate a pipeline in harsh places like Alaska, the National Geographic Channel will feature the Trans-Alaskan Pipeline System in the “World’s Toughest Fixes” on Thursday (June 11). The engineering series that highlights “complicated and intense industrial repairs” follows the replacement of a 32-ton valve on the pipeline. It’s really a lot more intense than it sounds, so give it a shot.