Pipeline? What Pipeline?
In spite of trying to run for VP as a “reformer” who secured a $40 billion pipeline, Alaska Governor Sarah Palin conducted a questionable bidding process for the much-bragged-about pipeline, one that might not ever be built, and is not a $40 billion project. The AP did an investigation that discovered that only a few companies could bid, and the winner, TransCanada, has murky ties to her administration.
Palin appointed Marty Rutherford to head the team to handle the process. But Rutherford, in 2003, was a lobbyist for Foothill Pipe Lines, Alaska, Inc. a subsidiary of TransCanada. Here are some other problems:
- Despite promises and legal guidance not to talk directly with potential bidders, Palin had meetings or phone calls with nearly every major candidate, including TransCanada.
- [Rutherford’s] former business partner at the lobbying firm was TransCanada’s lead private lobbyist on the pipeline deal, interacting with legislators in the weeks before the vote to grant TransCanada the contract. Plus, a former TransCanada executive served as an outside consultant to Palin’s pipeline team.
- Under a different set of rules four years earlier, TransCanada had offered to build the pipeline without a state subsidy; under Palin, the company could receive a maximum $500 million.
While Palin insists this is a $40 billion project, TransCanada puts the cost at $26 billion. And even not every member of Palin’s own party think the deal is kosher.
“Most definitely TransCanada got a sweetheart deal this time,” said Republican Sen. Bert Stedman, who voted against the TransCanada license. “Where else could you get a $500 million reimbursement when you don’t even have the financing to build the pipeline?”
And the fact is, even though Palin used this issue to glide into the governor’s office and is now heralding the pipeline as a major accomplishment of her administration, it may be years away, if it’s ever built at all. As of now, there is no $40 billion pipeline, and there many never be.
To obtain financing, TransCanada will need commitments from producers to use the pipeline. But the majors aren’t likely to agree to pay someone else tariffs for pipe they could lay themselves, and this they have steadfastly refused to do without long-term tax breaks from the state. Palin’s initiative was “bold but unworkable, a big splash with little payoff,” says University of Alaska energy economist Doug Reynolds. He predicts no movement on a pipeline until Palin agrees to negotiate with the producers.
What’s unfolding now is a game of high-stakes chicken. In response to Palin’s TransCanada plan, BP and ConocoPhillips started plans to build their own pipeline into Canada–and nobody thinks there will be two pipes. Palin’s critics say that the gas team’s inability to find a way to include the producers from the start could delay the project indefinitely.
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