Alaska Dispatch

TO: Pat Galvin, Commissioner, Alaska Department of Revenue

Dear Commissioner Galvin,

A little while ago you released a progress report on TransCanada's gas pipeline project and talked to reporters about it. You said that under the terms of the Alaska Gasline Inducement Act, the State of Alaska and TransCanada are on schedule to begin shipping natural gas from the North Slope to the Lower 48 by 2018. Thanks for that reassurance. We were really relieved to hear that. We are, however, concerned about other things you said.

You also said that next July's open season, during which the producers will signal their level of interest in committing gas for AGIA's pipe, shouldn't be considered "a litmus test" for the total project if such commitments are low or are contingent upon too many regulatory concessions. When we heard you say that, we got really concerned you don't understand what's at stake here. We're not trying to figure out the pH of the proposed pipeline; we're trying to get Alaska's stranded gas to market. We appreciate a good metaphor, but now's not the time. This issue demands sober, accurate language, not vivid, semantically false imagery.

You also said that the upcoming open season would likely be the first step in a series of negotiations that should, over time, bring the state, the producers, and TransCanada closer together in terms of fiscal and regulatory frameworks. You called an open season a "nebulous black box" and hinted that this upcoming one might not be the only open season for the gasline. We understand that the parties involved in the project will have to come to agreement somehow, but at the rate things are going now, an open-ended series of negotiations sounds like it'll take a hundred years. The run-up to this open season is about to kill us already, and we still have between eight and 11 months to wait for the results.

We're also worried about an implication your statement holds. Urging us not to jump to conclusions about what low response to the first open season would mean makes us think you're anticipating a terrible open season and already starting to cut firebreaks. We hope we're wrong, but still, it's worrisome, especially because Alaska will be on the hook for increasing percentages of TransCanada's development costs as time goes on. Heck, we'll trust you and reserve judgment until 2011. Is that long enough? If not, just let us know, and we'll push the timeline out a bit... say, to 2012.

Meanwhile, we have an idea to get the open season off to an auspicious start. We know it's still pretty far off, but you'll need plenty of lead time to get this ball rolling. Recently, Alaska had open season on ducks and geese, and that got us thinking. Why not use decoys to ensure that AGIA's initial open season really goes gangbusters?

You could set up a a series of pipe sections across the Alaska-Canada border, some worker camps, or perhaps a few Exxon survey vehicles. If it looks like Exxon plans to fill the pipeline on its own, maybe the other major North Slope producers will feel secure enough to readily commit their own gas to the pipeline. And if that happens during the first open season, it's safe to assume that the whole, grinding series of open seasons will be shorter.

Using real materials and workers as decoys would give the whole project a great head start. But in case you're worried about the expense, you could just use foil-covered pressboard tubes, and the workers could be actors -- just as long as it all looks good from a survey plane. Exxon trucks would just be icing on the cake. Exxon has already partnered with TransCanada in the AGIA line, but it's still waiting to commit its gas, and it has to be getting tired of standing on the sidelines. This could be a great opportunity for Exxon to play a crucial role in Alaska's future, and maybe earn a little forgiveness from Alaskans along the way.

Come to think of it, decoys might also work for Cook Inlet's troubled oil industry. The bankruptcy of Pacific Energy Services Ltd. has caused a few oil wells to be shut in there, and its surprise motion to sell its Cook Inlet operations as part of Chapter 11 proceedings has been met with counter-motions from the Department of Interior, the State of Alaska, and several companies. If Cook Inlet oil wells are just sitting there rusting away, why not put them to use attracting gas investment? If we make it look like Alaska's already open for business, maybe it soon will be.

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