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Canadians Set Long-Term Sights on MacKenzie Delta

Canadians Set Long-Term Sights on MacKenzie Delta

The recent agreement between TransCanada PipeLines and the Northwest Territories (NWT) (See Daily GPI, July 29) makes it plain that both parties have their sights set on bigger game than relatively modest pipeline extensions into the southern part of the Territories. After lying dormant for a decade, visions are reviving of a route extending all the way to the Mackenzie Delta and the Beaufort Sea to tap an estimated 13 Tcf or more of reserves found in a 1970s drilling boom.

The trick is to find a way to make a northern pipeline pay. The agreement specifies territorial and corporate leaders will "work diligently together, as partners, to foster the economic and timely development of the natural gas reserve potential of the Mackenzie River Delta region, including the natural gas transmission infrastructure to connect the region with TransCanada's pipeline system."

No target dates were set for results, however. All sides agreed "the timing, route and tolling of a natural gas pipeline from the Mackenzie Delta region will be dependent on market conditions, customer and community support and the pace of technological developments."

Right now the focus is on the currently booming Liard area just over the border from Alberta and British Columbia where Chevron says it has found reserves so rich that just one well can deliver sustained production of 80 to 100 MMcf/d. But producers wanted to tie in the more remote areas for future development.

Meanwhile on the regulatory front, the ageement is not as complete as it appeared at first blush. The territorial government, rather than completely dropping its case to bring Alberta's Nova intra-provincial pipeline under federal jurisdiction, has agreed to try for a "harmonized regulatory environment to eliminate jurisdictional uncertainty." A target for making progress has been set of March 31, 2000. Efforts to craft a regulatory system that takes into account the desires of emerging production regions will continue, especially within an "intergovernmental committee on pipeline harmonization" that has been established by the federal, provincial and territorial Council of Energy Ministers.

TransCanada persuaded the territories to put the jurisdictional appeal on hold with a pledge to cater to northern needs for gas service at competitive toll rates. It remains to be seen how - if at all, immediately - the settlement affects an application for distance-based rates on Nova now before the Alberta Energy and Utilties Board. But TransCanada cured the worst bone of contention by promising that future tolling settlements will take into account northern interests that were not allowed representation in previous toll negotiations.

The pact specifies "natural gas produced in the southern NWT should be treated in accordance with a set of tolling principles no less favourable than the set of tolling principles applicable to natural gas produced in northern Alberta."

In trade for the concession on widening toll negotiations, TransCanada secured an open invitation to participate in new gas service. The only pipeline link so far to mainline transportation has been a spur line off the B.C. grid of Westcoast Energy, a partner in Alliance Pipeline. The new agreement does not rule out further expansions by Westcoast or Alliance, but it specifies the territorial government and TransCanada will "work diligently together, as partners . . . to encourage development of the natural gas reserve potential of the southern NWT and to provide for the orderly and economic development of a competitively priced natural gas transmission infrastructure in the southern NWT."

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