Global Warming

<body topmargin=0 leftmargin=0 marginheight=0 marginwidth=0> <table cellpadding=0 cellspacing=0 border=0><tr> <td valign="top" colspan=2 height=90 BGCOLOR="#669966" TEXT="#080000" background="a6001573.jpg"> <div> <FONT SIZE="3" COLOR="#FFFFFF" FACE="Arial" ><B>GoogleGrease</B></FONT>     |     <A HREF="index.htm" TARGET="_top" TITLE="GoogleGrease">home</A>                                            <B>back to</B>  <A HREF="high_speed_rail.htm" TARGET="_top" TITLE="High Speed Rail">High Speed Rail</A></div> <DIV ALIGN="LEFT"></DIV> <div> <A HREF="high_speed_rail.htm" TARGET="_top" TITLE="High Speed Rail">High Speed Rail</A><FONT SIZE="2" COLOR="#FFFFFF" FACE="Symbol" >   ·   </FONT><A HREF="contact.htm" TARGET="_top" TITLE="Contact">Contact</A></div> <div> <I><B>Global Warming</B></I></div> <div> </div> </td> </tr><tr> <td valign="top" width=210 BGCOLOR="#FFFFFF" TEXT="#080000" background="a5fd2013.jpg"> <div> <A HREF="brief.htm" TARGET="_top" TITLE="Brief">Brief</A></div> <div> <A HREF="description.htm" TARGET="_top" TITLE="Description">Description</A></div> <div> <A HREF="chronology.htm" TARGET="_top" TITLE="Chronology">Chronology</A></div> <div> <A HREF="why.htm" TARGET="_top" TITLE="Why">Why</A></div> <div> <A HREF="how.htm" TARGET="_top" TITLE="How">How</A></div> <div> <A HREF="where.htm" TARGET="_top" TITLE="Where">Where</A></div> <div> <A HREF="news.htm" TARGET="_top" TITLE="News">News</A></div> <div> <A HREF="mission.htm" TARGET="_top" TITLE="Mission">Mission</A></div> <div> <A HREF="affiliates.htm" TARGET="_top" TITLE="Affiliates">Affiliates</A></div> <div> <B>Global Warming</B></div> <bR> </td> <td valign="top" height=390 width="100%" BGCOLOR="#FFFFFF" TEXT="#080000"> <div> Save the Polar Bear    Stop Coal Power   Stop Nuclear Power</div> <div> <A HREF="http://www.usatoday.com/" TARGET="_top" TITLE="http://www.usatoday.com/"><IMG SRC="ab240240.gif" border=0 width="64" height="36" ALT="usa today news logo" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></A></div> <DIV ALIGN="LEFT"></DIV> <div> Capitol power plant dims clean energy hopes</div> <div> <IMG SRC="ac6ea530.jpg" border=0 width="490" height="339" ALT="washington D.C. Power Plant" ALIGN="LEFT" HSPACE="6" VSPACE="0">WASHINGTON (AP) - As Congress tries to clean up energy sources and cut gases blamed for global warming, it is struggling to do so in its own backyard. </div> <div> The Capitol Power Plant, a 99-year-old facility that heats and cools the hallowed halls of Congress, still burns coal and accounts for one-third of the legislative branch's greenhouse gas emissions. For a decade, lawmakers have attempted to clean it up.</div> <bR> <div> In recent years, Congress has reduced its energy consumption. The steam and chilled-water power plant has become more efficient. It now burns more natural gas and only 35% coal, compared with 49% in 2007.</div> <div> But Congress is running out of options to make the plant fully green. Also, there are questions about whether it can afford to keep paying to use the extra natural gas, which burns cleaner than coal.</div> <bR> <div> The plant's story is one that is likely to play out across the United States as Congress looks to limit greenhouse gases and require more of the country's energy to come from wind, solar and other renewable sources.</div> <bR> <div> The issues hampering the cleanup - politics, cost and technological barriers - could trip up similar efforts elsewhere. The U.S. counts on coal-fired power plants for about half of its electricity; the plants are also the biggest source of heat-trapping gases.</div> <bR> <div> So if Congress cannot act locally, as the environmental slogan goes, how can it begin to think globally?</div> <bR> <div> In 2007, the facility released 118,851 tons of carbon dioxide, according to the Energy Department. That's a fraction of the amount released by the roughly 600 coal-fired power plants nationwide that produce electricity, and the emissions created at other plants from which Congress buys power.</div> <bR> <div> "We are holding it up as a symbol for how we can and must do better," said Mike Tidwell, director of the Chesapeake Climate Action Network. It is among 40 environmental organizations planning a protest Monday that is expected to draw about 2,500 people to the plant a few blocks south of the Capitol.