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Talks Underway on Joint Northern Pipeline

Talks Underway on Joint Northern Pipeline

It's not a perfect world yet, but sponsors of the major projects to tap reserves in the far north are working to avoid mistakes of the past by coming up with a joint plan to pipe supplies from Alaska and the Northwest Territories to market areas in the south.

Sources say planning appears to be narrowing down to construction of the Alaska Natural Gas Transportation System (ANGTS) and the Mackenzie Valley route in a giant Y shape, with a junction at Boundary Lake near the southern boundary of Canada's Yukon and Northwest Territories with the tops of Alberta and British Columbia.

Boundary Lake is in turn readily accessible to the Westcoast, TransCanada-Nova and Alliance systems. Senior Canadian government sources, who asked not to be identified, said that the big Y and the Boundary junction look like the most attractive plan, although regulators will be careful not to pre-judge any rivalry that develops in formal construction proposals expected next year.

One major party that appears to be keeping an open mind on the subject is TransCanada PipeLines. After being shut out of the latest major additions to the international pipeline grid, Canada's biggest natural-gas transporter aims to be in on all the next ones by considering all rivals to be potential partners.

TransCanada President Doug Baldwin, described the emerging mentality of flexibility in talking about prospects for connecting Arctic gas. "We are interested in being an active participant in whatever system gets built to move northern gas," Baldwin said in an interview.

If that means making a switch to form a team with a competitor rather than putting up a fight for exclusive rights to a transportation-services market, so be it. TransCanada plainly wants no repetition of the late 1990s, when holding out in hard regulatory fights for its own versions of projects ended in rivals building the Alliance and Maritimes & Northeast systems.

Baldwin said that in complicated and sensitive regulatory, political, environmental and aboriginal relations conditions of the north, "we'd be better off if we could figure out a way to do it collaboratively." For the moment, the Arctic pipeline scene continues to look like a contest, at least on the surface. On one side stands a proposed revival of the dormant ANGTS, now a Canadian project sponsored by the Foothills Pipe Lines partnership of TransCanada and Westcoast Energy. On the other stands the proposal becoming known as ARC, the Arctic Resources Corp. plan for a line through the Mackenzie Valley.

Behind the scenes, Baldwin said TransCanada has held discussions with its apparent competitor. "We continue to talk to those people all the time." In Canada, ARC is represented by a prominent former Conservative Member of Parliament, Harvie Andre, who as an engineer worked on early Arctic pipeline proposals and saw all of them wind up on the shelf partly as a result of aggressive corporate rivalries. Baldwin described the Foothills partnership and the ANGTS plan to transport gas from Prudhoe Bay as a natural starting point for northern pipeline development. But TransCanada also recognizes the strong interests among producers and northern authorities in putting "equal emphasis" on gas from Alaska and the Mackenzie Delta-Beaufort Sea region.

TransCanada's map of contending northern proposals currently has five entries: the ANGTS route beside the Alaska Highway, ARC along the Mackenzie River, an underwater link across the Beaufort between the Delta and Prudhoe Bay, a backwards L shaped route known as "under the park" linking the Mackenzie Valley and ANGTS south of Alaska's vast interior wildlife refuge, and the Dempster Lateral included in the old ANGTS design to pick up Delta-Beaufort production by following its namesake highway between Inuvik and the Yukon capital of Whitehorse.

A process of natural selection is suggested by the map, which was being used but not released for public consumption at an international pipeline conference and trade fair earlier this month in Calgary. By common consent among all the entries, the Dempster Lateral has virtually dropped off the map as too indirect and expensive. Most engineers describe the subsea connection as a delightful technical challenge - and just too exciting and hazardous to be tried. It features short, unpredictable construction seasons combined with the problems of inspecting and maintaining an industrial installation that would be beneath a wildly inhospitable cap of frozen ocean at least nine months of the year.

The under-the-park proposal is being widely rated as a non-starter for environmental reasons. It not only brushes past Alaska's cherished wildlife refuge; it also crosses a Yukon plain celebrated as the migration and breeding grounds for northern Canada's immense caribou population, the Porcupine Herd.

That leaves the combined ANGTS and ARC projects, to be combined in the Y formation. The pipeline debate is also narrowing down to a wrangle over which northern supply source should be tapped first, Prudhoe Bay or Canada's Delta-Beaufort region. In Canada at least, the reason for having such a debate at all is being questioned as a result of North American market conditions that seem to suggest there will be plenty of demand to go around.

Baldwin, pointing to high gas prices combined with widespread projections of rapid demand escalation across the United States and Canada, said "the market dynamics are in place to see our industry embark on a period of growth that we haven't seen since steel pipe moved the first molecule of gas from the Western Canadian Sedimentary Basin to a handful of consumers in eastern Canada."

The TransCanada president observed that if the demand predictions come true, North American gas consumption will reach about 31 Tcf per year. "We're more than ready to do what's necessary to meet an additional 21 Bcf/d in natural gas demand in North America - a 30% increase in 12 years. To put that in perspective, it represents three times the size of TransCanada's mainline." Baldwin said "60% of this expected new gas demand is in markets where TransCanada already has a presence..... our projection is that gas flowing via Canadian pipe could capture as much as 20% of the U.S. market by 2010."

Gordon Jaremko, Calgary

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