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Alaska, Yukon, NWT on gas pipelines State, Canadian governments, provide updates on proposed Alaska North Slope, Mackenzie Valley gas pipeline projects Kristen Nelson Petroleum News
Officials from Alaska, Yukon and the Northwest Territories spoke at the second annual American Conference Institute Alaska Oil and Gas Symposium in Anchorage Sept. 18, providing updates on the status of both the Alaska North Slope gas pipeline and the Mackenzie Valley gas pipeline (also see story on federal gas pipeline update in this issue).
The State of Alaska got alignment with the North Slope producers on a natural gas pipeline project, but “did a miserable job” of conveying the economic realities of the project to the Alaska public, says Alaska Department of Natural Resources Commissioner Mike Menge.
The state reached agreement on a fiscal contract with North Slope producers BP, ConocoPhillips and ExxonMobil, but the contract failed to get the approval it needed from the Alaska Legislature. Since Gov. Frank Murkowski lost in the August primary, the fate of the contract falls to the next governor.
“We certainly came close this time,” Menge said, referring to efforts since the late 1970s to commercialize North Slope natural gas.
There is a solution, but “you can’t wish a pipeline into existence” and you won’t get to where you’re going if you allow yourself to be “blown by the wind of popular opinion,” he said.
Menge said some people believe a pipeline to take North Slope gas to markets in the Lower 48 is “wildly economic.” The state didn’t find that to be the case in its analysis: the world is awash in gas at tidewater, he said, and recent high prices have resulted in both demand destruction and trillions of cubic feet of gas trying to find its way into U.S. markets.
Menge pegged the project, formerly estimated at some $20 billion, at $25-$30 billion, and said while some have suggested the state could take the companies to court to force development of the project, the proposal the Murkowski administration developed avoided the courts and sought alignment between the economic interests of the North Slope producers and the the state.
“There’s nothing easy about a $30 billion project,” he said, but with aligned interests and recognition of the economics, the interests of all partners can be protected and the project can succeed — and the tariff can be the lowest possible.
Menge also said that the notion that Canada will work against the project denies what is clearly in Canada’s best interests because the Alberta hub needs more natural gas to run at capacity.
Yukon will be ready Brian Love, director of oil and gas and pipeline business development for the Yukon Department of Energy, Mines and Resources, said both the Alaska and Mackenzie gas pipelines are very important to the Yukon.
There is no formal regulatory process under way in the Yukon for the Alaska highway project, he said, but preparatory work is ongoing. He said Yukon has been championing the project:
“The Yukon will be ready for this project,” he said, and other governments must also be ready.
Yukon lists seven key pipeline interests on its Web site: fiscal advantage; social investment; environmental stewardship; community and First Nation interests; clear and efficient regulatory process for the Alaska Highway pipeline project; connecting Yukon’s natural gas; and access to energy from the Alaska Highway pipeline project.
The last two points mirror Alaska concerns: replacing diesel in communities not on the hydro grid to reduce power and heating costs and providing access to natural gas to enhance resource development; and access to pipelines to move Yukon natural gas to market. Currently only the Liard Plateau in southeast Yukon is connected to outgoing gas pipelines.
NWT: Race for window Brendan Bell, minister of Industry, Tourism and Investment for the Northwest Territories, said moving Arctic gas to market isn’t a competition between the Mackenzie and Alaska Highway pipelines, but a race by both to catch the window for marketing gas. (See related item on page 1 of this issue in Oil Patch Insider.)
Liquefied natural gas is coming and is in competition with Arctic gas, Bell said. While some regasification facilities will be built, LNG is only part of the North American energy solution — but, he warned, “If we delay LNG will in fact eat our lunch.”
Steel prices up 150 percent since 2001 — with at least 20 percent of project costs from steel — combined with skilled labor shortages are real challenges, he said.
Hearings under way for the Mackenzie project are taking longer than planned, Bell said, and cost estimates for the project are being revisited (see sidebar this page).
While the Canadian federal government over the years has done as much to stall northern development as to encourage it, Bell said Canadian Prime Minister Stephen Harper suggested recently in a speech in Yellowknife that he thought the Mackenzie project was in the national interest.
Bell said the Mackenzie should be viewed as a dry run for the Alaska Highway project, and with the NWT population at 42,000 and an unemployment rate of 5 percent, more people will be needed for the Mackenzie project. He said workers from Alaska and the Yukon with experience in cold-weather construction would be a good fit for the Mackenzie pipeline — as would workers from the Northwest Territories for the Alaska Highway pipeline.
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