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View Diary: Palin and Treble Damages (48 comments)

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  •  Getting screwed (3+ / 0-)

    It's entirely possible that AGIA will utterly fail. However, without trying to attract other commercial parties to expose the oil companies for their shameful behavior -- withholding trillions of cubic feet of gas from US consumers, without the need for additional drilling, so as to extract 10s of billions of dollars in state concessions -- the state is even more exposed.

    The prior governor "negotiated" (read "gave away") enormous concessions simply because Exxon had him over a barrel. Without any leverage at all you have to just accept their demands.

    Palin may be reasonably criticised about some things. This legislation isn't one of them. And, at least, if there is to be criticism it needs to be on point and better researched. This is a COMPLICATED issue that requires enormous work. It can't be understood from a cold start in merely days, or even weeks.

    •  AlaskanAnt is correct (3+ / 0-)

      In this one, Palin took on Exxon Mobil and Conoco Phillips, who have been refusing to extract and ship the natural gas in Prudhoe Bay and other fields.  They want to build an oil company owned gas line, just the the current oil pipeline, where they jacked up the construction costs so that they could screw the State of Alaska with high tariffs to transport the State's 1/8 share of the oil (Alaska takes its royalties in kind, not in cash).  They want to screw the state with high tariffs for transporting the State's gas, too.

      And the politics of this was Palin, Alaska legislative Dems, and a few brave Republicans against Big Awl and their captive Alaska Republican Party establishment (the ones that wish Sara would go away).

      There are many things to fault Palin on, but this legislation is NOT one of them, and any effort to do so would backfire on Dems.

      "Everybody wants to go to Heaven but nobody wants to die" --- Albert King

      by HarpboyAK on Mon Sep 01, 2008 at 12:42:31 AM PDT

      [ Parent ]

    •  I think you are deeply imbedded in a grievance (0+ / 0-)

      conversation which may have its points, but none of what you have mentioned addresses the seed money and treble damages issue. And the reference to getting gas to US consumers is not resolved by anything you have cited, since the terminus is at the Alberta tar sands, not in the US, and I see in the newspaper reports and the paper posted on the Governor's website where there is any commitment to get the gas to the lower 48.

      And I would hope you understand just how peculiar it looks to the rest of us that only one party qualified under AGIA, when there were several bidders, and it was a company not one you have a grievance against. We have all seen in our many various states and jurisdictions legislation and regulations which appear on their face to be open to all, but whose terms are so prepared that a disliked bidder has no chance of success regardless of merits. Transcanada is also a foreign company, and a full consideration of the matter might also require a careful examination of who they are, who their Alaska friends are and similar matters beyond the scope of the post, which was the treble damages provision, a shocker for lawyers everywhere.

      Gov. Palin's letter of Jan 9, 2008 even leaves open the issue of adjustments in production taxes or royalties may be necessary, those production tax and royalty taxes changes in which  which will apparently trigger the treble damages. "Until the cost of pipeline capacity is better defined, we will not know whether any further change in production taxes or royalties may be necessary. The price of gas at destination markets minus the cost of capacity on an open access pipeline may be more than adequate to meet profit requirements  for producers shipping gas through the line." The letter also makes clear that the Governor and the process are determined principally to undo a prior process, referred to as SGDA, specifically.

      What you do need to understand and accept is that the rest of us are having Gov. Palin urged on us as a Vice Presidential candidate and her wonderful job in getting an otherwise new pipeline approved to increase oil and gas supplies to the US, and we have in view of what information is available to us, to find out not just the 'five word squib' version of her resume but  the best look we can get in the time allotted  at how she uses her authority as a governor to address a material issue.  Your Alaska papers, such as the Daily News, suggested that there were (only) two bills she had gotten through, this one and your newish ethics code after your immense political scandal. And the coverage and complaints and confusion about the treble damage provisions, without describing them in detail, was not insubstantial, so it was noticed as a problem there of which you were probably aware collectively. And anything where a Governor subjects her own state to treble damage penalties, when even she in her letter concedes that when more information might require the very kind of changes which would trigger them, is one which will draw as much attention as the available information makes possible.