</div> <bR> <div> Among them will be James Hansen, the NASA scientist who first testified in 1988 about the perils of global warming. He has called for halting construction of new coal-fired power plants without technology to capture and store carbon dioxide, the most prevalent greenhouse gas.</div> <bR> <div> "They need to start by getting the coal out of Congress," Hansen said.</div> <div> While carbon dioxide from the facility could be reduced 60% using carbon sequestration technology, the Energy Department in April 2008 ruled that out. The $112 million cost was too high. There is no place nearby to dispose of the gas and the extra coal burned to run the carbon-trapping equipment would increase other types of air pollution.</div> <bR> <div> Recognizing this dead end, just last week House Speaker Nancy Pelosi, D-Calif., and Senate Majority Leader Harry Reid, D-Nev., wrote the Architect of the Capitol with another recycled idea: convert the plant entirely to natural gas.</div> <bR> <div> While four times more expensive than coal, natural gas produces about half as much carbon dioxide.</div> <bR> <div> Referring to the facility as a shadow hanging over efforts to make Congress more environmentally friendly, the leaders said the conversion would demonstrate Congress' willingness to deal with global warming, energy independence and the use of finite fossil fuels.</div> <bR> <div> An effort in 2000 to rid the plant of coal and oil was blocked by two senators from coal-producing states. Sens. Robert Byrd, D-W.Va., and Mitch McConnell, R-Ky., argued at the time that the continued use of coal would save taxpayers money because it is cheaper than natural gas.</div> <bR> <div> Last week Byrd seemed more willing to compromise, saying he would support looking at the natural gas option.</div> <bR> <div> Converting the plant entirely to natural gas would require equipment upgrades at the facility that would cost between $6 million and $7 million, in addition to having to buy more natural gas. It would cost $139 per ton of carbon dioxide saved, or about $2 million a year just for the House's portion of heating and air conditioning.</div> <bR> <div> Pelosi and Reid say the investment far outweighs the costs. But in the midst of an economic crisis, it is not clear if that would be money well spent.</div> <bR> <div> "It doesn't make any difference what they do," said Bill Kovacs, vice president for the environment, technology & regulatory affairs at the U.S. Chamber of Commerce. "It makes a statement, but it is not going to change carbon dioxide concentrations at all anywhere in the world and coal will continue to be used somewhere else."</div> <bR> <div> Coal-fired power plants elsewhere will have difficulty meeting new mandates if passed by lawmakers.</div> <bR> <div> "The oldest and dirtiest ones will not compete well under that system," said Tidwell, who supports efforts to get the Capitol Power Plant off coal. "The people who own those power plants will have to make some choices."</div> <div> <I>Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.</I></div> <div> <B>LATEST RESEARCH: </B><FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://www.usatoday.com/weather/environment/2009-02-23-global-warming_N.htm" TARGET="_top" TITLE="http://www.usatoday.com/weather/environm">Threat posed by climate change increases</A></FONT> </div> <div> CLIMATE CHANGE: <FONT SIZE="2" COLOR="#0000FF" FACE="Arial" ><A HREF="http://blogs.usatoday.com/weather/global_warming/index.html" TARGET="_top" TITLE="http://blogs.usatoday.com/weather/global">More from the Weather Guys blog</A></FONT></div> <DIV ALIGN="LEFT"></DIV> <div> <B>------------------------------------------------                 --------------------------------------------------</B></div> <bR> <div> Clean Coal Agreement</div> <div> Updated:01/15/2009</div> <div> Matthew Simon, CBS 11 News</div> <div> KTVA</div> <bR> <div> After two controversial decades, the state has agreed to sell the Healy Clean Coal Plant to Fairbanks utility Golden Valley Electric Association, GVEA.</div> <bR> <div> The state, however, will finance the deal. That was the end result of a confidential Alaska Industrial Development and Export Authority, or AIDEA, board of directors meeting Thursday morning.</div> <bR> <div> AIDEA’s board publicly voted shortly after that meeting, finalizing the deal. AIDEA, the state's economic development agency, has been responsible for the state end of the Healy Project from the beginning.