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Alaska Governor Sarah Palin: Palin’s Pipeline Politicking

October 8 2008 by Weld Royal

Shortly before being named the GOP’s vice presidential candidate, Alaska Governor Sarah Palin spoke with Chief Executive magazine in an interview. She said the country “is long overdue for a woman in the White House and for having more of a maverick type who’s not beholden to any special interests”.

In August, Palin was fresh off political victory in Alaska as the state legislature passed a bill giving TransCanada Corporation, one of North America‘s biggest pipeline builders, the right to develop a natural gas pipeline from the North Slope to Alberta, Canada, where it would connect to a distribution system for Lower 48 markets. With a $30 billion estimated cost, the gas line could be the largest capital project in North America in the coming years. The project promises to deliver 4.5 billion cubic feet of natural gas a day roughly 7 percent of the U.S. demand.

Ushered into office less than two years earlier after promising to root out corruption and push the gas pipeline, Palin had accomplished a milestone.

Lawmakers on the Last Frontier have talked about developing North Slope gas for years. Gaining political approval for a plan crafted by her administration is one of several precedents for the state’s official CEO. At 44, Palin is Alaska‘s youngest ever governor; its first female and its first chosen as a Republican vice presidential candidate.

Palin’s predecessor, Governor Frank Murkowski, also pushed for a gas line, and reached agreements with resource owners BP PLC, Exxon Mobil and ConocoPhillips. State lawmakers believed it capitulated to the producers and blocked it.

Much of Palin’s success comes from good timing and good listening, believes Alaska Budget Report publisher Rebecca Braun. “Palin is a woman more created by the times than a woman who created the times”, she says. Without soaring commodity prices the gas pipeline would not generate the same attention.

Braun says the governor heard lawmakers’ concerns about the Murkowski plan and pushed another approach. Recognizing the power of the gas owners, Palin sought to increase the state’s leverage by adding an ally Trans Canada to its efforts. Alaska has agreed to pay $500 million in incentives to the Calgary company to develop the line.

For Palin’s plan to succeed, gas producers will have to agree to use the TransCanada pipeline. But two companies that own the gas BP and ConocoPhillips are developing a competing pipeline. Ken Boyd, an energy consultant and former Alaska oil and gas official, says state leaders have to bring together TransCanada and natural gas owners such as BP in a collaborative effort. “I don’t see that happening, but I hope it will”, he says.

Without Big Oil’s cooperation, Alaska could call upon Congress to exert pressure on companies to commit their gas to the TransCanada project. In her dealings with resource owners, Palin has been compared to Venezuela president Hugo Chavez. “We do have a reputation for playing hardball with the [gas] producers, but to me it’s taking a protective approach so that Alaska‘s interests are first and foremost”, Palin explains. During her Administration, the state sought to revoke leases held by Exxon Mobil, BP and others for Point Thompson, which contains gas reserves considered crucial to the gas pipeline.

Palin promises more force if producers balk at committing their gas to a viable gas line project. “If there would be a refusal when it’s very economical to develop the line, then we will go down a path that is stringent in reminding them they have a duty to develop the gas line and send the resource to very hungry markets”, she warns.

Meanwhile, TransCanada says it is moving forward with engineering, environmental reviews, aboriginal relations and commercial work on the pipeline.

And Alaska‘s Revenue Commissioner Patrick Galvin says nothing has changed now that Palin has been tapped by the GOP. “The gas line is a long term project”, he says.