      If you feel that more research would be better and that no run of a few days or a few weeks is adequate, you need to get busy on that and get it to the rest of us before the November elections. This election is too important to too many not in Alaska to have to form an opinion about a candidate based on the blurb garbage we are getting, and it is unreasonable for you to say that what we find when we look is not as complete as you want or does not agree with you and should be disregarded until something more satisfactory to you is provided. So, have at it. KOS is here for good research and open to its results.  

      •  Simply wrong to suggest this is about "grievance" (0+ / 0-)

        Let me speak again to the 3x damages provision of AGIA. Frankly, you failed to address any of my explanations of why AGIA's treble damages provision was necessary; you failed, as well, to recognize that you had properly characterized it. Your response is to point back to ADN press coverage, but I encourage you to engage in the substance of the legislation. (I'm sure, as a lefty, you recognize that the press go only about 1/2" deep on most issues). So let me try again.

        First: you are absolutely correct that there was much complaint from "AGIA haters" about the 3x damages provision. But the relevant question is this: was AGIA hated because of the 3x provision, or was the 3x provision pointed to by the haters as something that could be readily misunderstood?

        If you know anything about Alaska politics or economics you should recognize that it is the latter. Alaska needs to be understood as a company town. For most of teh post-pipeline era the oil companies have run the state. They did so through VECO. (The well-publicized corruption trials of both state legislators, as well as Uncle Ted, all turn on VECO).

        Now let me speak to the merits of the treble damages provision. AGIA needs to be understood as a commercial vehicle. The backstory, again, is that the oil producers have been refusing to move forward with a project, despite the fact that it is now highly profitable to do so, because they are using their leverage to extract LARGE concessions from the state. How to reduce their leverage over us? Answer: try to ensure that someone holds an open season, offering commercially reasonable tariffs, to flush out (in the public, both Alaskan and US) the project's highly profitable economcis. This then sets up both state (through litigation around the duty to develop, as well as possible reserves taxes) and federal pressure on the companies to move forward.

        So, how to get someone (a pipeline company) to step forward to both hold and open season and then stay the course to allow both state and national pressure to build? AGIA's answer to that was to offer inducements to share the risk of those project development costs -- the highest risk expenditures. Where AGIA gets REALLY unusual is that it also REQUIRES the licensee to continue to pursue regulatory permits -- a $600-$800 million-dollar exercise -- even in the absence of take-or-pay commitments from gas shippers. This is something that, frankly, simply isn't done in the commercial world. However, it was very much in the state's interest to keep the regulatory process afloat. There are two reasons.

        First, as I alluded to before, putting legal, fiscal, regulatory and political pressure on the companies to get the pipeline project going is likely going to take some time (several years). It doesn't make sense to simply stop at a "failed" open season, because pressure takes time to "ripen" and without that time the companies are back in the driver's seat (they control whether they nominate gas or not). Second, the more "real" the project looks the more that 3rd party producers will explore for natural gas. If a 3rd party nominates gas into a pipeline then from a legal producer the North Slope producers will be all but toast against a duty to develop claim. [Under their lease the Producers have a duty to develop hydrocarbons when it is reasonably profitable to do so. Fulfilling the objective standard of "reasonable profitability" is pretty straight forward if another company has made the commitment.] We've already seen evidence that AGIA is working in this regard: Anadarko this last winter drilled the first gas exploration wells ever on the North Slope.

        So keeping a pipeline company spending money for a significant number of years is in the state's interest.  Why the 3x provisions? Because no commercially sophisticated entity would spend the money trying to "force" the producers to the table if they knew that the Producers only had to say "ok, ok, we'll build our own pipeline but we only need X from the state", where X involves more modest tax and royalty concessions. The state is too likely to do a bait and switch. Most commercial deals/partnerships that involve significant outlays or risk have a breakup fee. The 3x damages provisions is exactly that. Although you suggest that the damages provision is "a shocker for lawyers everywhere", you provide no cites and the assertion is flatly contradicted by regular commercial practice.