</div> <bR> <div> Early Thursday afternoon, Revenue Commissioner Pat Galvin, who chairs AIDEA's board, surprised many with the announcement. “…great relief and excitement,” Galvin said, as he announced the Healy Clean Coal plant term agreement.</div> <bR> <div> The 25-year terms approved by AIDEA, GVEA, and Homer Electric Association, HEA, officials sells the state owned plant to GVEA for $50 million.</div> <bR> <div> However, the state would finance the sale at a 5% interest rate, and give GVEA a $45 million credit line, at a 6% interest rate, for restart costs including permitting fees.</div> <bR> <div> “The state will loan the money to Golden Valley to undertake the restart, but Golden Valley will pay for it,” Galvin says. Additionally, HEA will buy half of the plant’s power starting in 2014.</div> <bR> <div> The plant has basically sat unused since it was completed in 1999.</div> <bR> <div> While Golden Valley originally agreed to buy power from the state for 30 years, the utility sued to get out of the deal.</div> <bR> <div> GVEA officials argued the plant did not meet long term operating costs, reliability and safety requirements. In 2005 then Gov. Frank Murkowski, R-AK, sued.</div> <bR> <div> “The problem we had is GVEA wanted it as a gift. And I said absolutely no way,” Murkowski told CBS 11 News.</div> <bR> <div> Now, though, Murkowski' says he is pleased with the deal. “I think it's time to bury the bygones and get her online,” Murkowski says. “Move ahead with the project and get her online as soon as possible so that the rate payers not only in Fairbanks, but in the Railbelt can generate savings.”</div> <bR> <div> GVEA’s Board President Bill Nordmark says economic times have changed enough now, where buying a clean coal plant makes sense, as an alternative to using expensive oil to generate electricity.</div> <bR> <div> “Oil right now is back down low. But I think we've had a wakening here that were ready for high priced oil,” Nordmark says.</div> <bR> <div> Some critics have charged the timing of all of this appears suspicious, with Gov. Palin's State of the State Address next week. Galvin says there is no political motivation, the deal simply worked out now, and needs to move forward. Nordmark says the plant should be online within 6 to 18 months. The litigation should be settled in two months.</div> <bR> <div> The plant cost $280-million to build. Thursday deal is only worth $50 million. Galvin says the state does not view this as a loss.</div> <bR> <div> The $280-million were construction costs paid for mostly by a federal grant, and lots of state money.</div> <div> There was also some contractor money.</div> <bR> <div> Galvin says today the state actually values the plant at $48 million.</div> <bR> <div> Since the federal money was a grant Galvin says the state will not have to be repay that money.</div> <bR> <div> <B>To contact the Newsroom, call 907-274-1111.</B></div> <DIV ALIGN="LEFT"></DIV> <div> <B>------------------------------------------------                 --------------------------------------------------</B></div> <div>  <object width="425" height="344"><param name="movie" value="http://www.youtube.com/v/pVIk_EsAjTo&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1"></param><param name="allowFullScreen" value="true"></param><embed src="http://www.youtube.com/v/pVIk_EsAjTo&color1=0xb1b1b1&color2=0xcfcfcf&feature=player_embedded&fs=1" type="application/x-shockwave-flash" allowfullscreen="true" width="425" height="344"></embed></object>  </div> <div> <IMG SRC="a749a8f0.jpg" border=0 width="410" height="399" ALIGN="BOTTOM" HSPACE="0" VSPACE="0"></div> <div>  <div><iframe height="339" width="425" src="http://www.msnbc.msn.com/id/22425001/vp/28679027#28679027" frameborder="0" scrolling="no"></iframe><style type="text/css">.msnbcLinks {font-size:11px; font-family:Arial, Helvetica, sans-serif; color: #999; margin-top: 5px; background: transparent; text-align: center; width: 425px;} .msnbcLinks a {text-decoration:none !important; border-bottom: 1px dotted #999 !important; font-weight:normal !important; height: 13px;} .msnbcLinks a:link, .msnbcLinks a:visited {color: #5799db !important;} .msnbcLinks a:hover, .msnbcLinks a:active {color:#CC0000 !important;} </style><p class="msnbcLinks">Visit msnbc.com for <a href="http://www.msnbc.msn.com">Breaking News</a>, <a href="http://www.msnbc.msn.com/id/3032507">World News</a>, and <a href="http://www.msnbc.msn.com/id/3032072">News about the Economy</a></p></div>  </div> <div> Riches to Rags - A Rude Awakening</div> <div> <B>01 14 2009</B></div> <div> by: Nick McDermott, CBS Channel 11 News  KTVA</div> <bR> <div> Alaska's economy is like a three legged stool--one leg is oil and gas, another leg is federal spending, and the final leg is everything else.