North Slope, Canadian Politicians, Producers Urge Pipe Construction

A panel of Alaskan and Canadian politicians painted a colorful picture in Houston last week of why pipeline construction to the Lower 48 from Alaska has never been more urgent --- or more confusing. Unanimous in their belief that the North Slope could deliver needed gas supplies, they still could not agree on where or how many pipelines should be built.

After the politicians had their say, a panel of North American producers offered their take, all saying they are studying the various pipeline routes, and would rather not be pushed into one project rather than another.

As they spoke to a standing-room-only crowd at Ziff Energy Group's North American Gas Strategies Conference Tuesday, Alaska Gov. Tony Knowles, the Canadian speaker of the Senate and the premiers of the Yukon and Northwest Territories offered compelling reasons why two North Slope pipelines may be the best answer.

For more than 20 years, Canadian and U.S. government officials have agreed upon an Alaskan Gas Transportation System (ANGTS) route to transport gas from Prudhoe Bay south along the Alaskan Highway, across the Yukon, northern British Columbia and Alberta, and finally to export points along the U.S. border. The southern portion of the route, which extends from Alberta into the United States, is already completed (in two legs: Foothills/Northern Border Pipeline and PG&E Gas Transmission NW). Only the northern portion remains to be built.

Another Alaskan route, the Northern Gas Pipeline Project, was unveiled last year, which would run eastward from Prudhoe Bay in Alaska and come ashore in the Northwest Territories' Mackenzie Delta area in northern Canada, then follow the Mackenzie River south through the Northwest Territories, then interconnect with pipelines in Alberta.

Divergent stakeholder interests now compete for a route, which has gained momentum in the past few months. For Knowles, and others on the panel, the answer is simple. "Both are feasible and both should be built," said Knowles. "The market can handle it."

Noting the spirit of cooperation that has brought together competing producers wanting to transport the reserves, Knowles said that the route to be taken also would require cooperation between Alaskan authorities and the various Canadian interests. If they don't work together, Knowles warned that angry consumers may lose interest in natural gas and push for other types of energy sources, including coal and nuclear power.

"To have a project, you've got to have a sense of advocacy by government and a sense of urgency. The State of Alaska is wholeheartedly behind this project. It's the top priority of my administration," said Knowles. He said Alaska and Canadian officials have to have a "single vision, to make two pipelines our common goal to meet everyone's needs."

But if Knowles thinks there is a single vision, his fellow panelists from Canada may be wearing a different eyeglass prescription. Politicians and stakeholders within the Canadian provinces are divided as to what route would be best, and perhaps more important, which one should be built first.

Panelist Pat Duncan, premier of the Yukon Territory, advocates first building the Alaska Highway Pipeline Project, which would benefit her stakeholders. However, she also thinks a Mackenzie Delta pipe should be built.

Northwest Territories Premier Stephen Kakfwi, who has the Mackenzie Delta within his province, also wants the ANGTS, but he wants the Mackenzie pipe at the top of the list.

Then there's the Canadian government, which advocates a pipeline, but has so far taken a neutral position on location.

"Northern development cannot be forced," said Canadian Sen. Dan Hays, speaker of the Canadian Senate. "The projects are too large, the capital at risk is too great." Hays said the government is working with the governments of the Yukon and the Northwest Territories as well as aboriginal authorities to assess all of the potential projects.

"First, Canada has substantial resources of natural gas and a thriving industry, and we view northern gas developments in a positive light," said Hays. "Second, Canada believes in a market-driven policy with transparent, timely and equitable regulations supporting development of our natural resources in a way that is environmentally sound."

Hays said Canada also was working to "clarify the regulatory pathway for sponsors of natural gas projects" to become more efficient for the work ahead.

Duncan said that her government "believes there will be two pipelines constructed in the north, one to transport Alaskan gas, and another to transport Mackenzie Delta gas." She said, "it's our two-pipeline solution," and said the North American market can "easily absorb the staged introduction of gas from Alaska and the Canadian north."

A proponent of the ANGTS, Duncan said her government also favors a stand-alone Mackenzie Delta project, which would send supplies south without beginning in Alaska. However, she dismissed the Alaska-to-Mackenzie Delta project unless its many obstacles were overcome.

"This project would test the limits of pipeline technology in a variety of sea and land-based environments and face numerous engineering, construction and operational and financial risks," Duncan said. She added that it also "stretches the limits of public acceptability."

Kakfwi, who did not openly disagree with Duncan on the panel, instead said his native-rich population was ready to work, and that the region was ready for development. And, he said there was room for only one North Slope pipeline --- his.

A pipeline through his province would benefit the economy and, he said, stakeholders were unanimous in their support. "Governments have a duty to encourage the most efficient and economic distribution systems," said Kakfwi. "Constructing two pipelines where one will suffice may be good for those who build pipelines, but it is not good for the consumer who must pay the price in the end; nor is it necessarily good for the environment."

Speaking on producers' panel on the same issue, Phillips Alaska CEO Kevin Meyers said both pipeline routes are still being considered. "We continue to evaluate both options. We're on a fairly aggressive schedule, and at the end of the day, we have to know that the project is competitive." Even though plans are much farther along for the proposed southern route from Prudhoe Bay, Phillips could back the Mackenzie Delta route, which is shorter and may gain stakeholder approval more quickly.

No matter which route gains approval, though, Meyers and the other members of his panel agreed that the hard part actually would start once the green light goes on. The regulatory process, which will involve approvals by "hundreds and hundreds" of regulatory agencies in both Canada and the United States will probably take longer than the three-to-four-year pipeline construction. Meyers' best guess on when the pipe could actually begin flowing is around 2007. "That's an aggressive time frame."

Once in place, though, he said the opportunities would be wide open.

The projected 4 Bcf/d from the North Slope is "a substantial amount," he said. "Often, people think once you get the gas to Alberta or AECO the work is done, but where does the gas go once you get it there?"

Tony Fountain, BP North America Gas & Power president, said his company has three stages of North Slope work ongoing. An $86 million gas-to-liquids project is in the works, which he said has a "great future market potential." BP also wants to push ahead on a North American LNG project, but he said that is "down the road" (see related story). Any LNG proposal would be "helped" if the Alaskan Gas Transportation Route, which runs parallel to the Alaskan Highway, is selected for the pipe route, Fountain said.

Like Phillips, Fountain said BP's number one priority now is moving ahead on the Lower 48 pipe, which he said has the "capability to be a contender for the greatest energy project for this decade or maybe this century" if the market remains competitive. Fountain said the pipe's construction also offers a "tremendous technology challenge."

Gulf Canada Resources Ltd.'s COO Ron McIntosh, who said a North Slope line and a Mackenzie Delta line could both be built, said the Mackenzie Delta route was gaining "strong Northern support" from producers because it "would be the most cost efficient route and would have the least environmental impact." He said, "clearly, the current forecast is that there is room for both" pipelines.

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