newsminer.com

JUNEAU — Critics of TransCanada Corp.’s natural gas pipeline proposal are lodging two big complaints against the company.

First, they say TransCanada is looking for too-high a profit on the pipeline.

And they say the company wants to funnel Alaska’s gas exclusively into its own pipeline network in Canada.

Both have major money implications for the state as well as North Slope gas producers shipping their gas through TransCanada’s pipeline.

A high profit and a stranglehold on Alaska gas in Canada could translate into higher shipping costs for producers and less tax and royalty revenue to the state, the critics say.

Calgary-based TransCanada, one of North America’s biggest gas pipeline operators, is the only company Gov. Sarah Palin is considering for a state license and a $500 million subsidy for work toward a gas line, one of Alaska’s most elusive economic development dreams.

TransCanada is proposing construction of a 1,715-mile, $26 billion pipeline down the Alaska Highway to Alberta, where the Alaska gas could feed into existing pipelines.

The administration and its experts are poring over TransCanada’s bid for the license, which requires the Legislature’s approval.

Joe Balash, the governor’s oil and gas adviser, said questions about pipeline profits and what happens to Alaska’s gas once it leaves the state are among an array of issues the administration is still mulling.

“There are things in the TransCanada application that we’re looking at hard,” he said.

Part of the state’s evaluation process was inviting public comments on the TransCanada bid. More than 300 came in by mail and online.

Steve Porter, a former Conoco Phillips employee and deputy revenue commissioner now advising the Legislature, commented that TransCanada is proposing a high 14 percent return on its investment that easily could grow to 25 percent during inflationary times under terms of the company’s bid.

More profit for TransCanada means higher fees for shipping gas through the pipe, potentially cutting returns to gas producers and the state by billions of dollars over the life of the pipeline, Porter said.

TransCanada has said if the company wins the license, it will expect the state to support its profit request when it seeks permission to lay the pipeline from the Federal Energy Regulatory Commission and its Canadian counterpart, the National Energy Board.

The investment return is based on the size and risk of the project and other factors, including what regulators have allowed in the past, TransCanada spokeswoman Shela Shapiro said.

“The state should not bind itself in advance to what I believe to be a very generous rate of return, possibly the largest ever granted in Canada,” Porter wrote.

Others submitting comments to the state also objected to TransCanada’s proposed profit, including Exxon Mobil, the largest North Slope gas holder, and Anadarko Petroleum Corp., a Slope explorer and part owner of the Conoco-run Alpine oil field.

Exxon didn’t bid for the license under the Alaska Gasline Inducement Act, which state lawmakers passed last year. Conoco is offering its own pipeline project without seeking the state license and seed money.

Alliance Pipeline Ltd., owned partly by TransCanada rival Enbridge Inc., objects to TransCanada’s proposed exclusive hold on Alaska’s gas.

Alliance told the state its own 1,850-mile pipeline, which began service in 2000, can compete as the cheapest way to move Alaska gas from Alberta to the prime Midwest market at Chicago.

“TransCanada implies that it has a monopoly over the flow of Alaska natural gas,” Alliance wrote, but added the gas “should not be held captive to TransCanada’s pipeline network.”

TransCanada has confirmed to the state that Alaska gas shippers will be required to send their gas into the company’s Alberta pipeline system. And they’ll have to pay an access fee.

But TransCanada argues this will be the best deal for the shippers and the state. Once the gas is in the Alberta network, it says shippers can then connect to pipelines run by other firms.