</div> <bR> <div> Alaska is currently experiencing serious reductions in oil prices with a high of $147/bbl. to a recent low just above $30/bbl.</div> <bR> <div> Since our 2009 operating budget alone depends upon an annual oil price of $74/bbl., we can expect a sharp decline in revenues if oil prices stay low and the global recession stays with us for a while.</div> <div>  </div> <div> The Revenue Forecast just issued by the Department of Revenue predicts oil at $70+/bbl. in FY2010 and beyond. </div> <bR> <div> his is almost 50% above The International Energy Association's forecast of $51/bbl. If the IEA's forecast is more accurate Alaska is in for multiple years of budget shortfalls. </div> <bR> <div> Nationally, Alaska is seen as better off than most states because of our Permanent Fund and dividend distribution. Nevertheless, Alaskans like other Americans are now seeing the effect of the economic downturn on their 401ks and retirement plans. </div> <bR> <div> Nationwide, people are concerned about their jobs. Because the private sector is attempting to weather the financial storm by conserving cash, a significant portion of the jobs being lost in the Lower 48 are in the private sector, not government.</div> <bR> <div> The challenge for our state leaders is to take the steps necessary NOW to help the Alaskan private sector keep and create good, high paying jobs for Alaskans today and tomorrow. In Alaska, this means natural resource development. </div> <bR> <div> Our future can be sustainable if our government fights to maintain the natural resource development we now have and is aggressive in seeking additional development. </div> <bR> <div> The need today calls for our leadership to be more concerned about policy and governance and not politics. </div> <div> Wisely, the State set money aside this year to cover expenses. But in the last two years our base operating budget has doubled from $2.4 billion to $4.8 billion.</div> <bR> <div> How long can we live off our savings?</div> <bR> <div> Where will the money come for Alaska's growing needs? Will we be seeing multiple year budget shortfalls? </div> <bR> <div> When our Administration took office in late 2002, 990,000bbl/day went through TAPS. Currently, that is down to around 716,000bbls/day. Production from Prudhoe Bay and Kuparak is declining at 6% per year.</div> <bR> <div> How will we replace revenues from declining production, recognizing that it was only the high oil prices that allowed us to build our nest egg? </div> <bR> <div> The Permanent Fund has lost approximately $10 billion in the last year from a high of $40.4 billion to the present $30 billion. </div> <bR> <div> POTENTIAL LOSS OF NATURAL RESOURCE DEVELOPMENT OPPORTUNITIES. Alaska's oil producers are currently making budgetary decisions regarding exploration and future production in Alaska.</div> <bR> <div> With U.S. production down, and the price down approximately 2/3 from last year's high, there is fear that producers may spend less in Alaska on everything from exploration to maintenance.</div> <bR> <div> For example, Shell just announced that it was cancelling its 2009 drilling and seismic season. Other companies have announced cutbacks in their exploration and development programs. </div> <bR> <div> According to North Rim Bank's economic revenue for the third quarter, Alaska jobs in oil and gas number 11,500 with an average wage of $108,000. The average for all other jobs is only $43,500. It would really hurt Alaska to lose those high paying jobs. </div> <bR> <div> In the past Presidential debates, both candidates indicated their support for offshore oil and gas exploration, contrary to their previous position.