The campaign to throw construction of the Canadian leg in the Alaska gas pipeline project open to competition reached the top of the Canadian government, where a senior committee of the Liberal cabinet Thursday opened its doors to Enbridge Inc.
Enbridge made a case to the cabinet's northern development committee that TransCanada PipeLines Ltd. should not have the Alaska project virtually by default, as heir through ownership of Foothills Pipe Lines to the 1970s Alaska Natural Gas Transportation System. The committee includes Deputy Prime Minister Anne McLellan, ministers of environment, Indian affairs, northern development, natural resources and fisheries and oceans. The committee's mandate is to take care of national issues arising from the Mackenzie Gas Project and the Canadian side in the Alaska pipeline plan.
While no immediate decisions were announced or expected from the strictly private discussions, the meeting was a breakthrough for Enbridge. Stephen Letwin, the company's vice president for gas strategy and corporate development, said the campaign for rights to compete in the project was triggered by a rude surprise. While on a lobbying mission to Ottawa, he reported having a startling encounter with veteran senior civil servants whose bailiwicks included dormant institutions created by the 1970s Northern Pipeline Act and who assumed the old structure would be resurrected to govern the 21st Century reincarnation of the Alaska project.
In an interview with NGI, Letwin made it plain that Enbridge stands ready to appeal to the Canadian courts if civil service inertia prevails in Ottawa.
Industry sources added that the Enbridge faction in Ottawa includes George Addy, a former director of investigation and research for the Canadian Competition Bureau. Now a prominent lawyer and corporate leader in the deregulated telecommunications sector, Addy is a renowned advocate of open competitive markets whose ideas have included stripping Canada Post of its mail monopoly.
Enbridge wants Ottawa to follow Washington's example by setting aside the Northern Pipeline Act and Northern Pipeline Agency and letting the fate of the Canadian leg in the Alaska project be determined by project competition before the National Energy Board and the Canadian Environmental Assessment Agency. Enbridge points to the jurisdiction and open-season approach adopted by the U.S. Federal Energy Regulatory Commission as the model for Canada.
Enbridge is no novice at modern pipeline competition. While originally an oil transporter rooted in Canada's early industry development following the 1947 Leduc gusher near Edmonton, Enbridge branched out into gas in the 1990s. Affiliates of Enbridge hold 50% interests in both the Canadian and U.S. legs of the five-year-old Alliance Pipeline to Chicago from northern Alberta and British Columbia. Enbridge gas interests also include the Vector pipeline from Chicago to the Dawn trading hub in southern Ontario, and Canada's largest distribution franchise in Toronto, eastern Ontario and western Quebec.
TransCanada has no exclusive claim to the moral and legal high ground in the Alaska pipeline rivalry, Enbridge insists. Letwin acknowledged that Foothills is a "prebuild" of southern legs in ANGTS that has never formally abandoned that official status and earns its keep by transporting about 30% of Canadian gas exports to the U.S. on two legs from southern Alberta to Chicago and southern California. But Foothills has been amply repaid for the favor by being kept mostly full and repeatedly expanding since its completion 23 years ago, Letwin pointed out.
A document presented to the federal cabinet said "Enbridge and Alliance expect to be involved in a pipeline from Alaska to Alberta as well as from Alberta to markets. The final project will require additional equity investors to support the Canadian portion of the US$20 billion project."
Letwin said Enbridge expects to spend the next 18 months assembling a proposal that Enbridge wants to include Alaskan producers BP, ConocoPhillips and ExxonMobil. "Any proponent will need to discuss equity participation by the Alaska North Slope producers."
The Canadian half of the 1970s ANGTS apparatus became obsolete long ago, Enbridge maintains. The northern part of the Foothills system has been a missing link for so long that it is simply dead rather than just dormant, Enbridge suggests.
The old Northern Pipeline Act said all the Canadian leg of ANGTS would be built by 1985, Enbridge pointed out. As a result, new amendments would have to be enacted in order for the original legislation to cover the reincarnation of the Alaska project, the company said.
"Without a doubt, Parliament intended the Foothills project to be completed by the mid-1980s," said Enbridge's presentation to the ministers. "It was never contemplated that the project would still not be constructed 27 years later."
The previous Liberal government, under former prime minister Jean Chretien, in practice recognized that a fresh start would have to be made on the Canadian part of the Alaska project, Enbridge added. In 2001, Chretien made the new reality plain in a letter to the premier of the Northwest Territories: "The Canada-U.S. agreement on ANGTS does not preclude the possibility of alternative projects being developed," the prime minister wrote.
A late-2002 announcement of an appointment to the Northern Pipeline Agency made it plain that the federal government wanted to avoid being drawn into any pipeline faction, Enbridge observed. The announcement said: "The government of Canada remains route-neutral with respect to an Alaskan natural gas pipeline and believes that North American energy markets are better served if industry is allowed to determine the nature and timing of pipeline development."
Enbridge will make it easy for the politicians, Letwin said. Under 21st Century energy policy, including free trade between Canada and the U.S., no government has to pick sides in pipeline competition. The federal cabinet only has to decide not to decide the case in advance. "What we're asking for is regulatory neutrality," Letwin said.
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