Alaska divided over who will transport its natural gas

It is finally official - as of December 5, Alaska handed the Alaska Gasline Inducement Act licence over to TransCanada. The deal is for construction on a $30 billion (Dh110.19 billion), or more, pipeline transporting natural gas from Alaska's North Slope southward.

But don't hold your breath.

Oil majors ConocoPhillips and British Petroleum (BP) are still conducting a media blitz publicising their alternative gas pipeline, Denali. So good is their advertising, it took me sitting though a couple of radio ads in my car to realise that what was being pitched was not the pipeline Governor, and former vice-presidential candidate, Sarah Palin is backing.

The problem? Both Conoco and BP are unhappy with Palin's terms, hence the Denali media blitz, and no-one has signed on to actually deliver gas to the unbuilt pipeline. Now the state has even booted Exxon off of the Point Thomson Unit, which holds roughly a quarter of the North Slope's natural gas reserves. The state claims Exxon has failed to perform, while the oil company says it has and should receive a lease extension into 2009.

Ok, it seems pretty clear cut.

Recession

But it isn't just me that is a little confused between who is backing what and why.

With the US heading into a significant recession, Alaska could use the economic boost provided by pipeline construction - and people in the 49th state know that.

Demand for natural gas is growing, and even though energy prices are down right now it isn't going to stay that way. As Alaska's crude supply continues to wane, the state is going to need to replace the space in the budget left by black gold. So, for economic survival in a state dependent on natural resources, it is vital to get the right pipeline built.

But it is pretty hard to figure out, at least at this point, which pipe is best.

While I'm not a fan of having one of the oil majors having a stranglehold on a gas pipeline, I'm also not convinced that the state has the best setup in order. After BP's repeated oil pipeline leaks and the Exxon Valdez, I think Alaskans are a little sceptical that either company is going to be looking out for the state's best interests.

But Palin has made the decision to award the license to a Canadian company, albeit the only one that met the terms of the tender, and I can't say I'm happy about the pipeline terminating in Canada. My understanding is that there is nothing written into the terms of the licence that guarantees contracts to US companies either.

If we're going after Alaska's natural gas, it had better benefit Alaskans and I don't see how that is happening under either plan.

So what to do?

Although I'm sceptical, I'd like to see some more details about the Denali pipeline.

The problem here is that oil companies are used to getting sweetheart deals out of Alaskan politicians. After all, Alaska Senator Ted Stevens was convicted of taking gifts from an oil company head shortly before losing his office in the last election.

Palin's pipeline was in response to a whale of a deal between previous governor Frank Murkowski and the majors that was tossed out shortly after he left office.

My only concern is that despite the $500 million that Alaska is feeding into TransCanada to get the pipeline built, the bargain basement crude oil prices we're seeing now are going to deter the type of investment the project will ultimately need.

- Leah Bower is a freelance journalist based in Alaska.