McCain VP nominee Sarah Palin has approved a Canadian company's application to build a natural gas pipeline - along with the $500 million state subsidy to go with it. Is this noteworthy?
More over the fold.
First, the background. TransCanada Corporation is the parent company of TransCanada PipeLines Limited, one of Canada's largest companies. TransCanada's network of pipelines transport the majority of Western Canada's natural gas production to markets in Canada and the United States.
In 2006, Palin campaigned on ensuring the construction of a new natural gas pipeline. She succeeded in having the pipeline approved. As MSNBC explained:
On Aug. 1, Palin scored a major victory when the Alaska Legislature passed a bill that authorizes her administration to award a license to TransCanada Alaska to build a 1,715-mile natural gas pipeline from Prudhoe Bay on Alaska’s North Slope to a hub in Canada.
The pipeline would be the largest construction project in the history of North America. If completed as hoped within 10 years, it would ship 4.5 billion cubic feet of natural gas per day.
In one of her last acts before being tapped as a VP nominee, on August 27, Palin gave her approval to Transcanada:
Palin ... signed a bill authorizing the state to award Calgary-based TransCanada a license ... The license will be granted in 90 days.
The State's press release is here.
What's notable is the license comes with $500 million bucks:
In the latest development in the rivalry between TransCanada's proposed pipeline and a joint BP-ConocoPhillips project, Alaska Gov. Sarah Palin signed a bill that authorizes the state to award TransCanada a licence to start developing a natural gas pipeline.
Alaska's approval comes with up to $500 million in seed money, which in effect is a government subsidy.
What's more interesting to to this uninformed Canadian observer, is that BP and ConocoPhillips are advancing their own pipeline, called Denali, apparently without state support or subsidies.
The NY Times flagged this point back in early August:
Two of the three major producers on the North Slope, BP and ConocoPhillips, announced last month that they were moving forward with building a pipeline on their own, and that demand and the high price of natural gas meant they would not need subsidies from the state. They say they have committed to spending $600 million on early development of the pipeline.
To be fair, the rationale identified appears to be committments given by TransCanada that BP and ConocPhillips were unwilling to match:
The $500 million buys a commitment to run a pipeline that is open on reasonable terms to new companies that find new gas. TransCanada has agreed it will expand the line to accommodate newcomers. It has agreed to charge rates that average the cost of future expansions among all shippers, new and old. That arrangement stimulates new drilling and new gas production, instead of letting the first gas shippers lock up the entire basin and stifle the growth of the state's natural gas industry.
Full story from the Anchorage Daily news here.
As a Canuck, it would be interesting to hear the take on the subsidy from our northern neighbours.