With a striking new drilling success confirming that thelong-awaited time has arrived for making a start on developingnatural gas in the Canadian North, natives and authorities thereare laying out welcome mats.

As a consortium led by Chevron Canada Resources tested itssecond big discovery well near Fort Liard in the southwesternNorthwest Territories, the federal Department of Indian Affairs andNorthern Development agreed to let the group go ahead with aproduction project triggered by the group’s spectacular first findlast year. Rather than make the companies wait for completion of anelaborate environmental and land-use strategy, Northern DevelopmentMinister Robert Nault accepted pledges that they will co-operatewith a planning effort getting under way this winter. Naultratified a favorable decision earlier on the Chevron group’sproject by the territorial government’s Mackenzie ValleyEnvironmental Impact Review Board.

The new, C$9 million (US$6.2 million) well confirmed that aproverbial “elephant” of a gas find has been made. Restricted-flowtests of Fort Liard M-25 yielded flows of 28 MMcf/d, prompting thegroup to predict it will deliver 50-75 MMcf/d when a productionsystem is installed. The second success approaches the scale of thegroup’s initial K-29 discovery, a C$16 million venture into remoteand mountainous terrain that found reserves estimated at 400-600Bcf. It ranked in the top one-tenth of 1% of the 74,000 gas wellsdrilled to date in Canada.

The development plan calls for a 20-mile pipeline link to thetip, just inside the Northwest Territories, of Westcoast Energy’snorthern-most branch of the Canadian gas grid. From a processingplant at Fort Nelson in northeastern British Columbia, the northerngas will be able to travel to markets across the continent via avariety of routes including the new Alliance Pipeline which isexpected to be completed to Chicago in October. The Liard projectcalls for construction of the pipeline over the next three months,with production beginning in May.

Chevron Canada, a wholly-owned subsidiary of its SanFrancisco-based namesake, operates the project as senior partnerholding 43% ownership, with minority backing from prominent Calgarygas hunters including Purcell Energy Ltd., Berkley Petroleum Corp.,Anderson Resources, Paramount Resources, Ranger Oil, CanadianNatural Resources, Numac Energy, Alberta Energy Co. and TalismanEnergy.

At the same time as the group reported its drilling results, theDene community at Fort Liard affirmed it is not only ready fordevelopment – it wants home-grown native businesses and workers totake a lead in spreading the gas industry across the North as faras Alaska. Local Dene Chief Harry Deneron praised the CanadianChevron for a masterful performance in community relations, whichhas included helping to train local workers and making sureaboriginal business enterprises get in on the action. The region’sAche Dene Koe community, through ADK Holdings Ltd., has enterprisesin oil and gas-field construction, camp management and catering,fuel supply and air services, as well as ventures with wellcontractor Akita Drilling, two helicopter companies andAlberta-based Mullen Trucking.Deneron said he hopes to lay groundfor expanding the budding native industrial empire when he playshost later this month to a meeting of 40 northern aboriginalleaders. Collaboration on pipeline, oil and gas projects tops theagenda.

In a statement sent to the industry capital of Calgary, ADKpredicted “these discussions could open the way to gas developmentsnot only in northern Canada, but potentially link proven reservesin Alaska.” Two rivals – Foothills Pipe Lines and Arctic Resources(Alaska) Co. are courting support for a revival of 1970sgas-transportation megaprojects spanning the Canadian North andAlaska. Foothills is attempting to revive the 1970s Alaska Highwayroute and the Alaska Natural Gas Transportation System, of which itis now the sole owner.

Arctic Resources, a group that includes Houston-based MunicipalEnergy Resources Corp, is promoting a different pipeline route -subsea between Prudhoe Bay and the Mackenzie Delta, then souththrough the Mackenzie Valley – and radically different control.Arctic Resources is inviting Canadian and Alaskan natives to takeon 100% ownership of the pipeline system using 100% debt financingtechniques developed by Municipal Energy for government-owned,bond-financed U.S. gas projects. Discussions are continuing acrossthe North.

In Ottawa, Nault pledged that preparations for development willbe given high priority by his native affairs department andEnvironment Canada. A target of March 31, 2001, has been set forcompletion of a “cumulative effects assessment and managementframework” to guide industrial projects. Work has begun withformation of a “multi-stakeholder working group” withrepresentatives of industry, aboriginal, government andenvironmental interests.

At the same time, a vast supermarket of additional northernexploration prospects is being opened. Northern Canadianauthorities invited companies to select drilling targets that theywould like to see posted for a new auction of resource rights thisspring. The invitation covers a vast region of the centralMackenzie Valley, stretching from Inuvik on the Delta south almostto Alberta and from the Yukon boundary to the eastern shores ofGreat Bear Lake.

Gordon Jaremko, Calgary

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