</div> <bR> <div> The change in heart was due to high oil prices and a cry for relief from the public. Yet, when it came to ANWR, both candidates maintained their opposition. How inconsistent! </div> <bR> <div> We know it is less expensive to explore on shore than off shore particularly when the 800 mile TAPS pipeline is ready and running at only 1/3rd capacity. We have the technical know how to manage the ANWR footprint and to protect our caribou herds. </div> <bR> <div> ANWR stands as the best site in North America for a potential major discovery. It will reduce imports and send a signal to offset price hikes just as we have seen OPEC attempt to control production with supply cuts.</div> <div>  </div> <div> Alaskans and our Legislature must aggressively renew our efforts and take the ANWR issue to the American people. Polls now show that Americans support ANWR with safeguards, as do a majority of our Native Alaskan residents. </div> <bR> <div> In previous years, our Legislature funded Arctic Power and it was effective in educating the public. You may recall that ANWR was approved by Congress in 1995 only to be vetoed by President Clinton. It is in our interest to renew the ANWR effort with an appropriate level of State funds to allow Arctic Power to continue to lobby Congress and the public. </div> <bR> <div> Another important reason to reenergize Arctic Power is that we know that some members in the US House of Representatives are anxious to put ANWR in a permanent wilderness status. We must NOT allow that to happen. </div> <bR> <div> We cannot overlook the fact that Alaska's oil and gas industry operates in a high cost, high marginal tax region--yet must remain competitive world wide as well. Permitting alone can be a costly and frustrating process. </div> <bR> <div> Take the case of Shell Oil which has invested over $3.5 billion over the past two and a half years to acquire the necessary permits for exploration off shore in the harsh Beaufort and Chukchi Seas.</div> <bR> <div> The dispute involves environmental groups, the North Slope Borough and other agencies which contest the development plans.</div> <div>  </div> <div> The 9th Circuit Court has just rejected Shell's request for permits to proceed with drilling, because two of the three judges on the panel were not satisfied that Mineral Management Service had covered all the necessary environmental concerns in the EIS. </div> <bR> <div> Shell has spent over $500,000,000 on environmental and other studies in support of its permit applications. How long can a company stay with a project?</div> <bR> <div> Will we lose the opportunity to determine whether frontier areas like these can be developed economically?</div> <bR> <div> In this case the dispute was between Alaskan interests for the most part--now, all of Alaska loses. This point was made clear when Shell cancelled its 2009 seismic and drilling season. </div> <bR> <div> Additional complications include the listing of the polar bear on the Endangered Species list and its impact on OCS development.</div> <bR> <div> Because the habitat of the polar bear is on sea ice, and because it has been determined that the sea ice is being reduced by CO2 emissions, any development in Alaska (or in the entire US for that matter) that will emit CO2 presents a potential impact on the polar bear, and thus arguably violates the ESA. </div> <bR> <div> It appears we may have to look to federal rulemaking for relief. </div> <bR> <div> Another concern is the announcement by Flint Hills to shut down its refinery in Fairbanks by year's end. The impact on Fairbanks and the Alaska Railroad would be devastating.</div> <bR> <div> Are there other companies which would step in? Should the Alaska Railroad acquire the refinery or lease it to a competent operator? Clearly, the military, the Interior and the railroad cannot afford to lose the refinery and its business. </div> <bR> <div> I was pleased to see Alaskans reject Proposition 4 which would have adversely impacted all the large mines in the State and undermined our permitting system. Are we sure that the Proposition 4 group are not still out to cripple the industry? </div> <bR> <div> I understand they may be pursuing an initiative to prohibit mixing zones which are used by industry and communities for water discharge. Prohibiting these zones will not impact fish, but will hurt Alaskan industries and municipalities. </div> <bR> <div> The initiative process may have its place, but it is being abused in Alaska. The Federal Clean Water Act protects our fisheries from industrial pollution of all kinds. </div> <bR> <div> If people want to change the permitting system, it should be done through the legislative process which provides for give and take as bills move through committees to the floor for votes.