        This is not a "problem" with the bill; it is integral and necessary to make AGIA work as a commercial entity. If you don't think so then I encourage you to try to answer the following: How exactly would you propose to reduce the Producers leverage and get them actually to move forward in the absence of risk sharing (and some sort of commercial assuarance as to faithfulness to the partnership)?

        You write that the Governor "acknowledges" that "more information" might come to light that necessitates exposing the state to 3x damages. I don't think you're right. I'm certainly not aware of her saying this. Do you have a source? What everyone acknowledges is POSSIBLE is that additional state inducements may be necessary. What AGIA does is ensure that those inducements cannot be provided to a competing project. That isn't a problem -- it just forecloses the option of a bait and switch. Tell me: why is it a problem for the Producers to nominate gas into a pipeilne that they happen not to own (the NORMAL practice in teh natural gas industry) ? If there is none then your "gotcha" -- 3x damages, but what if adjustments to the fiscal system are later proved necessary -- carries absolutely no water. And guess what? There's no requirement that the Producers receive concessions for a pipeline that they also control. And hey, even if there were, TransCanada has agreed to allow them to obtain an ownership stake in their AGIA-licensed project.

        Now, it's critical to understand that for the state's $500 million a number of very significant benefits are secured. Under the statute, the pipeline will be required to offer commercially favorable tariffs. This provision alone is worth roughly $8 billion (net present value) to the state. As well, the licensee must agree to a negotiate Project Labor Agreement -- something that labor interests in the state are thrilled about. The pipeline's access terms are improved beyond those that the Federal Energy Regulatory Commission has authority over. This will result in significantly more expansion (read, throughput) on the pipeline to carry more gas to lower-48 markets (it will also generate untold billions in additional state revenues). Transportation rates for those expansions, under AGIA, are likely to be favorable to explorers. Finally, AGIA requires forward and continued progress on the pipeline through the regulatory process. I'll return to this point in a moment.

        The $500 million, then, boasts severable favorable policy aspects. First, as a subsidy it is transparent: the state's total exposure it known and capped (unlike a reduction in tax or royalty rates which might provide enormous benefits in a high price environment that are wholly unwarranted). Second, there are a number of very tangible state benefits that are received in exchange for the inducement.

        In an earlier post you suggested that perhaps the $500 million was not prudent, because after all Conoco and BP are "purusing" their own project without the money. That pursuit is a DIRECT result of the competition from AGIA. Some history that you may not know.

        a) The Murkowski contract gauranteed NO foward progress at all, as the Producers maintained that the project was just too risky to agree to that.

        b) In the summer prior to the AGIA application deadline, Conoco floated a "proposal" in which it suggested it could start field work on the project if the state would only first agree to closed-door negotiations on fiscal terms. Getting started prior to securing improved fiscal terms was characterized by them as being "too risky".

        c) Just prior to the AGIA application deadline Conoco and bp announced that they'd be getting going with their competing project, today, even without up front fiscal concessions from the state. We in this state were treated to a multimillion dollar ad compaign, in print, radio and tv, about the Conoco/BP project during the Legislature's consideration of whether to award a license under AGIA. Once the license was awarded the ad's largely stopped. Hmmmmm..... funny coincidence.

        Now as to your concern that the gas will not flow to the lower-48: relax. No gaurantee is needed. If you knew anything about about the natural gas industry you'd know that Alberta currently exports many Tcf of gas to the US, and is expected to continue to do so (even given tar sands demand) for decades. The gas will hit lower-48 markets because Canadian gas demand is not nor will it be sufficient to use it. Study after study confirms this. (See US DOE, CERI, Wood Mackenzie, and CERA reports on this). Finally, no gaurantee is possible. No one can legally "force" where North Slope gas molecules eventually go. But again, the beauty is that we don't have to. If the pipeilne project goes, then reality is that they're on their way to help US consumers.

