At Platts Energy Podium, Federal Coordinator Pearce Says Escalating Price Tag is Biggest Hurdle to Alaska Natural Gas Pipeline

Washington (ots/PRNewswire) -

The escalating price tag for the proposed Alaska natural gas
pipeline is the biggest obstacle facing the massive project, the top
US official coordinating permitting said here on Monday.

Appearing at the latest Platts Energy Podium event in Washington,
Federal Coordinator of the Alaska Natural Gas Transportation Projects
Drue Pearce said competing project proposals to ship gas from
Alaska's North Slope to major US markets are navigating treacherous
political, financial and logistical terrain, but progress has been
made on all fronts. The best-case scenario for completion of a
project is around 2018, Pearce said, adding that "a more realistic
first-gas date, but still optimistic, is probably 2019."

But as steel prices continue rising, permitting and construction
delays will increase the price tag for one of the largest energy
infrastructure projects in US history. The greatest risks are cost
overruns and how that might impact the cost of shipping about 4
billion cubic feet per day (Bcf/day) of gas from Alaska to Chicago.

"Those delays will be very, very costly if they happen," said
Pearce, who has been federal coordinator since late 2006. Once a
project is permitted by state and federal agencies, a single-season
construction delay could add "hundreds of millions, if not billions
of dollars," she warned, adding that "once we get through licensing,
then the financial markets will have to make the decision" on whether
to go ahead with the project.

Asked to describe her level of certainty that the long-delayed
project will be built within the next 10 to 15 years, Pearce said she
was "very optimistic" it will happen. "I see full glasses, not empty
glasses. I do believe we're closer than we've been in 30 years, and I
believe it's time for the gas to come to market. The Lower-48 states
are going to need the gas delivered in a pipeline at a stable price,
a stable delivery, so I'm very optimistic that now is the time to get
it built."

The project is moving along on two tracks. North Slope oil and
gas producers BP and ConocoPhillips have jumped ahead of TransCanada
in the effort to secure a permit from the US Federal Energy
Regulatory Commission. FERC has agreed to begin the "pre-filing
process" for the producers' proposed Denali Pipeline, which means the
producers can begin some field work this summer. BP and
ConocoPhillips bypassed a formal process for getting a state
endorsement from Alaska, saying the conditions were too prescriptive
and did not address outstanding tax issues.

Denali would be sited along the Alaska Highway. Canadian
affiliates would then transport the gas from the Alaska border into
Alberta. BP and ConocoPhillips told FERC the pipeline would connect
either to existing Canada-to-US pipelines, or the sponsors would
build a pipeline southeast from Alberta to the US border and,
perhaps, across parts of North Dakota, Minnesota, Iowa and Illinois
to the Chicago area.

Denali is the producers' alternative to a proposal by TransCanada
that awaits approval from the Alaska Legislature. Alaska Governor
Sarah Palin's administration has supported the TransCanada project
because it met most of the requirements of the Alaska Gasline
Inducement Act, which establishes the conditions for developers to
obtain a state endorsement and a US$500 million financial incentive.

State officials have encouraged the companies to merge the two
projects into one, both to gain momentum as a single initiative and
because projected gas production would not fill two pipelines, Pearce
said. However, she said, the companies do not appear to be heeding
this advice.

Sponsored by Platts, a division of The McGraw-Hill Companies,
Platts Energy Podium provides an ongoing forum for prominent
newsmakers and the press to address important energy and
environmental issues. Members of the media may receive complementary
registration for Energy Podium events by contacting Nancy Covey at
+1-202-942-8719, Nancy_Covey@platts.com. A recording of the Drue
Pearce session is available via podcast at
http://platts.com/energypodium/index.xml/.

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