updated 10/25/2008 5:51:24 PM ET 2008-10-25T21:51:24

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.

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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.

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