The goal won praise but the means failed to draw support when Arctic Resources Co. unveiled the most detailed version yet of its proposal for combined transportation of natural gas from Alaska and Canada’s Northwest Territories. Territorial Premier Stephen Kakfwi described the Arctic plan as mostly a distraction.

The Mackenzie Delta Producers Group of Imperial Oil, Conoco Canada, Shell Canada and ExxonMobil Canada pointed out that after more than two years of canvassing, the combination scheme still has no producer support or shipper commitments. Those will be essential, and the owners of northern gas will call the shots on the timing and shape of the pipeline project, added officials of the Canadian Association of Petroleum Producers.

The Arctic plan, laid out in writing for the first time as a “preliminary information package” for submission to regulatory authorities, continues to call for a C$12-billion (US$7.8-billion), 2,400-kilometer (1,500-mile) pipeline from Prudhoe Bay to the Mackenzie Delta, then south through the Mackenzie Valley to an Alberta junction with the established North American grid. The schedule anticipates gas starting to flow as early as 2007, with construction planned in phases.

The key element of the Arctic route continues to be an “over-the-top” line along the floor of the Beaufort Sea between Prudhoe Bay and the Mackenzie Delta, with total deliveries of American and Canadian production ultimately projected at 5.2 Bcf/d. The key ingredient of the business plans continues to be a formula billed as a natural extension of municipal utility practices: 100% debt financing, and 100% ownership by northern aboriginal governments that would do the borrowing.

Kakfwi praised Arctic for keeping the over-the-top option on the industry agenda. His government supports the idea as a way to capture Canadian economic activity associated with Arctic gas development for the Northwest Territories — and especially as the means for ensuring Mackenzie Delta-Beaufort Sea resources are not left behind by the proposed revival of the Alaska Natural Gas Transportation System. The territorial premier said he has encountered strong interest in further assessment of the over-the-top option in discussions with Alaskan producers BP and ExxonMobil.

But Kakfwi pointed out that when it came time for the Aboriginal Pipeline Group to make a deal to participate in a Mackenzie Valley route, it signed a partnership with the Mackenzie Producers. The arrangement calls for one-third ownership of the pipeline by the aboriginal alliance, a coalition of native business and political leaders. Kakfwi said Arctic just “distracts” a minority of northern natives from working towards a realistic business deal. He described the Arctic formula as a way for the sponsors to earn management fees for running the project while native communities take on all the liabilities.

“Sometimes things sound too good to be true,” Kakfwi said. “One thing is certain: Nobody gets a dollar for nothing in any business… I don’t want people to be had.”

During one of his frequent visits to the Canadian gas capital of Calgary, Kakfwi also cleared up one big question hanging over the Mackenzie Producers. Departing from ancient tradition of slow consensus building in native politics, the premier said his government will not make achieving unanimous northern agreement a condition of territorial support for a Mackenzie Valley line.

The producers, in launching C$200-$250 million (US$125-$160 million) in work on a two-year “project definition” effort, acknowledged that their agreement with the Aboriginal Pipeline Group covers only 75% of the native population and pledged that efforts to make it unanimous will continue. While all the native communities belong to the coalition, the Deh Cho or Dene of the southern Northwest Territories held back from signing the agreement with the producers. Kakfwi pointed out that the Deh Cho participated in unanimous resolutions in early 2000 to support a Mackenzie Valley pipeline in principle by the aboriginal group and the majority-native territorial legislature. When the Deh Cho abstained from signing the agreement with the producers last October, the overall commitment did not change, Kakfwi said.

“They’re not for it or against it. It’s a business deal. They’re not compelled to sign. They may feel their business interests are somewhere else.” While the Deh Cho are seeking a land-claim settlement with the federal government before making a pipeline commitment, Kakfwi pointed out they rank among the foremost native industrialists as participants in gas and diamond-mining developments in their region of the southern Northwest Territories. “When it’s in their interests, they are there,” the premier said.

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