</div> <bR> <div> Unlike the special interest groups which tried to block Pebble Mine with fear tactics, no mine will be permitted by either federal or state regulation which would jeopardize the rich Bristol Bay fishery or its watershed. </div> <bR> <div> To the South, the Kensington Mine under Coeur has been trying to permit its mine for the last 20 years. It has invested $230 million into the project, and now EPA has jeopardized the fragile negotiations between SEACC and Coeur. The matter has gone all the way to the Supreme Court where it now awaits a decision.</div> <bR> <div> It is my hope that the misguided idea by a few in the Legislature to increase taxes on mining will not be pursued. An increase in this economic climate is counter productive. </div> <bR> <div> THE GASLINE. The single most important long term issue in Alaska today is maximizing the return for our citizens on our huge gas reserves.</div> <bR> <div> If we can achieve it, the gasline's impact on the economy with new jobs, new revenues will be the economic engine for the State for the next 50 years and beyond.</div> <bR> <div> It will impact every segment of our society, jobs, education, health care, rural services and more. </div> <bR> <div> Cost estimates to build the line continue to rise in excess of $30 billion.</div> <bR> <div> As we contemplate gas flowing in the 2020 time frame, we are seeing competition for markets in the Lower 48 from the development of more LNG. Seven terminals are in operation today--only three were operational when I was Governor.</div> <bR> <div> Three more terminals are soon to be opened and three others are under construction. Twenty-five terminals are being examined and 13 have been approved by federal regulators, but are not yet under construction. </div> <bR> <div> In addition, technology has advanced in just the last two years to allow drilling to take place in tight shale and sand formations. This means gas in large quantities is available and being drilled in Eastern B.C. and the Rockies.</div> <bR> <div> One wonders what impact the competition for Lower 48 markets, the expanding LNG production, and the new technology to drill in tight shale and sand formations will have on Alaska's gasline project.</div> <bR> <div> The Producers always have the option of shipping the gas as liquid through TAPS if the risks and impediments to constructing the gasline appear too great. </div> <bR> <div> In a December 15, 2008 press release Petro Canada stated that shale gas from northeastern British Columbia may contain 37 TCF of gas. This is similar to Alaska's known reserves on the North Slope. The BC reserves could be developed sooner and with far less risk because it can be connected to Canadian and Lower 48 markets through an existing pipeline. </div> <bR> <div> So, we need to move forward with the gasline on a fast track - to have a gas based revenue stream to replace/supplement the current oil based revenue stream and to beat the competition to maintain the value of the gasline project to the nation.</div> <bR> <div> But, the question is will AGIA really get our gasline built in a timely manner?</div> <bR> <div> The last two years have been devoted to changing strategy from negotiating an upstream agreement with the Producers calculated to have them make the Firm Transportation (FT) commitments needed to finance the gasline, to passing legislation designed to constructing a gasline owned by a non-producer third party, and on raising production taxes on the producers.</div> <bR> <div> The Knowles and Murkowski administrations sought to negotiate with the Producers under the Stranded Gas Development Act (SGDA) because they held the gas and had the capability of financing the gasline through bankable FT commitments. </div> <bR> <div> While AGIA's objective of third party pipeline ownership may be the ideal, this strategy is flawed because a third party has neither the gas nor the economic strength to finance the gasline.</div> <bR> <div> This third party ownership strategy seeks to obtain a major piece of infrastructure through politics and the threat of litigation, instead of making it a commercial transaction among aligned parties.