        As for your complaints about my complaints of inadequate research: you suggest that the national press gives you "garbage" (I agree) but then rely principally upon the ADN or the Fairbanks Newsminer?! Why do you think that these are such authoritative sources? Why do you believe that reporters up here are not regularly co-opted by the industry? Shoot, the co-opt connection up here is even more transparent and clear than with Viacom/Seagrams, etc. Look, my point was that this is a highly complex issue and the tone of you're assertions about "obivous" problems belies an expertise in the subject which you clearly lack.

        I'd be HAPPY to answer questions or concerns about AGIA. If you have some please ask.

        Look: I want Obama to win. But I do think it crucial for criticisms to be accurate and appropriately directed. Unfortunately your research work on AGIA is off the mark. It has the look and feel of someone who's trying to attack Palin, and is looking (researching) for ammunition where you can. I guess that's ok, but please try to leave the bias behind. In the long run it will make the movement stronger; it also distinguishes us from the Rove's of the world.

        •  As to what Palin said about more information (0+ / 0-)

          possibly requiring a change in her position, the quotation in the piece was from her letter of January 9, which is posted on her Gubernatorial website on this project from which I downloaded it to create the quotation you see in the post comment. I sort of thought that meant she said it.

          As to treble damages, and commercial practice, whle there are often negotiated breakage fees, trebling the damages without limit is not in my experience, thirty five years of law practice in NY (not in the oil business), a customary way of dealing with breakage fees. Actual damages, yes, treble, no. That rate is only used in certain sorts of statutes where the result is expressly intended to be punitive to a very high degree, assuming punitive damages remai legal at all in the US Supreme Court - odds not good on that. And this transaction provides that the state must pay that fee if whatever administration is doing whatever it did, decides differently than did Palin and those who support AGIA specifically. A subsequent administration holding different beliefs than yours does not make a change 'bait and switch.' Your problem it seems is that since you cannot otherwise bind future administrations whose makeup you do not control, you have chosen this penalty mechanism to make it as onerous  and politically expensive as possible for any future administration to do so. that is a judgement question.

          Unlike you, I am looking at this from the outside for the purposes I mentioned. You are plainly a strong partisan of the AGIA-TransCanada arrangement, and have internalized rationalizations and explanations for it which I have not internalized and which are specific to Alaska. My grandfather and uncles fished there, salmon, halibut and king crab and cod in their time, out of the Port of Seattle, and Poulsbo, but I am not an Alaska native and do not intend to be. But the problem is that one needs to accept your rationalizations and characterizations and ignore such matters as the Governor's own letter to make your argument work.

          And your argument about the $500 million does not to my mind explain why you are asking the taxpayers to take a half billion dollar up front risk before the first pipe goes down or is even financed, or the ability to finance tested. It reminds me a little of the Mat Milk dairy situation where the administration decided it wanted to keep a dairy processor open and put $900,000 into it of state funds, only to watch it fold  immediately anyway, and its assets be sold to influential local dairy types anyway. Part of what is evaluated in politicians is taking 'prudent' risks in committing vast quantities of state funds.

          I did not respond to your rationalization for the treble damages because it does not make rational sense. I do understand the point that you feel you need to get to an open season because then the supporters of this notional arrangement can attempt on behalf of the state, to forfeit licenses granted by the prior gubernatorial administration which you do not like, since the open season provides an opportunity to get gas out of the state from the North Shore, removing an obstacle to exploitation. I understand from other sources that it is likely both projects will have an open season in 2010 ( probably in the 2010 campaign season, it sounds like when an administration change is possible if Gov. Palin is not in Washington). I also understand that at the Ferc end there is already some pressure and will be more to produce a single pipeline possibly amalgamating the two plans. What I continue to find worthy of comment, however, is the plan's willingness and intention to bind all future administrtions to it by means of this self imposed penalty which will be paid by the taxpayers, not negotiated as part of the license but built into AGIA, and the astonishing gift of up to $500 million to a private, non-US company which will also have to be paid for by taxpayers.

