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U.S. Ambassador Pushing Canadian Frontier Development

U.S. Ambassador Pushing Canadian Frontier Development

Interest in finally tapping natural gas on the northern frontiers of North America reaches into the inner circles of Washington, the Canadian supply community has learned.

The word has been spread twice in ways that include personal demonstrations by United States Ambassador to Canada Gordon Giffen. It was more than a bit of diplomatic adventure tourism when Giffen trekked about 1,200 miles northwest of Calgary to Fort Liard in the middle of the winter. "I learned 40-below is cold," he said. But he also indicated the U.S. has a genuine interest in the gas drilling, community relations, production development and pipeline breakthroughs being scored in the Northwest Territories by the 10-company Liard consortium led by Chevron Canada Resources. "I learned a ton about the valuation of natural gas, the Mackenzie Valley Delta analysis, potential reserves, transportation issues, pipelines, and the perspectives and interests of the aboriginal groups."

On a spring trip to Calgary, for the annual meeting of the Canadian Association of Petroleum Producers, Giffen kept any public statements so diplomatic that they were barely noticed. But there was a message between the lines. It was conveyed in meetings at inner sanctums like the Calgary Petroleum Club, where his contacts included former territorial premier Nellie Cournoyea, an Inuvialuit leader from the gas-rich Mackenzie Delta.

Giffen put his message on the line in an interview: "Let's get off the dime. Let's assess the considerations and move forward." He was referring to the resurrection of pipeline megaproject proposals to tap the northern gas reserves that the Chevron group is proving to be at last becoming available as a result of advancing technology, better sensitivity to environmental issues and vastly improved community relations. While there are competing versions, all the grand designs contemplate eventually tying in both Alaskan and northern Canadian gas. Giffen acknowledged the legacy of resistance to Arctic gas projects on grounds that they involve industrializing sensitive frontier terrain. He said, "This is not something being imposed on Canada. It's opportunities that we need to talk about together."

Giffen stressed that the U.S. is interested in both Alaskan and Canadian gas sources. He reported learning a startling fact, at least by Washington standards. As much gas has been re-injected annually into the Prudhoe Bay oilfield as Canada uses in a year (about 3 Tcf). That gas is coming available because it is no longer needed as a driver for fading Alaskan oil production.

The revival of interest in northern gas is a sharp about-face that has been gratifying to long-time advocates of frontier development such as Foothills Pipe Lines Chairman Bob Pierce, who has been busy in recent months on a long string of meetings in the north as well as in the Canadian and U.S. capitals. Only eight years ago, the U.S. Office of the Federal Inspector of the Alaska Natural Gas Transportation System urged the president to bury the northern pipeline project as a white elephant. It was said that ANGTS and the supporting 1977 pipeline treaty with Canada had been rendered uneconomic and a burden on both countries' industries and governments by energy free trade and gas surpluses. ANGTS remains on the books. The president rejected the inspector's advice, thanks not least to efforts by the megaproject's Canadian sponsors: Foothills and its owners, TransCanada PipeLines and Westcoast Energy.

Giffen made it plain Washington is not afraid that southern U.S. or Canadian gas reserves are about to run dry. The ambassador, who has made a study of these issues, knows the difference between geological resource endowments and the inventory of reserves booked with engineering verification as known to be available for production at current prices. In the U.S., "there's always been an estimate that reserves are enough to keep us going for eight more years. That's been the story for 75 years," Giffen observed.

The reason for the reviving interest lies in a broader view of energy trade that was confirmed by the painful winter price spikes, especially for heating oil along the Atlantic seaboard. There is a desire to ensure the U.S. does not keep all its energy eggs in one basket. The ideal is competition among suppliers. Giffen said "we need to work together to harmonize regulatory regimes to make efficient transactions possible, to make sure we manage reciprocal energy interests in a way that enhances the prosperity of North America and helps us attain more energy independence as a continent."

The ambassador to Canada predicted, "If we expand on the options available in North America we will reduce the potential impact of OPEC getting together and affecting energy prices the way they did most recently."

In encouraging even closer energy ties between Canada and the U.S., Giffen stressed that both sides stand to gain. "This is not a one-way street." He pointed out that electricity flows north from the U.S. into British Columbia every winter, and dramatically into Quebec from Vermont during emergencies such as the 1998 ice storm that curtailed heat, light and power supplies for millions of households in central Canada. Giffen added "the economics of the relationship flow north. There are jobs and prosperity in Canada because there is a market in the U.S."

Gordon Jaremko, Calgary

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