September 4, 2008 / 10:54 PM / in 9 years

Alaska gas project hailed by Palin still embryonic

ANCHORAGE, Alaska (Reuters) - A long-delayed natural gas pipeline championed by Gov. Sarah Palin that would carry supplies from Alaska to Canada and then to the lower 48 states exists in concept only and is years away from fruition.

<p>Alaska Governor and Republican vice presidential nominee Sarah Palin speaks to reporters at the Republican Governor's Association gathering at the Museum of Russian Art in Minneapolis, Minnesota, September 4, 2008. REUTERS/Robert Galbraith</p>

The vice presidential hopeful, in her speech Wednesday to the Republican National Convention, said she fought to bring about “the largest private-sector infrastructure project in North American history” to bolster America’s energy security.

“And when that deal was struck, we began a nearly $40 billion natural gas pipeline to help lead America to energy independence,” Palin said.

But plans for the pipeline that would ship gas from Alaska’s North Slope -- a project envisioned since the 1970s -- remain on the drawing board.

“No, it hasn’t been started, and that’s on the record,” said Paul Laird, executive director of the Alaska Support Industry Alliance, an oil field service trade group.

No question, Palin has been a strong pipeline advocate.

Last month, the state legislature endorsed her recommendation to award TransCanada Corp a license to build a 1,715-mile pipeline to Western Canada from Prudhoe Bay. In Alberta, the gas could be diverted to the United States on TransCanada’s existing lines.

But there is no commitment to actually build it. The Canadian firm must still convince the state’s major gas producers that its project is their best bet.

Alaska officials have worked for decades to encourage construction of a line to tap the North Slope’s 35 trillion cubic feet of gas reserves and move it to markets.

Up to now, high costs and poor economics have thwarted that ambition and kept the gas stranded in the region’s oil fields. Estimates for the opening of the line are now as far away as the end of the next decade.

Palin’s state legislation entitles TransCanada to up to $500 million in subsidies for planning work, and it bars the state from striking a different deal with any other party.

TransCanada has just embarked on field surveys -- as has a competing project sponsored by BP Plc and ConocoPhillips -- but neither one has secured construction or operating permits, customers or financing.

No construction can start on any pipeline until the Federal Energy Regulatory Commission grants a permit, said former Gov. Tony Knowles, a Democrat who served from 1994 to 2002 and then lost to Palin in 2006. He opposed granting TransCanada a state license.

“Some people think it was the right step. Other people didn‘t,” he said. “But there’s nobody who thinks that this has started construction of the pipeline. All it does is it identifies who the state is supporting to get the certificate from FERC.”

Palin’s speech was the first time a $40 billion price tag had been floated. TransCanada has pegged the cost at $26 billion and state consultants have estimated $31 billion.

However, Laird pointed out inflation has gripped energy projects everywhere.

“Given what has happened with construction costs, with materials cost -- particularly steel -- it’s not outlandish,” he said.

Editing by Jeffrey Jones and Christian Wiessner

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