          Finally, I did not criticize you for inadequate research. i said if you have better explanations or evidence to be considered on the issues I raised, since you claim you are more up to speed on this and I am a moron,  post it here so people can see those explanations and that evidence. You are as free as I am to post, and if you have the evidence, it would seem that you believe tht evidence would help Mrs. Palin or at the least, the AGIA project.

          •  *sigh* (0+ / 0-)

            Christy:

            I'm getting frustrated. Your interest is clearly in "winning an argument", rather than understanding the issues. You're being snarky, and not engaging in any of the substance of what I'm trying to explain. Instead you're characterizing me as a "partisan", as someone with a warped view of the issues. Isn't it JUST POSSIBLE that I know one hell of a lot more about AGIA as a commercial vehicle, and the shaols that it needs to steer past, than you? I'm happy to engage in a discussion that's devoted to trying to get to the bottom of the matter; I'm not interested in trading rhetorical barbs where we talk past each other.

            The letter that you cite to does indeed recognize that it is POSSIBLE that economic circumstances may require additional state assistance for the pipeline project. Let me re-state the quote from her January 9th letter:

            "Until the cost of pipeline capacity is better defined, we will not know whether any further change in production taxes or royalties may be necessary. The price of gas at destination markets minus the cost of capacity on an open access pipeline may be more than adequate to meet profit requirements  for producers shipping gas through the line."

            There is no suggestion there -- none -- that there may be need to provide a competing pipeline (outside of the AGIA process) targeted royalty, tax, or other financial incentives. Although additional incentives may be determined by the state to be appropriate, there's NO REASON why the Producers (as upstream entitites) cannot enjoy those incentives while they ship gas on an AGIA-licensed project. I hope that you see that this answers the criticism of the 3rd paragraph of your previous reply.

            Now, you are reasonably correct in your following characterization of of the treble damages provision:

            Your problem it seems is that since you cannot otherwise bind future administrations whose makeup you do not control, you have chosen this penalty mechanism to make it as onerous  and politically expensive as possible for any future administration to do so.

            But it's also true that, as a commercial matter, no third party pipeline entity would be willing to undertake the actions necessary to move the project forward. Why not? Because the easiest and most likely thing, by far, for any future governor would be to leave a third-party pipeline, and its investment to date, high and dry just as soon as teh Big 3 started coming around. Meanwhile, forward movement on the project by the AGIA licensee is indeed critical to try to de-leverage the state from the grip of the Producers. Without such de-leveraging the state finds itself in the position of the Producers being able to demand almost anything they want. As background, you need to understand that the previous governor, Murkowski, was so leveraged by the Big 3 that he was willing to provide contractual gaurantees of 45 years of frozen tax rates (production, income, and property). Talk about binding the hand of future legislatures!.

            You suggest that:

            A subsequent administration holding different beliefs than yours does not make a change 'bait and switch.'

            I think there's still a misunderstanding of what AGIA is about. The state held an RFP. The "proposals" being solicited were to hold an open season by a date certain, and to proceed to FERC certification (among other things). The state agreed to match expenditures, and in exchange got a long list of very valuable goodies from the pipeline developer (as I explained in an earlier post, and which you seem to discount altogether). The RFP, in essence, commits the state to a partnership with the AGIA licensee. I do think that a future administration breaking the partnership would almost certainly involve having used the licensee as a "stalking horse" (do you know the origin of that phrase? Is it "stocking horse"?) to get the Big 3 to move. How else do you characterize it?

            You express the following concern:

            And your argument about the $500 million does not to my mind explain why you are asking the taxpayers to take a half billion dollar up front risk before the first pipe goes down or is even financed, or the ability to finance tested.

            Here's some short factural background on how pipelines are financed and constructed, which I hope answers your issue.

