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Open Season

The Alaska Pipeline Project announced on January 29, 2010, that it filed its Open Season Plan with the U.S. Federal Energy Regulatory Commission (FERC) for the Commission’s review and approval.

The filing is an important milestone--it initiates the first open season process in the 30-year history of efforts to develop Alaska North Slope natural gas.

The Alaska Pipeline Project’s Open Season Plan filing demonstrates our commitment to the development of Alaska’s natural gas under the Alaska Gasline Inducement Act (AGIA). It shows we are on schedule, meeting our objectives, and in compliance with AGIA.

While much work is still to be done, the launch of our open season process takes us one step closer to achieving the long-desired goal of bringing Alaska’s natural gas to market. The project would:

  • Generate billions of dollars of revenue to support government services by the State of Alaska, Canadian provinces/territories and local governments.
  • Provide new long term supplies of natural gas to Alaska, the U.S. Lower-48, and Canada, or to international LNG markets.
  • Create thousands of jobs and hundreds of business opportunities for the workers and economies of Alaska, the broader U.S., and Canada.

Purpose of Open Season

In simple terms, the open season puts the project to a test of the market.

During the Open Season, the Alaska Pipeline Project will provide information about the project to potential shippers of natural gas--including details such as anticipated project costs, engineering design, tariffs and timelines. The shippers will assess this project information and determine their interest in shipping natural gas through the pipeline under the offered terms and whether to make long term commitments to reserve capacity on the pipeline.

The pipeline project needs these advance commitments from the shippers--long-term transportation contracts for 20 years or more--in order to secure the financing required to build and operate the project.

Open Season Process

The process that we have initiated is not the open season itself, rather we have pre-filed our Open Season Plan for public comment and for review and approval by FERC as required by FERC Order 2005. Order 2005 applies to the federal regulatory review of an Alaska natural gas pipeline project and establishes a number of unique open season rules, one of which requires pipeline proponents to submit their open season plans in advance for FERC review and public comment.

The project’s Open Season Plan will now undergo a 60-day review process. We anticipate that the public review period will run through the month of February and the FERC review and approval period to extend through March.

If FERC approves our plan, we will begin our actual open season by inviting bids from potential shippers at the end of April 2010. The open season will run a minimum of 90 days through the months of May, June and July.

The Alaska Pipeline Project is targeting the completion of its open season bid review and negotiation process by year-end 2010, contingent upon the satisfactory resolution of shippers’ conditions precedent.

Open Season Information

The project is fully committed to meet the public information requirements of FERC Order 2005 and is providing several points of access to project information.

Members of the public can find our Open Season Plan submittal to FERC on this site, as well as on FERC's website. We welcome and invite public review and comment on the project.

Canadian Open Season

The open season process we have initiated with FERC only applies to the portion of the project in the United States. A separate but coordinated open season for the Canadian portion of the project will be conducted concurrently in Canada. There are no requirements to file an Open Season Plan with Canadian regulators for the Canadian segment of the project.

Reporting of Open Season Results

It is important to keep in mind that major pipeline builders rarely report open season results immediately because the shippers’ bids to reserve pipeline capacity almost always include conditions, not unlike the contingencies written into a contract for sale of a home.

Thus, with the close of the open season bidding period at the end of July, follow-up negotiations between the Alaska Pipeline Project and shippers are likely to commence to resolve those contingencies.

Experts believe shippers may also include in their bids some conditions beyond the control of the Alaska Pipeline Project, such as taxation and resource access issues which cannot be decided by the project. Many people expect the shippers to ask for the State’s engagement in resolving these issues before they will be able to commit to the project.

Options to be Assessed During the Open Season

During the open season, the Alaska Pipeline Project will present two alternative project options for assessment by potential customers, and shippers will have the opportunity to reserve capacity on the option they prefer.

It is economically feasible for only one of the two project options to advance and the results of the open season will determine the preferred development choice.

One option would transport an estimated 4.5 billion cubic feet per day of North Slope natural gas approximately 1,700 miles (2,736 kilometers) across Alaska to Alberta, Canada, (the Alberta option), where it could be sent on existing pipelines to North American gas markets.

Another option is to transport an estimated 3 billion cubic feet of natural gas per day approximately 800 miles (1,287 kilometers) to Valdez, Alaska, (the Valdez option), where shippers could liquefy the gas in a plant constructed by others and ship it on tankers to U.S. and international markets.

It is important to emphasize that both options would provide opportunities for Alaska communities to acquire natural gas from the pipeline from a minimum of five strategically located off-takes. The Alberta option would also provide opportunities for local gas deliveries in Canada as well.

A world-class natural gas treatment plant, to be located adjacent to the North Slope’s Prudhoe Bay facilities, and an approximately 58-mile (93-kilometer) transmission pipeline connecting the natural gas supplies of the Point Thomson field to the plant are components of both development options.

In-State Gas

The Alaska Pipeline Project has set a high priority on providing access opportunities for in-state natural gas to heat and power local homes, business and industry. Both of the project options provide for local natural gas off-takes in Alaska, and the Alberta option also provides off-takes in Canada.

The U.S. Alaska Natural Gas Pipeline Act of 2004 (ANGPA) requires that all proposed projects to transport North Slope gas, including the Alaska Pipeline Project, assess Alaska’s in-state gas needs and provide off-takes to the pipeline that would allow local energy providers the opportunity to obtain gas to meet community needs.

At least five of these local natural gas off-takes will be provided in Alaska under both the Alberta and Valdez options, with the locations to be based on the results of an in-state natural gas study and on interests expressed through bidding during the open season.

FERC regulations also require that there be no undue discrimination or preference in awarding capacity on the pipeline. Congress designed this so that all shippers, including in-state natural gas providers, have an equal opportunity to use the pipeline. The Alaska Pipeline Project open season will be fully open to all in-state Alaska shippers.

In-State Gas Study Findings

The In-State Gas Demand Study was independently prepared for the project by Northern Economics, the Institute of Social and Economic Research at the University of Alaska (ISER) and Science Applications International Corporation (SAIC), with the input of local businesses and industry. The Study projects the future potential demand from Alaskan residents and industries for natural gas and natural gas liquids (e.g., propane) that would be available with construction of a natural gas pipeline from the North Slope.

The purpose of the study is to meet the requirements of the FERC open season regulation of Alaska natural gas transportation projects. The study is also intended to facilitate the identification of at least five off-take or delivery points and potential delivery volumes at various locations along the pipeline, and to allow the initial design of in-state delivery rates.

Project Alignment

TransCanada and ExxonMobil share a common goal--an Alaska natural gas pipeline that is constructed with the full support of the State of Alaska, the U.S. and Canadian governments, and the major North Slope producers.

Experts agree that all interested parties will eventually need to be aligned in one project in order to complete such an enormous and complex undertaking. We believe the Alaska Pipeline Project and its alignment with the State of Alaska under the AGIA process offers the best path forward for success.

We have worked with North Slope producers for many years in Alaska and have respect for their capabilities. We look forward to meaningful discussions to align on the Alaska Pipeline Project.

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