Arctic Resources Gains Key Aboriginal Support for Northern Pipe

Arctic Resources Co., the upstart that only last year entered the myriad of pipeline proposals to move northern gas into the Lower 48, moved a few steps closer to fulfilling its dream of building a pipeline from Alaska's Prudhoe Bay to Edmonton last week by earning the endorsement of key Canadian aboriginal leaders.

The cornerstone of ARC's approach is to build a consortium of political, producer, transportation and regional leaders, and without aboriginal support, the plan would never succeed. However, Bob Murphy, point man for Houston-based ARC, said Friday that if all continues to go well, "gas could be flowing by 2006."

Last week, aboriginal leaders representing the Sahtu landowners and the Alberta First Nations agreed to endorse the project, including its approach to providing pipeline management by aboriginal and Native American groups involved in the governance of the project (see NGI, June 19, 2000). The Deh Cho, said Murphy, who also occupy a significant portion of the land through which a pipeline will travel, are now considering the proposal, and Murphy said he was optimistic.

"Together, Sahtu and Deh Cho lands represent over 70% of the land in the Northwest Territories, through which a pipeline would travel," he said. Gaining aboriginal support is key to any pipeline to the Lower 48, he said.

ARC's Northern Gas Pipeline Project would create a natural gas pipeline extending from Prudhoe Bay in Alaska through and under the Beaufort Sea, coming onshore in northern Canada and extending up the Mackenzie River Valley to interconnects in Edmonton. Following a ramp-up period, ARC estimates it would transport 4 Bcf/d through the high-pressure 1,200 mile, fully entrenched route.

The pipeline would cost $4 billion, and financing and reserves would add another $1 billion to the cost, which would be 100% debt financed. The debt financing would lower the tariffs, making it attractive to shippers.

Murphy said he's hopeful that by the end of the year, ARC could begin its pre-application permitting process --- but he added there was still much to be accomplished.

"The ARC approach is all inclusive," Murphy told NGI. "We fully intend to gain the support of all of the parties because we are offering a balanced approach to project management. We believe our approach is far more than just a route. That's important to understand.

"Our approach offers the least expensive, the lowest tariff," he said. "Politically, we have to take care of Canadian interests. We have to take care of the political issues in Canada and that includes bringing the aboriginal regions in. You have to do that to succeed."

ARC's proactive approach combines Canadian aboriginal and Native American interests that line the pipeline route with an independent business consortium under the company's umbrella, Murphy said. The balance of interests of the competing stakeholders offers the type of business discipline "that will be required by the capital markets and industry."

What ARC gained last week was a Framework Memorandum, executed by the Ernie MacDonald Land Corp. (EMLC), one of six Sahtu landowners whose territory would be crossed by the pipeline. The memorandum was structured to include participation of other aboriginal landowners following briefings in their communities. The Fort Norman Metis Land Corp. also agreed to join EMLC as a signatory to the memorandum.

EMLC President Larry Tourangeau said that he believed the "interests of Canada, the United States, industry, the environment and aboriginal people are best served by an initial single, cost-effective pipeline that connects both northern Canada and Alaska to southern markets without damaging either Canadian or Alaskan resources."

What EMLC also likes, and what Murphy hopes ARC can convince other aboriginal leaders of as well, is that ARC will give the affected aboriginal regions control over the pipeline --- an approach not used by other competing proposals. "We believe that aboriginal ownership and involvement, as proposed in the ARC approach, will improve the prospects for a safe, timely and economic project," said Tourangeau.

ARC Chairman Forrest Hoglund, who spearheaded the efforts of former Exxon Corp. in its unfulfilled plans to build a natural gas pipeline from Alaska almost 30 years ago, said the endorsement of aboriginal leaders "marks a major milestone to getting to the right answer quickly on this important project." He called the "one pipeline approach with aboriginal support" the "fastest, lowest cost, best environmental and best political approach" for the region.

Now it's on to gaining more support, and beginning the critical step of establishing a special purpose committee, Murphy said. The SPC would be organized and created under Canadian law and owned by certain aboriginal groups whose lands the pipeline crossed. Similar provisions would be offered for the Alaskan region, he said.

Murphy said ARC is now working with the producers interested in an Alaskan pipeline, as well as political leaders in Canada and Washington, DC. When asked how producer involvement was going, Murphy said the companies were "doing the type of work anyone would need to do" to study which option would be best for their companies.

"At the same time, we're certainly hopeful that they're going to want to perceive this route as the far more economical one and the one with the best political approach," Murphy said. "Of course, the economics of the project matter, but politics matter too. Pipelines have to work economically and not just at $9 gas. This is a long-term project, and we've put a great deal of emphasis on the business sense of it."

ARC's proposal is not the only one on the drawing board, but so far, none have gotten further than the proposal stage. No applications have been applied for yet by any of the competing proposals, which include two other major proposals:

The Alaska Natural Gas Transportation System (ANGTS): The ANGTS was approved in September 1977 by President Jimmy Carter and the U.S. Congress. The proposal envisions a 5,000-mile joint U.S.-Canadian overland pipeline that would deliver up to 2.5 Bcf/d to the Lower 48. Portions of ANGTS already have been completed, with more than 2,600 miles along two legs from Alberta into the United States. The statutory framework between Canada and the United States also still exists. However, this project has languished and environmental reviews still have not been completed. Costs for the unbuilt segments range between $7-$11 billion.

Central Pipeline Route: This would follow the ANGTS to just below the Arctic National Wildlife Refuge, then travel southeast through the Yukon Flats National Wildlife Refuge into the Northwest Territories and south into the Mackenzie River Valley into Alberta. This has languished mostly because of environmental protests of the route and less political support.

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