            Typically, natural gas pipelines are financed on the basis of "firm transportation" contracts. Shippers agree to pay reservation fees for capacity for a long period of time (say 10-20 years). Thos contracts are the basis for a pipeline obtaining financing on a project finance basis. Until financing is obtained quite obviously no construction can begin.

            Shipping commitments are made in the context of an "open season" -- what is essentially an auction of capacity on a "not undue discrimination" basis. For this project between 10s and 100s of millions in preparatory work will be required. Given that the Producers have been recalcitrant in moving this project forward (they have leverage and want to use it against the state to obtain maximum concessions in the form of multi-decade contractual gaurantees as to tax rates, among other things), these expenditures by themselves are hugely risky for any third party to make.  Proceeding past the open season, in the event that the shipping commitments are not obtained, is as I explained earlier even more risky (for a pipeline developer) but also necessary to allow pressure on the Big 3 to sufficiently ripen.

            I must admit to being a bit shocked when you say the following:

            I did not respond to your rationalization for the treble damages because it does not make rational sense. I do understand the point that you feel you need to get to an open season

            You assert that I make no rational sense, but then admit that you do not understand the overall strategy. In an earlier post I tried to explain some of the sources of leverage that might be brought to bear. If you have interest in understanding them please let me know and I'll try to go over them again, in less short-hand. But do not tell me that I'm irrational because you do not understand. The rest of the paragraph goes on to suggest that because there is a competing project now the $500 million is a bad idea. You ignore the very good evidence that the only reason there is any work being done on a competing project is BECAUSE of the AGIA process.

            Finally, I wish to note that as a public policy matter it is FAR PREFERABLE to have AGIA's $500 million inducement, as well as the treble damages provision for providing targeted incentives to a competing project, "baked into" AGIA rather than negotiated. Why? Both in the legislative hearings and debate involved in passing AGIA, as well as in the painfully extensive hearings concerning whether the legislature should approve the award of the AGIA license, these issues were put to substantial public scrutiny. This is the essence of "good government". (A side note: the KEY support block on AGIA were democrats in the legislature; most republicans opposed granting a license to anyone other than the Big 3. We're not just talking about the Governor's judgment here, but also the judgment of every democratic House member and all but one of the democratic Senate members).

            Conversely, negotiated provisions in a bilateral contract only see the light of day when a complete package is presented on a "take it or leave it" basis. The political pressure to "take" a negotiated pipeline deal is (in this state) enormous. The oil companies know this, and therefore MUCH PREFER a negotiated process. They can get things that are much more distasteful included in a package deal -- especially if, as is usually the case, those "things" don't have a clear and transparent price tag.

            I never called you a moron.

            •  Show me the evidence (0+ / 0-)

              You claim that the gas is going to the Lower 48.  From what the research I have, in fact, the demand for energy for Athabascan Tar Sands at full throughput, will exceed both the capacity of the Makcenzie line and the Alaska line.  In addition, gas fields in lower Canada are in a declining phase.

              Thus the Tar Sands will be more than enough demand for to consume all of the gas in the TransCanada project.  Tar Sands alternative sources are difficult or impossible.  Any attempt to use coal (at least twice the GHG output) will hit right against any Canadian obligations to Kyoto.  Nuclear is possible, but difficult, expensive, and may face public revolt.

              So, tell me.  Your passage below does not have basis in fact.

              Now as to your concern that the gas will not flow to the lower-48: relax. No gaurantee is needed. If you knew anything about about the natural gas industry you'd know that Alberta currently exports many Tcf of gas to the US, and is expected to continue to do so (even given tar sands demand) for decades. The gas will hit lower-48 markets because Canadian gas demand is not nor will it be sufficient to use it. Study after study confirms this. (See US DOE, CERI, Wood Mackenzie, and CERA reports on this). Finally, no gaurantee is possible. No one can legally "force" where North Slope gas molecules eventually go. But again, the beauty is that we don't have to. If the pipeilne project goes, then reality is that they're on their way to help US consumers.

