A 32-year veteran of efforts to build an Arctic natural gas pipeline is betting against one being constructed from either Alaska or the Mackenzie Delta. Harvie Andre, chairman of Arctigas Resources Corp., said “it’s just a small bet (C$100, US$66). I hope I’m wrong. But it smells like the 1970s all over again.”

Politicians in the U.S. and Canada are creating “insurmountable risks,” Andre told a gas pipeline and storage conference held in Calgary by the Canadian Institute.

In the U.S., Andre said the project killer is insistence by Alaskan state and federal representatives on milking southern gas markets for the highest conceivable northern economic benefits and employment. The result is an impossibly expensive scheme, priced in the range of US$15-20 billion, for a pipeline along the Alaska Highway, a new line to Chicago, and a federally-subsidized floor price for 4.5 Bcf/d. All three owners of Alaskan reserves, BP, ConocoPhillips and ExxonMobil, declared the plan uneconomic under reasonably foreseeable market conditions last year. ExxonMobil also rejected the subsidy plan, Andre pointed out.

In Canada, Andre blamed murky prospects for a Mackenzie Valley pipeline on failure by all concerned to do a “reality check.” He predicted gas prices will only stay high enough to justify the most efficient version of an Arctic production and pipeline megaproject. The double-digit peaks hit in the market spike of 2000-01 permanently destroyed about 2 Bcf of gas demand and ended in a slump, he pointed out.

He predicted a ceiling will be kept on prices by competition including liquefied natural gas from overseas and coalbed methane production in the U.S. and Canada.

Andre continues to promote the Arctigas “over-the-top” proposal, a 21st-Century version of the original northern project he worked on as a Calgary engineering professor and consultant in the early 1970s. It calls for a single pipeline to carry both U.S. and Canadian arctic production along a route that would start at Prudhoe Bay, skirt the Beaufort Sea coast to the Mackenzie Delta, then run through the Mackenzie Valley to the established gas grid. While Andre watched from Ottawa as a Member of Parliament and cabinet minister for two decades, the original scheme splintered into ancestors of current proposals for separate U.S. and Canadian pipelines, and then succumbed to falling gas prices and rising northern native opposition.

Andre said he found it hard to believe a winter flurry of unofficial claims that a construction deal has been done by the northern Aboriginal Pipeline Group, TransCanada PipeLines and the Mackenzie Delta gas consortium of Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil. He voiced doubts that TransCanada will be willing to pay for a promised aboriginal one-third interest in the pipeline while leaving ownership with the natives in the way they say they must have.

Andre said the business plan the aboriginal group presented in Ottawa, in an unsuccessful attempt to obtain federal financial backing, also foreshadowed conflict and confusion. The plan specified that Alaskan gas would not flow in at least the natives’ share of the Mackenzie Valley pipeline, he said. He predicted, “Without co-operation between Canada and the United States, the most likely outcome is no pipeline for the foreseeable future.”

Strict silence on northern deal-making prevails at TransCanada. Its vice-president for gas strategy, Steve Becker, said a confidentiality agreement prevents any disclosures about continuing negotiations.

Becker said the way to make the Arctic project work is to incorporate TransCanada into both the Alaskan and Mackenzie Delta plans. TransCanada forecasts that its Alberta grid and eastbound mainline would have spare capacity even if they carried all the 1.2 Bcf/d of gas intended to move through the Mackenzie Valley. Becker said the system may have room for all of Alaska’s gas too, depending how producers do at maintaining western Canadian production by drilling to counter the projected annual decline of current capacity by 3.7 Bcf/d.

TransCanada proposes to receive arctic gas into its Nova grid in northwestern Alberta, transmit it to Fort McMurray then carry it south along the eastern side of the province to the start of its mainline. Any new capacity needed in Canada to relay northern production to U.S. markets could be installed efficiently in established rights-of-way with the costs “rolled in” or spread out across the entire system as additions to current tolls, Becker said.

©Copyright 2003 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.