</div> <bR> <div> In this regard, the administration seems more concerned about preventing the Producers from monetizing the gas they hold under lease, than achieving the State's long term economic need for a gasline to replace our currently oil based revenue stream. </div> <bR> <div> Point Thomson is an example. We need a reasonable resolution on Point Thomson because without Point Thomson, there is no gasline, and without a gasline, there is no Point Thomson. </div> <bR> <div> The decision to deny Exxon's ice road project in to Point Thomson should be re-examined. To turn down Exxon's plan on the ground that we cannot trust Exxon is not a good enough reason.</div> <bR> <div> Point Thomson should not be used as an opportunity to punish the Producers for perceived past inadequacies. </div> <bR> <div> I realize that Exxon Mobil and its partners have been a long time coming to realize that they need to develop rather than to delay the project. That is why my Administration denied their original operating plan. But keep in mind that Point Thomson will provide 1 BCF/d of early gas to the gasline and lower the tariff by $1. </div> <bR> <div> The gas from Point Thomson would logically be the first gas put into the line to allow more recovery of oil from Prudhoe Bay before it becomes the only supplier of gas to the line. Now that Exxon has put forth an unequivocal plan of development, it is time for the State DNR to get over old quarrels and move the project along in the interest of the State. </div> <bR> <div> Outsourcing The Negotiations. The structure of AGIA is basically flawed for another reason. By dealing only with mid-stream issues (i.e. construction of the gasline) and leaving the licensee to negotiate upstream issues with the Producers, AGIA abdicates a fundamental Constitutional responsibility of the Legislature. I will be surprised if this issue is not litigated. </div> <bR> <div> The financing for the pipeline will be collateralized by 20 - 25 year Firm Transportation (FT) commitments from the shippers.</div> <bR> <div> Neither TransCanada nor the State has the credit necessary to provide the collateral or guarantee in the amount required to finance the gasline. TransCanada candidly advised me in a July 13, 2006 letter:</div> <bR> <div> TransCanada has consistently advised your Administration to be wary of independent pipeline proposals that would seek to develop a pipeline without the agreement and support of the ANS producers.</div> <bR> <div> You will also recall that TransCanada declined to join various consortia seeking to develop independent pipelines without ANS producer support. </div> <bR> <div> For TransCanada, this means that it must either negotiate FT commitments with the Producers which do have the capital or lobby our federal government to provide a guarantee as "the shipper of last resort."</div> <bR> <div> The Congressional Delegation has told us that the federal government is highly unlikely to act as bridge shipper to finance the project in what would appear to be favoring a Canadian company when we have so many U.S. companies seeking federal assistance. </div> <bR> <div> The fatal flaw with AGIA is that it not only allows, but requires TransCanada, as licensee, to conduct the negotiations with the Producers on the commercial terms of a contract to obtain the FT commitments. In other words, AGIA outsources to TransCanada the obligation the State Constitution places on the Legislative and Executive branches to maximize the returns on natural resources for the benefit of all the citizens of the State. </div> <bR> <div> There Is No Commercial Alignment Of The Parties. This would not be so unfavorable if TransCanada's interests were aligned with the State, but they are not. </div> <bR> <div> For openers, TransCanada needs more gas in its system, so it will protect its shareholders by getting gas into its Alberta system. If this means delaying the Alaska project while it first develops recently discovered shale gas from Eastern B. C., then so be it.</div> <bR> <div> If it means making any deal it can with the Producers to secure the FT commitments to allow the line to be financed and built and to get ANS gas into its system, so be it - even if it is not in the best interest of the State and does not maximize the benefits the State receives from the gas.</div> <bR> <div> There are three major risks for holders of gas associated with construction and operation of the pipeline: fiscal certainty; cost overruns; and price of gas.