              "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

              by oregonj on Fri Sep 05, 2008 at 05:52:35 PM PDT

              [ Parent ]

              •  WAIT A MINUTE! (0+ / 0-)

                You ask for "proof", but provide none yourself. I cite to four different studies that support my position. What studies on tar sands demand do you have? Honestly.

                Look, tar sands are NASTY, messy, and horrible for GHG emissions. But let's look at what you're assuming. You're position that tar sands demand will simply suck up natural gas supplied by Alaska (as well as Mackenzie) rests on the assumption that, but for Alaska gas, there would be (on a one-for-one basis) less tar sands development. Implicitly, you're assuming then that tar sands projects are so marginal that they can only go forward if Alaskan gas lowers the price of gas in Alberta. But although Alaskan gas is expected to have a price effect, I've seen NO assessment that suggests that the effect would exceed 50 cents/MMBtu. Tar sands projects hinge on high oil prices (sustained above at least $60/bbl); they're just not that sensitive to gas feedstock costs. I think you need to try to tell a halfway coherent story (in terms of supply, demand, and prices) as to why you think that Alaskan gas will simply fuel tar sands development.

                I'm a bit puzzled, as well, by assertions that you make that seem internally inconsistent. You say:

                Tar Sands alternative sources are difficult or impossible.  Any attempt to use coal (at least twice the GHG output) will hit right against any Canadian obligations to Kyoto.  Nuclear is possible, but difficult, expensive, and may face public revolt.

                If you believe that Canadian obligations to Kyoto will effect tar sands development, then you can entirely relax about any Alaskan gas being used to "feed" tar sands development. After all, continued tar sands development is slaughtering Canada's ability to comply with Kyoto. The only solution for Canada, if they want to continue to develop and expand tar sands, is to bring on nuclear as a heat source. (And I'm not promoting this, by the way -- I'm just saying that tar sands put Canada between a rock and a hard place on Kyoto).

                •  Your rhetoric does not add up (0+ / 0-)

                  I cite to four different studies that support my position. What studies on tar sands demand do you have?

                  To be honest, I can't find direct citations to the gas balances in those sources.  I did find that they were industry funded, and US DOE in their price forecasting puts the the gas in the lower 48 market as an ASSUMPTION.

                  What studies on tar sands demand do you have?

                  My folks don't have the money for these kinds of studies.  But  our data is well-sourced and the logic of this for TransCanada is pretty straightforward.

                  If west Canada NG is declining, and Alaska supplies maybe 3.9 bcfd,  Tar takes anywhere from 2 to 4 bcfd at full throttle, you just try tell me that the economics of this from TransCanda's POV don't say that "we (and others)are spending tens of billions on extraction and UNCONVENTIONAL PETROLEUM delivery to the lower 48" without regard to the fact that they are looking to the Arctic for gas.

                  Implicitly, you're assuming then that tar sands projects are so marginal that they can only go forward if Alaskan gas lowers the price of gas in Alberta. But although Alaskan gas is expected to have a price effect, I've seen NO assessment that suggests that the effect would exceed 50 cents/MMBtu. Tar sands projects hinge on high oil prices (sustained above at least $60/bbl); they're just not that sensitive to gas feedstock costs.

                  And, of course, it's a marginal cost question.  Gas is about half the cost of producing tar sands petroleum, and this is where Kyoto comes in.  Coal is about double the GHG per BTU of gas.  If allowances are $40 per tonne, and given that the gas energy input is about half the cost of the tar sands product - then plus the GHG allowances for coal - will probably double the price of using coal as a feedstock. I would safely guess that there is significant amounts of tar sands that are economical ONLY with cheaper natural gas from increased Arctic supply AND lower compliance costs  - especially at the first stop from a dedicated source.

                  I am just waiting for all these folks in the US to realize when they pay their gas heating bills this winter that it has increased in part to pay for the dirtiest fuel on Earth.

                  "Anyone who believes exponential growth can go on forever in a finite world is either a madman or an economist."

                  by oregonj on Sat Sep 06, 2008 at 03:58:40 PM PDT

                  [ Parent ]

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