A gas pipeline project from Alaska’s North Slope to Lower 48 markets is creeping toward dueling open seasons while the Mackenzie Gas Project (MGP) to tap the Canadian Arctic was recently pushed back another four years to 2018. Blame it on the regulatory process in Canada, TransCanada CEO Hal Kvisle told a Houston audience Wednesday.

MGP has “been through the most horrendous regulatory process that mankind has ever invented,” Kvisle told attendees at Pipeline & Gas Journal‘s Pipeline Opportunities Conference.

TransCanada holds the state concession to construct the Alaska gasline and it has a partner in ExxonMobil Corp. (see NGI, Aug. 3, 2009). On Wednesday the partner’s open season plan was approved by the Federal Energy Regulatory Commission, and the open season is planned for this summer. That’s lightning speed compared with MGP.

“We’re disappointed any time a regulatory process takes that long,” Kvisle told NGI. “We don’t blame the individuals on the [MGP] Joint Review Panel. This is a situation created by the government of Canada and a total lack of organization and capability when it comes to putting together something like this. This is no surprise to them. I deliver that message to them directly all the time. And the cabinet ministers appreciate it and they understand it and they’re working to try to improve the regulatory process in the frontier regions of Canada.”

Late last month Canada’s National Energy Board predicted that regulatory reviews in the country would proceed more quickly following the adoption of efficiency measures by the Conservative government (see NGI, March 29). The measure comes too late to accelerate development of MGP (see NGI, March 22), and Kvisle views it with a skeptical eye.

“I’m very enthusiastic about it, but I’ve been through that exercise as well,” he said. “We did a regulatory streamlining exercise in Alberta 10 years ago. (Before I was at TransCanada I was an upstream guy, and these were regulations around drilling and development.) We identified several hundred regulations that everybody agreed were no longer necessary, and after five years of work none of them were repealed. The problem is that most regulations are underpinned by legislation, and in order to get rid of the regulation you have to get legislative change. And you know how difficult that is.

“I don’t want to pour cold water on [the latest effort at streamlining] because it’s an absolutely necessary thing, but this is not something that’s going to improve the prospects in the next year or two. This is going to take five or six years.”

MGP has been something of a star-crossed project anyway since a review of the proposed pipeline in the 1980s found that it was not in the national interest as it would be harmful to the Aboriginal people whose land it would cross. Kvisle said the Aboriginals now back the project, “but because a formal decision had been reached that it was not in the national interest, they now have to go through a very rigorous process to demonstrate that it is in the national interest. It’s actually more complicated than just the application; you’re actually reversing a previous finding. And none of that applies to the Alaska project through Canada.”

Indeed, the Alaska project would move North Slope gas that is currently being reinjected during the course of oil production while there currently is no production to support MGP, Kvisle noted. “In fact, 8 Bcf/d comes out of the ground [in Alaska] every day, and it’s all reinjected back into the reservoir,” he said. “At some point that continuous reinjection of gas doesn’t make as much sense and so it’s time to start taking some of that gas off and sending it to market.

“Whereas in the Mackenzie there is nothing there. All the discovery wells that were drilled were abandoned and there are no roads; there’s no infrastructure. Except in the frozen winter there’s no way of getting to the locations. And so you’ve got a multi-billion-dollar investment right in the development in the Mackenzie.”

And an Alaska pipeline was determined to be in the national interest about 20 years ago, and that finding still stands. “So all we have to do on the Alaska project is the normal construction permitting that you would require on any pipeline in Canada or the U.S., and we can typically get through that process in a couple of years,” Kvisle told NGI.

At the conference TransCanada vice president and head of Alaska operations Tony Palmer said the company has actively sought the participation of BP plc and ConocoPhillips in its projects and has offered the two companies — backers of the competing Denali pipeline project — an equity stake in the TransCanada line.

During his presentation Kvisle sought to dispel doubts that Alaska gas will be needed in light of all the gas production from unconventional shale plays in the Lower 48. He predicted that to accommodate demand growth — mainly driven by gas-fired power generation — the upstream will have to bring on 15-16 Bcf/d of new supply every year. “Over a five-year period you need 70 Bcf/d to stay flat,” he said, noting that there is indeed room for 4 Bcf/d of gas from Alaska.

Kvisle said he expects demand for gas from the industrial sector to grow 1-1.5%/year and for residential and commercial demand to increase at the rate of population growth. With more gas coming from shale plays, Kvisle said he expects the power sector’s thirst for gas to continue to grow as it did from about 9 Bcf/d in the 1990s to about 20 Bcf/d currently.

“People are willing to stand up and sign contracts to underpin gas-fired power generation because in most markets it’s the best alternative,” he said.

The Federal Energy Regulatory Commission last week approved, with two modifications, TransCanada’s open season plan, saying it “generally complies” with the open season regulations. However, two modifications are required, FERC said in its order. “First, TransCanada must immediately open its data room to allow prospective bidders sufficient time to review needed information, and secondly, the company must make certain revisions to its plan to comply with the Commission’s Standards of Conduct,” FERC said. An open season notice is expected to be launched by April 30 with closing around July 30, the Commission noted. Denali — The Alaska Gas Pipeline LLC, is expected to begin the FERC open season process in the next few weeks (see NGI, Jan. 18).

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