No guarantee gas pipeline will be built

updated 5:51 p.m. ET Oct. 25, 2008

ANCHORAGE, Alaska - Contrary to Gov. Sarah Palin's campaign promises to "build a pipeline quickly," the massive project to send natural gas south is still no sure thing.

TransCanada Corp. has been awarded a state license, but still needs approval from the Federal Energy Regulatory Commission, which is years away. Canadian regulators must sign off on their portion. First Nation tribes in Canada are objecting to the proposed route. And even if it sails through financial and regulatory hurdles, TransCanada still has no obligation to build the pipeline.

If the company doesn't complete the project, it could still receive up to $500 million in state subsidies, with startup costs split evenly until the company tries to secure contracts to ship gas through the supply channel. Between the time TransCanada locks in shipping commitments and files for a federal permit, the state will pick up 90 percent of the tab even before ground is broken.

If TransCanada can't woo the energy companies to use its pipeline, banks won't finance the project. And unless the state or TransCanada decide to break the contract, the company must move forward with the federal permitting process for a project that would be all but doomed. The state treasury would cover most of those costs.

According to a new report by the Congressional Research Service, TransCanada and state officials may be underestimating how long the project will take; the target finish date is 2018.

Should TransCanada win federal permission to start digging, U.S. taxpayers could be on the hook, big time. Included in the company's bid is a proposal for the federal government to absorb up to $75 billion in liability over a 25-year period if the major natural gas suppliers refuse to ship their gas through the line, the CRS report said. Such a measure would require congressional approval.

Meanwhile, ConocoPhillips and BP have launched a competing project completely outside the state's process — Denali-The Alaska Gas Pipeline — that promises to get the job done more quickly.

Clearly, two pipelines won't be built, and already state officials acknowledge that the winners in Palin's process may end up being absorbed into a consortium with the multinational energy giants. After all, with no guaranteed gas supply, there's little need for a pipeline.

"Frankly, this continues to be one big negotiation," said Revenue Department Commissioner Pat Galvin.

More from msnbc.com Move over, feds — locals try stimulus, too  Daily Nightly: Tim McGraw helps neighbors in need Were you paying attention? Take our weekly quiz World Blog: China puts foot down on 'Oba Mao' T-shirts Scoop: Levi Johnston poses with only a hockey stick Stimulus tracker: See where millions of dollars went On Twitter: Breaking news updates | Weird and wild

MORE FROM

Section Front

Obama campaign head gets big book deal Officials turn down Franken request Joe the Plumber to become war correspondent Franken lead at 49 with absentees left to count Minn. Senate winner won't be known in 2008 First Read: 'Twas the seventh week of recount... Franken opens first lead in Minn. Senate race Mom of Palin daughter's boyfriend arrested Minn. court weighs rejected absentee ballots Minnesota panel reviews disputed ballots Section Front   Add headlines to your news reader: