A price tag of C$500-$700 million (US$375-$525 million) has been put on a plan to turn the Mackenzie Delta Gas Pipeline and production project into the launching pad for significant hydroelectric development in the Northwest Territories. However, sponsors of Canada’s Arctic natural gas project are trying to figure out whether this would be an added complication or an answer to their most difficult problem of obtaining community consent to construction of its production and pipeline system.
The hydropower plan comes from Northwest Territories Power Corp., a Crown corporation of the territorial government. It includes building a weir or submerged dam across the Great Bear River in the central Territories, a power station and a transmission line through the Mackenzie Valley to Inuvik, NTPC Chairman Richard Nerysoo said.
“Technically we have the capability of delivering,” he said in an Edmonton interview as he courted support for the power plan. The concept has been under study and negotiations with communities affected for nearly two years. “We have a vision.”
NTPC’s grand design calls for the gas project to be the anchor customer for a new power grid that would expand across the territories, spread south to the northern Alberta oilsands region and eventually make exports to the United States. Surveys of the Mackenzie River and its tributaries indicate that they can generate 15,000 MW or more power than the mammoth James Bay or Churchill Falls projects in northern Quebec. The grand design is at least a quasi-official scheme. The scheme is highly popular in northern political circles as a uniquely environmental form of industrialization.
The Northwest Territories power plan relies on “run-of-the-river” technology. The system uses submerged, sometimes inflatable weirs at locations of strong natural flows such as rapids and canyons. Tall dams, deep reservoirs, hazards to wildlife and disruption of communities are eliminated. Besides working with the gas project, Nerysoo said his Crown corporation will offer investment partnerships to electricity suppliers such as Atco in Calgary and Epcor, a city-owned Edmonton power and water company with a growing portfolio of generation projects and public service management contracts elsewhere in Canada and the U.S.
The power project would give a political boost to the C$5-billion (US$3.75-billion) Mackenzie natural gas development by generating northern support for construction approvals, added Nerysoo. He is in a position to know about the political side. He was the first aboriginal premier of the Northwest Territories in the 1980s, also served as speaker of the territorial legislative assembly and remains a fixture among regional business, government and native leaders. “It creates a vested interest,” Nerysoo said.
The hydroelectric scheme spells jobs, business, energy supplies and environmental gains for aboriginal communities along the 1,200-kilometer (750-mile) route of the proposed Mackenzie Valley pipeline, Nerysoo said. As a one-third owner of the gas project, the Aboriginal Pipeline Group is encouraging the industry partners to examine the technical feasibility of the power plan and try to make a deal to build it.
“Our mandate is to maximize aboriginal opportunities and benefits through ownership in the pipeline,” group president Bob Reid said. “Use of hydropower from a project that could be at least in part aboriginal-owned would certainly be in line with our mandate.” Reid said deciding on electric or gas compressors will be up to the experts designing the Mackenzie project.
Effectively, that leaves the decision up to senior partner Imperial Oil and the Colt-KBR northern pipeline engineering alliance. Studies are under way, but it is still too early to predict conclusions, Mackenzie project spokesman Hart Searle said. The high initial cost of up to C$700 million (US$525 million) to build the proposed hydroelectric power supply for the pipeline does not automatically rule it out, said Reid, a veteran of TransCanada PipeLines who came out of retirement to run northern aboriginal participation in the Mackenzie project.
A conventional pipeline burns five per cent or more of the gas it carries in its compressors, with the fuel contributed by shippers as a payment-in-kind element in the toll structure. Rising gas prices effectively increase operating costs. At the Mackenzie pipeline’s projected full capacity of 1.9 Bcf/d, its compressors would burn 95 MMcf/d or US$475,000-worth of northern gas per day at current Henry Hub prices.
Hydroelectric power has no fuel cost, Reid pointed out. Paying for a dam and transmission lines involves inventing a gas delivery toll that spreads their construction cost over the pipeline’s life, he said. But his group will listen to the conclusions of the project technical team and not just the wish lists of northern agencies. “We want the most efficient design,” Reid said. “That’s in everybody’s interest.”
He emphasized that his piece of the northern pipeline puzzle tries to take a strictly business approach, basing its thinking on net revenues to be generated by the aboriginal pipeline ownership share. The greatest obstacle to the territorial power proposal appears to be a mismatch in timing, Reid said. The system cannot be built by the pipeline’s 2009 target date for completion, Nerysoo confirmed. As a result, the gas consortium could face extra costs for a late conversion to electric compressors. NTPC’s engineers advise it, however, that advancing compressor technology is making the idea of a convertible gas-fired system feasible, Nerysoo added.
The hydroelectric alternative is attractive to another faction with a role in the northern pipeline outcome: environmentalists from the rest of Canada. The NTPC proposal is applauded, for instance, by David Hik, an Edmonton professor who holds the Canada Research Chair in Northern Ecology at the University of Alberta. The university, a center of research and influential opinion on northern conditions and industrialization, will be home to a national secretariat that will run Canada’s contribution to the 2007-09 International Polar Year.
The territorial power plan is a recipe for cutting the Mackenzie pipeline’s greenhouse-gas emissions, increasing aboriginal participation in industry, improving Arctic engineering capabilities and starting a new generation of clean energy development, Hik predicted. “We expect to see the application documents from the Mackenzie Gas Project by the end of the year,” he said, voicing an unofficial consensus that complications faced by the MGP have caused a months-long delay in filings that were formerly promised for this summer. “Our hope is they will certainly consider this (hydroelectric power scheme) as a key component of their project,” Hik said.
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