TransCanada and ExxonMobil have reached an agreement to work together on the proposed Alaska gas pipeline project from the North Slope to the Lower 48.

“We are pleased that TransCanada and ExxonMobil have reached agreement on initial project terms to progress this exciting initiative,” said TransCanada President Hal Kvisle. "TransCanada envisions that our combined activities with ExxonMobil, along with the support of the State of Alaska, the U.S. and Canadian governments, and other interested parties, will result in the timely completion of the project.

Rich Krueger, President of ExxonMobil Production Company, said, “ExxonMobil and TransCanada have the experience, expertise and financial capability to undertake this project. We have on-theground knowledge of Alaska and Canada, experience working in the Arctic, a strong history of technology and innovation, and the proven ability to build and operate projects of enormous scale in the most challenging environments.”

TransCanada will remain the Alaska Gasline Inducement Act (AGIA) licensee and contract obligations of the company to the state remain unaffected.

In November 2007, TransCanada submitted an application under AGIA to build a 4.5 billion cubic feet per day 48-inch diameter natural gas pipeline running approximately 1,700 miles from a new natural gas treatment plant at Prudhoe Bay to Alberta. In December 2008, TransCanada was awarded the AGIA license, having received approval of the Alaska legislature the previous spring. TransCanada has moved forward with engineering, environmental reviews, Alaska Native and Canadian Aboriginal engagement, and commercial work to conclude an initial binding open season by July 2010.

Secretary of the Interior Ken Salazar reacted favorably to the June 11 announcement of the ExxonMobil and TransCanada partnership. “This is a significant step forward on a project
very important to the President and the Department of the Interior as a way to get American energy to the Lower 48,” Salazar said. “We recognize there are two very strong project proposals, both aiming toward a 2010 open season and both now supported by major gas producers that control vast proven reserves of North Slope gas. We look forward to working with all stakeholders involved with this project.”

In welcoming the announcement, Senator Lisa Murkowski said, “a deal between TransCanada and Exxon is a major sign of progress toward our shared goal of commercializing Alaska’s vast natural gas reserves. While a lot of work remains to be done, this brings us one step
closer to bringing jobs and reliable energy to Alaskans and the nation. As the project
proceeds, cooperation between the North Slope producers, TransCanada and the state
will be the key to its success.”

The North Slope holds an estimated 35 trillion cubic feet of natural gas proven reserves. ExxonMobil holds the rights to slightly more than a third of those reserves. Undiscovered reserves could add as much as 215 trillion cubic feet to proven reserves.

Drue Pearce, Federal Coordinator for Alaska Gas Pipeline Projects, said ExxonMobil’s active engagement as a full participant in the TransCanada project is a major development. “We welcome ExxonMobil to an active role in the project and look forward to working with them in
coming years,” Pearce said.

The other two major gas leaseholders, ConocoPhillips and BP, are pursuing a separate gas pipeline project called Denali. Despite the ExxonMobil alignment with TransCanada, the Denali project will proceed. Denali is working on engineering and environmental reviews and expects to hold its open season next year.

“We are going to continue to focus on our 2009 work program and conducting an open season in 2010,” said Scott Jepsen, spokesman for the Denali project, to the Dow Jones Newswires on June 11. He said the objective of the program is to attract the best commercial offers and then move the project to the next steps, which are financing and construction. He noted it would be very difficult, if not impossible, for Denali to partner with TransCanada unless some of the terms of AGIA are changed.

Both projects will take at least ten years to complete. The Denali pipeline would move 4 billion cubic feet a day.

RDC Executive Director Jason Brune said “the agreement can be seen as a positive step with all of the producers, TransCanada and the state now directly engaged in commercializing our natural gas resources.” He said all parties share the common goal of a successful project, but
noted the three producers will need fiscal clarity on taxes to achieve that goal.

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