American legislators stand warned again that they will do no favors for the proposed Alaskan natural gas pipeline if they persist in trying to nail down a route chosen by what it does for political constituencies.

John Carruthers, program manager at BP for the Alaska Gas Producers Pipeline, delivered the warning in Calgary after the U.S. Senate voted to incorporate an Arctic route designed to maximize northern employment and gas service into omnibus energy legislation.

“We are encouraged that there is a lot of discussion,” Carruthers told a well-attended conference of northern industry, government and native leaders held by The Canadian Institute. But he also promised that BP will do its best to make sure there is plenty more discussion about gas industry needs as the legislation makes its way through Congress.

“Anything that limits choices is not positive,” Carruthers said, acknowledging the Senate’s vote for a route along the Trans Alaska Pipeline System for oil and then along the Alaska Highway as the one that spells the most benefits for state residents. It also does the most for Canada’s Yukon Territory, where Premier Pat Duncan again endorsed the approach.

Carruthers made it plain that the Alaskan project is in no condition to make any commitments. He reported that the producer pipeline group of BP, Phillips Petroleum and ExxonMobil is disbanding after a US$100-million feasibility study last year by about 800 experts from 100 companies concluded that an Alaskan gas development is not yet commercially viable.

“The risk and reward balance is simply not sufficient to attract the multi-billion dollar investment we would need,” Carruthers said. “That is not to say we are giving up. BP is just as committed today as it was a year ago — perhaps even more so.” He said BP staff will continue to work on the Alaskan plan. The next effort will concentrate on finding ways to cut costs and recruiting support from U.S. state and federal authorities for a version of the project that puts industry interests first.

On the political front, Carruthers said the Alaskan producers’ idea of “active support” from all jurisdictions stops short of subsidies, but makes the rules as accommodating as possible. The requests include enabling U.S. federal legislation to create a clear and timely process, a more efficient regulatory regime in Canada and a predictable fiscal and royalty regime in Alaska. At the state level especially, Carruthers said the project requires predictable and reliable tax laws in order to avoid any repetition of Alaska’s long history of disputes and legislative changes affecting North Slope oil. The history has been “good for lawyers and bad for business,” the BP officer said: “We simply will not go down that road again.”

Carruthers said full results of the Alaskan gas feasibility study will be released soon. When asked what makes the plan uneconomic, he said the problem is not any one factor but a combination of costs, the market outlook and uncertainty over tax, royalty and regulatory regimes.

As sketched by Carruthers in Calgary, the Alaskan proposal continues to call for deliveries in the range of 4-5 Bcf/d through a monster line laid with pipe 52 inches in diameter. Besides the northern leg, the Alaska gas producers’ plan also continues to call for an entirely new express pipeline between the end of the Arctic connection in northern Alberta and the U.S market hub at Chicago.

Carruthers told the Canadians that the Alaskan producers are aware that there is excess capacity on TransCanada PipeLines and that Alliance Pipeline could expand. But BP, Phillips and ExxonMobil concluded that the space on the Canadian pipelines would be in use by the time Alaskan gas could flow, and its volumes would be so high that they require a separate system. Carruthers told reporters that the Alaskan group does not rule out making a deal to have the Canadian pipelines build the express line. He encouraged TransCanada and Alliance to make proposals.

About the only plan definitely rejected is the controversial “over-the-top” or ARC proposal by ArctiGas Resources of Houston and Calgary. Carruthers said the Alaskan gas producers looked at the ARC plan, which calls for a Beaufort Sea link between Prudhoe Bay and the Mackenzie Delta, then a native-owned, 100% debt-financed route for a mixed stream of gas south through the Mackenzie Valley to Alberta. Carruthers said the Alaskan producers concluded no one has yet come up with a better proposal to serve them than the giant they have been considering.

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