Blog: Dermot Cole
Pipeline projects align in one respect —both predict FERC filing in October 2012
Published Tuesday, August 18, 2009
Both the TransCanada and Denali pipeline projects are now predicting that they will file for a certificate of public convenience and necessity with the federal government in October 2012.
Denali, the joint effort of BP and ConocoPhillips, recently published a revised schedule, pushing that filing date back from August 2011.
Two pipelines will not be built, but one might be built.
If one is to be built, then the companies will merge in some fashion.
Both entities say they are moving ahead with plans to have a so-called "open season" next year, the results of which will influence the future pace of progress.
It is likely that when the companies controlling the gas pledge to ship gas in a pipeline they will attach conditions that will include such matters as the long-term tax plans of the state, etc.
At that point, the state will have more negotiating to do.
Here is a description of the open season process, as offered by Pete Frost of Conoco in a 2004 presentation before a state legislative hearing.
In the United States, the FERC (Federal Energy Regulatory Commission) oversees this process, which must be open and transparent.
Although the FERC allows reasonable flexibility in the design of open seasons, significant precedent defines the open season process. Typically, open season processes are conducted as follows:
The pipeline will often engage in preliminary discussions with the marketplace and will sometimes use non-binding open seasons or solicitations of interest.
This process helps the pipeline to judge the extent of the market support and to insure that the pipeline is neither too large nor too small for the apparent demand for the transportation services. The pipeline then issues a public notice to announce its open season.
The open season must be of sufficient duration to allow all interested shippers an opportunity to respond. The open season documentation will also outline the rules under which the pipeline will evaluate its bids.
The pipeline’s open season package typically includes significant information about the project including receipt and delivery points, route, timing, services, pro-forma agreements, a proposed precedent agreement and estimated rates.
If there’s insufficient capacity to satisfy all the bids, the pipeline’s open season package will specify the type of tie-breaker that will be employed to allocate the available capacity.
Once capacity has been allocated through the open season process, the shippers will normally enter into binding precedent agreements with the pipeline, which demonstrate the need and support for the project.
The pipeline company uses these agreements to justify the project at the FERC and to underpin the financing of the construction of the pipeline.
Pipeline owners and financial lenders require these long-term contracts for firm capacity to ensure repayment of the capital cost of building the pipeline. without these commitments, gas pipeline projects, which by their nature involve a longer payout than typical oil pipeline projects, could not be financed.
Shippers need a contractual commitment from the pipeline to ensure capacity is available to support their own needs.
Once capacity is awarded through the open season and binding precedent agreements are executed, a shipper’s contractual right to the reserved capacity is protected.
A shipper’s economics are founded on the availability of this contracted capacity. In exchange for the pipeline’s commitment to reserve a specified quantity of capacity for a shipper, the shipper agrees to pay a monthly reservation charge that is due regardless of whether gas is actually shipped.
A pipeline must have sufficient binding precedent agreements or executed transportation contracts prior to filing its FERC application. If the pipeline overbuilds, it is at risk for all unsubscribed capacity and cannot recover those costs from the contracted shippers.
The Denali Pipeline is still alive? I don't think they did any work th is summer. After their propanda blitz in the summer of 2008, I have heard nothing. Didn't they claim that they were going to spend $200 million in studies during 2008/2009. Did they decide to use that money for executive bonuses instead?
Denali and TransCanada FERC filing in October 2012...hum-m-m
In-state natural gas needs will not wait for the time delay. So what is the schedule of the "bullet line" down the rail belt? And what provisions are going to be developed for the rural connection to the little fellow system?
Since 1969 the promise of north slope gas and Fairbanks is still waiting...
Might be time to quit using the carrot approach and get the whip out for the stubborn mule.
Henry Hub is $3. What makes anyone think they are in a hurry to develop Alaskan gas. Wait till next summer when they announce they have put off the open season for two more years because no one is interested in shipping. For all of you who will begin the gas for Alaska now, remember if the producers don't produce there is no gas for Alaska now.
There will be no in state gas line from up north until we solve the way it will impact Usibelli's coal industry. Bring it out into the open. If light does not shine bright on this issue we will not have the kind of intelligent developement our state needs. The whole idea of shipping our gas off into Canada is disgusting. We can do better. There may well be a viable spinoff industry using natural gas to gasify coal while producing electricity. Anything is better than the present non solution where we end up paying exorbitant energy prices in a state that has enough to fuel world markets.
It is long past time to identify the real reasons for why we do not already have a natural gas line running down from the arctic to Valdez or other tidewater. Usibelli has huge longterm clout supplies hundreds of jobs is a mainstay of the state owned railroad and has huge assets and investments in this state. A gasline with abundant gas would effectively take out a large hunk of what is no doubt his most profitmaking business- right here at home. The loss in Healy and elsewhere around the state would be near catastrophic and not just to the owner of the mine. This speaks loud and clear to legislators and governor's and they have to listen. Well just do better work it out so Usibelli still mines and sells coal and we have good clean burning gas at a reasonable cost. We don't have to just be gridlocked here with a future determined by one energy supplier balanced against another while the majority of us get hosed out of a larger job producing economy. We can do better than that grim but true vision.
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