Political approval secure, pipeline starts planning

What could prove to be North American’s largest construction project is $500 million closer to launching. On Friday, TransCanada Corp.

What could prove to be North American’s largest construction project is $500 million closer to launching.

On Friday, TransCanada Corp. won final approval from Alaska legislators to build a $30-billion natural gas pipeline.

The state senate approved the 2,700-kilometre pipeline 14 to 5.

The state house of representatives approved the project in July.

Along with the exclusive state licence, TransCanada gets $500 million for the project’s prep work.

The pipeline would move more than 125 million cubic metres — or 50,000 Olympic-sized swimming pools — of natural gas per day from Alaska’s North Slope to Alberta.

From the Alberta Hub the gas could be shipped to the Lower 48.

It’s the largest construction project in North American history, according to Governor Sarah Palin’s office.

About 1,200 kilometres will be built in Canada, spanning two provinces, a territory and the traditional land of numerous First Nations.

A large chunk of the pipeline would pass through the Yukon.

“The Legislature’s decision represents a significant milestone in advancing this major natural gas pipeline project to connect stranded US natural gas reserves to Alaskan and Lower 48 consumers,” said TransCanada’s president and chief executive officer Hal Kvisle, in a statement.

“This ratification of our licence … will facilitate TransCanada’s continuing commercial negotiations with potential shippers.”

TransCanada has priced the project at $26.2 billion but independent estimates have suggested costs could rise to $30 billion.

Project development — environmental work, First Nation consultation and engineering — will continue until July 2010.

TransCanada hopes to have some commercial interests aligned by that deadline.

The licence approval does not mean a pipeline will be built.

If the company can’t secure shipping commitments from North Slope gas owners, the project will fail.

TransCanada doesn’t own gas in Alaska, but energy giants BP and ConcoPhillips do.

The two companies have begun work on a separate pipeline project outside the Alaskan government purview.

Unlike the TransCanada project, the competing Denali pipeline is not eligible for the $500-million subsidy.

TransCanada needs shipping commitments from Exxon Mobil Corp., which owns most of the gas in the North Slope, and its two pipeline rivals to move forward.

TransCanada, through its Foothills Pipe Lines Ltd. subsidiary, has worked on the project for 32 years.

And it will be another 10 years before gas starts flowing.

If TransCanada’s plan is followed without fault, the pipeline will be in service by September 2018.

Governor Palin pushed the pipeline project through the Alaska Gasline Inducement Act.

The legislation is supposed to protect the states interests and has imposed dozens of obligations on TransCanada.

Those include employment guarantees, reasonable transportation rates and spur lines to offer Alaskans cheap energy.

“Alaska’s potential to continue providing a safe, secure and domestic source of energy is great,” said Palin.

The pipeline could contribute to energy needs in the Lower 48.

TransCanada has built about 59,000 kilometres of natural gas pipeline in North America.

The Calgary-based company recently reported a 21 per cent increase in net income from 2007.

About $324 million in net income was made in the second quarter of 2008, up from $257 million last year.

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