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Enbridge: Cost-plus building days gone Pipeline companies have to keep costs down, Canadian company tells legislators, expects negotiated shipping rates on Alaska line Kristen Nelson Petroleum News
Alaska legislators have received briefings on gas pipeline issues from a number of proponents and April 13 they heard from Enbridge, one of two Canadian pipeline companies interested in building a line to move Alaska North Slope gas to the Lower 48. The company’s Alaska gas project manager, Ron Brintnell, was in Juneau for a talk to the House Republican open caucus, which has been hosting the presentations.
Enbridge has ownership interests in more than 50,000 miles of North American pipelines, Brintnell said. The company plans to build gas lines more than the length of the line from Alaska to Alberta over the next five years, owns Canada’s largest natural gas utility and is working with regulators on allowing utilities to take long-term contracts, an issue important for ANS gas contracts.
Asked by Rep. Ralph Samuels, R-Anchorage, about claims by the North Slope producers that they need to build the line in order to control costs, Brintnell said pipeline companies have to keep their costs down.
Enbridge was the first company in Canada with a negotiated settlement for transportation rates, he said, adding that the “days of cost-plus” construction are gone.
Pipeline companies have to file cost of service tariffs, Brintnell said, but most shipment now is on a negotiated basis, even though there is a tariff. “We do have incentive to control costs,” he said.
Producers all out of Alliance Enbridge owns 50 percent of the Alliance pipeline from British Columbia to Chicago, a line which, like the proposed Alaska gas pipeline is high pressure and liquids rich, he said.
Producers were the driving force behind the Alliance line, Brintnell said: they wanted to make sure the pipeline met their needs. Originally Enbridge had 11 percent ownership in Alliance and was the only pipeline company among the original 22 owners, most of whom were producers.
The producers drove the process to get the line moving and the design, he said, but by the time Alliance went into production in 2000 the producers had exited.
“They didn’t need to own it,” he said, but they wanted to make sure it met their needs. “And we think — and obviously we don’t know for sure — but we think the Alaska line might progress in a similar fashion.”
Samuels asked if the producers retained enough control of the Alliance line to veto expansions. Brintnell said no, that Enbridge now has 50 percent ownership and the other 50 percent is owned by a publicly traded trust.
Rep. Mike Kelly, R-Fairbanks, asked if it was known from the beginning that the producers wouldn’t retain ownership of Alliance. Brintnell said he was not aware of a preplanned departure by producer owners, who moved out of ownership at different times. Producers were there to get the project moving and those who didn’t need to be there and thought it was moving got out sooner, he said.
Meeting needs of Canadians Brintnell said he knows Alaskans are focused on having the gas pipeline meet the needs of Alaskans; the same is true on the Canadian side of the border. He said Enbridge has held discussions with federal and provincial governments and First Nations’ groups.
Canadians expect to participate in construction, but that doesn’t mean fewer jobs for Alaskans, because there aren’t enough Canadians to do the Canadian work. You’re not going to see Canadians moving into Alaska, more likely Alaskans will have the opportunity to come to Canada and work, he said.
Like Alaska, Yukon expects to get Alaska gas off the line to meet its needs, since the province doesn’t currently have a gas supply. In the future Yukon also wants to be able to put gas into the pipeline and since there will be gas coming off the line in Alaska, he said, there should be capacity to take Yukon gas.
Brintnell also said Canadians would like the opportunity to compete to have ownership in the line.
Samuels asked how much gas Yukon would want to put into a line and Brintnell said that isn’t clear. The first well in the Yukon has just been completed and the size of the resource isn’t known, he said.
Agencies looking at both processes TransCanada holds rights to build a gas pipeline under the Northern Pipeline Act and Brintnell said Enbridge believes the act is valid.
The difference of opinion Enbridge has with TransCanada is that Enbridge doesn’t believe the act grants an exclusive right, he said.
Brintnell said the project approved by the act is not the project being talked about today and updated environmental work would be needed as well as what he called “modern” consultations with First Nations.
The act isn’t the only option on the Canadian side: several large pipelines have been built in the last five to 10 years under the National Energy Board process, including Alliance, and that process doesn’t require new legislation or new agreements with the United States, he said. The NEB process allows for competition, Brintnell said, and Enbridge thinks that breeds innovation and will result in the best project.
He also said the Northern Pipeline Act was not grandfathered under the North American Free Trade Agreement, so a project under the act could have the potential for litigation if U.S. companies were not included on the Canadian side.
Enbridge does not believe the Northern Pipeline Act provides timing advantages, Brintnell said. It could be challenged by First Nations in court and certificates could be squashed based on inadequate First Nations’ consultations. The Treaty 8 nations in British Columbia do not support the Northern Pipeline Act nor does the Yukon Aboriginal Pipeline Coalition, he said.
Enbridge doesn’t expect to go to court House Speaker John Harris, R-Valdez, asked if Enbridge would sue if the producers contracted to work with TransCanada under the Northern Pipeline Act.
Brintnell said he wouldn’t expect Enbridge to go to court.
“The one thing that we typically do not do is challenge our customers,” Brintnell said.
But he said he thinks the producers have the same concerns about the Northern Pipeline Act as Enbridge has.
Enbridge could work with TransCanada on a project other than the Northern Pipeline Act, and has partnered with them on projects in the past.
Samuels said TransCanada has said it would go to court to defend its rights under the Northern Pipeline Act, and Enbridge is saying others would sue if a project proceeded under the act, all of which creates a frustrating situation for Alaska.
Brintnell said Enbridge is not asking that the Northern Pipeline Act be set aside, nor that the Canadian government should take anything away from TransCanada. What Enbridge wants is confirmation of no exclusivity, he said.
Harris asked Chief Mike Smith of the Kwanlin Dun First Nation, who accompanied Brintnell to Juneau, if TransCanada had been in contact with him about Kwanlin Dun First Nation issues. Smith also represents the Yukon Aboriginal Pipeline Coalition, whose traditional lands will be crossed by the pipeline.
Smith said there have been discussions with the producers as well as with TransCanada. He described TransCanada presentations as “meet and greet” events. He said a lot of concerns were raised, but TransCanada simply responded that they have the ticket to build the line.
Rep. John Coghill, R-North Pole, asked how many Native groups had lands along the route and Smith said there are 10 groups along the route in the Yukon.
Smith said about 100 miles of the line would run through Kwanlin Dun lands.
Our goal is not to litigate, he said, but to find out about the line, mitigate the impacts and look at opportunities and benefits from construction and operation.
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