Exxon, TransCanada pact may involve little more than engineering

ANCHORAGE - TransCanada on June 11 announced that it has an
agreement with Exxon Mobil Corp. for the two to work together on a natural
gas pipeline from Alaska to the Lower 48. But that agreement may amount to little more than Exxon doing some of the engineering for TransCanada.
"We are pleased that TransCanada and ExxonMobil have reached
agreement on initial project terms to progress this exciting initiative," Hal Kvisle, TransCanada president and chief executive officer, said in a written news release about the partnering.
The news release contained no details, but the companies teleconferenced with reporters later in the day to discuss the agreement. In the teleconference, the two companies said Exxon will participate in all aspects of TransCanada's project: technical, commercial, regulatory and financial. TransCanada will retain the lead in its project and be majority owner.
Some Alaska state legislators were briefed by TransCanada earlier in the day,
and at least one emerged highly skeptical about the importance of the
development. "My take is what's going on here is a completely overblown media
circus," said Anchorage Rep. Mike Hawker, whose wife works for Conoco in its Cook Inlet operations.
Hawker said that the companies will announce the formation of an "integrated project team."
"The way it's been explained to me is that all this project team is, is they've hired Exxon Mobil Corp to do the front end development work on the gas treatment plant which is something TransCanada doesn't do. That's oil industry technology, that's not pipeline technology," he said.
He said TransCanada is basically hiring Exxon as a subcontractor. "Exxon will pass its expenses back to TransCanada, TransCanada will bill half of them back to the state of Alaska," he said.
That the state will reimburse Exxon for its gas pipeline costs is raising eyebrows. But that repayment can't be avoided under the gas line inducement law.
"Yeah, nobody likes Exxon, and how they treated the Exxon Valdez plaintiffs even recently bothers me terribly, and maybe this means we will give them a little bit more scrutiny," said Beth Kerttula, House minority leader.
Under the terms of the Alaska Gasline Inducement Act, the state has agreed to reimburse TransCanada for up to $500 million in costs.
Hawker said that he understands the idea is for the companies to do more together in the future, but at this point there are no commitments other the gas conditioning plant work.
Commenting to Matt Lauer on the “Today” show, Alaska Gov. Sarah Palin said Hawker supported the Alaska Gas Line Inducement Act. “He still supports it. It’s politics. Matt, coming up here on an election year, I think a lot of the folks are positioning themselves for future runs and things, so they have to say some things like that.”
"Exxon is the driver. They have the largest interest, the deepest pockets," said Fadel Gheit, a senior energy analyst with Oppenheimer & Co. "Exxon is the tie-breaker. If Exxon takes a side, this is the winning side." But, Gheit cautioned, Exxon isn't likely to make a firm commitment to one project over the other unless the company secures a favorable fiscal commitment from the state.