November 15, 2001 --- Vol. 7, No. 142November 2001

U.S., Canadian pipeline firms sign MOU to build Alaska Highway gasline

Six powerhouse United States energy firms and Canada's three dominant gas pipeline companies are pulling out the stops to ensure North Slope gas is delivered to Canada and Lower 48 markets by 2008.

In a benchmark deal announced Nov. 15, Calgary-based Foothills Pipe Lines Ltd. said the memorandum of understanding represents a “giant step forward” for the Alaska Highway pipeline.

It said the companies are proceeding immediately with firming up the long-standing proposal for transporting Alaska gas and expect to submit their plans to the North Slope producers by year's end.

“Once agreement is reached with the producers, the companies intend to move forward with the project,” setting 2008 as the start-up target, Foothills said in a statement.

The deal, which a Foothills spokesman said has been “in the works for several months,” is aimed at the nine companies building, owning and operating a highway delivery system.

The partners are subsidiaries of The Williams Companies, Duke Energy, Sempra Energy International, Enron (which is being taken over by Dynegy), PG&E Corporation and El Paso Corporation — a galaxy of the major U.S. pipeline and broad-based energy companies.

The Canadian companies are Foothills and its joint owners, TransCanada PipeLines and Westcoast Energy (which has scheduled a Dec. 15 shareholders' meeting to approve a takeover by Duke Energy).

Foothills chief executive officer Dennis McConaghy, said all of the MOU signatories, including their predecessor companies in some cases, have been “involved in developing the Alaska Highway project at one point.

“Through this agreement, the companies are demonstrating their intent to renew their commitment to the commercialization of vital natural gas infrastructure from the Alaska North Slope to Canada and the Lower 48 states,” he said.

The Foothills statement said the MOU establishes the “key principles for re-enlisting” in the partnership to build the Alaska portion of the highway project.

It said a “key element” is that current and re-enlisting companies “are committed to eliminating historic and other commercial barriers to construction” of the pipeline.

“They have not contacted the producers as of yet. Or, I should say, this is the first I have heard of it. … They have not contacted our project team,” Curtis Thayer told PNA Nov. 15. Thayer is a spokesman for the Alaska Gas Producers Pipeline Team, a joint study group representing the North Slope’s three major producers, BP, ExxonMobil and Phillips.

Foothills’ announcement, Thayer said, “does not affect what we are doing here and what we expect to accomplish by years’ end.

“But one thing we have said from day one is that we have made no conclusions or assumptions about who would ultimately own a gas pipeline. That discussion has not taken place. We would welcome anyone who can bring value to the table,” he said.

The deal comes at a time when the gas study group has estimated that a highway pipeline would cost more than going “over-the-top” with a line from the North Slope, under the Beaufort Sea and connecting with Mackenzie Delta gas in a delivery system through the Mackenzie Valley, although Thayer has said the gas team is still examining the economics of the two routes as part of studying the feasibility of developing Alaska gas.

Meanwhile, the Mackenzie Delta Producers Group and First Nations occupying the bulk of the Mackenzie Valley right-of-way have reached their own agreement setting the stage for an aboriginal equity stake in stand-alone Canadian pipeline, plus economic benefits, creating a growing sense among analysts that the Delta could come on stream before the North Slope.

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