</div> <bR> <div> Because AGIA avoids upstream issues, it does not even purport to address fiscal certainty.</div> <bR> <div> TransCanada has rightly said that fiscal certainty is a Legislative issue. But how can it negotiate a commercial agreement with the producers with this issue "off the table?" </div> <bR> <div> The Producers insist upon fiscal certainty. What agreement will TransCanada reach with the Producers about fiscal certainty?</div> <bR> <div> Unlike the State, TransCanada is indifferent to the taxes the Producers pay on Alaska gas. Surely, TransCanada will agree to support any tax structure in Alaska the Producers want in order to get ANS gas into its system and to begin collecting tariffs.</div> <bR> <div> How much will a future Legislature be forced to concede five or six years from now when oil flows and revenues are down and TransCanada and the Producers "join forces" to lobby for the tax rates the Producers demand in order to put their gas in the line? </div> <bR> <div> Because, unlike Alaska and the Producers, TransCanada owns no gas, it will not be a shipper and will not face the risk of a higher tariff (and a consequential lower wellhead value of its gas) due to construction cost over runs.</div> <bR> <div> FERC will authorize a 12-14% return based on the amount of equity <B>TransCanada</B> has invested in construction of the gasline.</div> <bR> <div> Because a higher tariff will result in more money to its shareholders at the expense of the shippers, including the State of Alaska, TransCanada does not face the same commercial risk/reward incentives as the Producers and Alaska.</div> <bR> <div> Thus, a commercial agreement would be very difficult for TransCanada to negotiate with the Producers, because the parties' interests are so different. </div> <bR> <div> Again, because it will ship no gas, <B>TransCanada</B>, unlike the State and the Producers, will face no risk regarding the global price of gas.</div> <bR> <div> Since the FT commitments require the shipper to pay the tariff whether or not it is shipping gas and no matter whether the price is above or below break even, TransCanada will get paid the tariff, including its profit, no matter what the price of gas.</div> <bR> <div> This demonstrates how different the parties' interests are and why such commercial misalignment makes it very difficult for Trans Canada to negotiate a deal for the State. </div> <bR> <div> Even if notwithstanding this commercial misalignment (and the "withdrawn partners" problem), AGIA were to result in TransCanada and the Producers joining forces, the economic and commercial arrangements will be negotiated at State expense.</div> <bR> <div> The Producers have testified that they expect pipeline ownership to be commensurate with gas ownership. This would leave open about 20 percent of the ownership of the line. </div> <bR> <div> While TransCanada reportedly wants more than the 20 percent ownership, that portion represents the volume of State royalty and production tax gas.</div> <bR> <div> By controlling negotiations as AGIA commands TransCanada can simply claim that portion. </div> <bR> <div> <B>CONCLUSION.</B></div> <div> I suggest that the new Legislature provide extensive oversight of the two projects as they are now progressing. </div> <bR> <div> Determine whether the outsourcing and commercial non-alignment concerns described here will prevent TransCanada from negotiating a gasline contract.</div> <bR> <div> Determine whether the federal government has any appetite to supply the financing that the Producers would otherwise supply through FT commitments.</div> <bR> <div> Determine whether TransCanada is making progress in negotiating a commercial arrangement with the Producers and, if not, why not.</div> <bR> <div> Determine the likelihood of the Producers unconditionally committing their gas to the TransCanada gasline during the 2010 open season.</div> <bR> <div> Re-examine whether AGIA is really in the best interest of the State and will result in the construction of a gas pipeline in a timely manner.</div> <bR> <div> If you are not satisfied, consider having FERC perform the study of whether the federal government should build the line as required by the Alaska Natural Gas Pipeline Act of 2004.</div> <bR> </td> </tr></table></body>