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Canada v. U.S. on Northern Pipeline

Canada v. U.S. on Northern Pipeline

Northern pipeline rivalry is taking on political overtones of economic nationalism, with Northwest Territories Premier Stephen Kakfwi calling on industry and government leaders to stand up for Canada by backing a Mackenzie Valley route against the Alaska Natural Gas Transportation System.

"We have a once-in-a-generation opportunity to make the right choice," Kakfwi told an industry conference on northern prospects in the Canadian gas capital of Calgary recently. In the Northwest Territories, the premier said "I want to emphasize we are talking about Canadian gas with the potential to generate royalties for the federal government and spin off revenues for the provinces and territories Canadian reserves that will create nation-wide business opportunities and thousands of jobs for Canadians, across this country."

He made pointed comparisons between the principal sources of gas for the rival routes. His extended visit to Calgary to court support came a week after the chairman of ANGTS sponsor Foothills Pipe Lines, Bob Pierce, told the U.S. Senate's energy committee the Lower 48 states could have Alaskan gas delivered in 2006 or '07 for less than US$2 per MMBtu by reviving the 1970s international megaproject. (see NGI, Sept. 18)

With the high level of Canadian interest and the fact that the state of Alaska and its two powerful U.S. senators have taken an aggressive stance behind the ANGTS route, the only sure thing is that the issue will be discussed for a long, long time. An alternative is to build two pipelines, but while producers claim there's enough gas for two lines, it's not clear there would be a market or financing for two.

The ANGTS grand design still calls for construction of a "lateral" to the Mackenzie Delta-Beaufort Sea region, but only at a future date yet to be set, after connecting the Prudhoe Bay area with a route along the Alaska Highway through the Yukon Territory. ANGTS is vigorously backed by Yukon Premier Pat Duncan, who has also been on the road seeking support in the U.S. and Canada and arrived in Calgary as Kakfwi was wrapping up his meetings there. Duncan said the last time she looked at a map, the Yukon was still Canadian. Her administration points out the ANGTS route is already secured by U.S. and Canadian government approvals and the Yukon, unlike Kakfwi's jurisdiction, is not demanding an ownership share in the pipeline project for its native population. Both northern territories maintain their powerful aboriginal communities are ready to co-operate with development, although each suggests the other has farther to go in making sure of consent.

The Northwest Territories premier pointed out that the Mackenzie Valley proposal works better, from the Canadian point of view. The idea is to connect Canadian reserves in the Mackenzie Delta-Beaufort Sea region first, and only afterwards hook up Prudhoe Bay with a subsea pipeline across the northwestern top of the continent.

The appeal to patriotism came backed by projections of rich Canadian benefits and promises to make assembling the project as easy as possible by setting up a co-operative process of regulatory and environmental reviews in the Mackenzie Valley. An Aboriginal Pipeline Group is keen to invest in the project and is developing a firm proposal after a meeting with industry leaders last week, Kakfwi said.

Kakfwi, citing a study done last year for a gas industry group by the international energy economics consulting house of Purvin & Gertz, set a pricetag of C$2.3 billion (US$1.6 billion) on an 840-mile, 1.6 Bcf/d pipeline from the Mackenzie Delta to the established gas grid in northern Alberta and British Columbia.

The plan is a spiritual heir to the Delta Project proposed in the late 1980s by Imperial Oil, Gulf Canada and Shell Canada, but it adds in a potential link to Prudhoe Bay with an ocean-floor route along the top of the continent under the Beaufort Sea. Imperial, Gulf and Shell are re-evaluating about 12 Tcf of Delta-Beaufort discoveries. Kakfwi pointed out that the big producers' holdings are only the tip of an Arctic resources iceberg. Canadian industry and government technical authorities estimate the combined potential of the Delta-Beaufort region and the Liard area of the southern Northwest Territories at between 47 Tcf and 66 Tcf.

For Canadians, Kakfwi said his government estimates the Mackenzie Valley-based version of the entire Delta-Prudhoe system would "yield C$2 billion in wages and C$4 billion in purchases, most of them outside the NWT. "With only 40,000 people in the Northwest Territories, we simply cannot provide all the investment, workforce or supplies needed." His government estimates building the Delta-Prudhoe system would create 11,000 person-years of employment in the north but more than 60,000 for all of Canada. Tax and royalty revenues from Delta development, primarily going to the federal government, are projected to exceed C$6 billion or C$9 billion, if the Prudhoe connection is also built. Canadian gas production revenues are forecast at C$16 billion if only the Mackenzie Valley line is built and C$18 billion if the new grid also hooks up more fields on the way west to Prudhoe Bay.

As during the Foothills pitch in Washington, gas producers stayed politely neutral in public when Kakfwi visited Calgary, although he reported that Burlington Resources is supporting the Mackenzie Valley proposal after acquiring Canadian Arctic drilling prospects with its takeover of Poco Petroleums last year. BP, with large holdings in both Prudhoe Bay and the Mackenzie Delta, while saying it remains open on the question of which pipeline, has given indications it views the Mackenzie Delta route as attractive. And Kakfwi got more than testimonial letters of support this summer, when Canadian gas producers anted up C$523 (US$360 million) million in exploration commitments to obtain 5,684 square miles of eight-year drilling leases in the Delta-Beaufort and Mackenzie Valley regions.

Gordon Jaremko, Calgary

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ISSN © 2577-9877 | ISSN © 1532-1266
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