|
Debate engines revving up TransCanada, Enbridge dispute on Alaska gas line rests on legality of 1977 law Gary Park For Petroleum News
TransCanada is adamant it has right on its side, not to mention a wealth of history as a natural gas transporter.
Enbridge scoffs at TransCanada’s legal arguments and counters the claims of experience by rolling out its own record as the only Canadian pipeline company to operate in the north and Arctic.
And, after a lull of two years in the back-and-forth between the two Calgary-based companies, there is every reason to think they will lock horns again now that Alaska Gov. Sarah Palin and her administration have urged state lawmakers to award TransCanada the license to build a 1,700-mile gas line from the North Slope through Canada to the Lower 48 along with up to $500 million in state reimbursement.
While TransCanada has rated Palin’s announcement as a “positive step forward,” it leaves no doubt that shipping commitments from North Slope gas owners BP, ConocoPhillips and ExxonMobil are essential to get financing and embark on the construction stage, or government guarantees of those commitments.
Otherwise, TransCanada is ready to make available an equity stake in the pipeline to producers who commit volumes in the first open season — a negotiating offer that undercuts Enbridge’s assertion that it is on better terms with the producers than TransCanada.
Northern Pipeline Act rights will be legal issue in Canada Within Canada, the real showdown will be over the legalities of a 30-year-old piece of legislation that gives TransCanada the exclusive right to build the Canadian segment because it owns certificates originally granted to Foothills Pipe Lines, now a wholly owned subsidiary of TransCanada.
TransCanada says the certificates awarded under the 1977 Northern Pipeline Act remain valid because they have no expiration date.
In addition, it claims to have spent more than C$2 billion over the years to retain those rights, including the construction of the prebuild section from central Alberta to deliver up to 1.4 billion cubic feet per day to various U.S. markets.
TransCanada says the Foothills system was built in anticipation of an eventual connection with a pipeline from the North Slope and to that end it has worked with aboriginals whose lands an Alaska line would cross.
Enbridge asserts that so much time has elapsed that the Canadian government should direct the National Energy Board and the Canadian Environmental Assessment Agency to allow a fresh round of proposals through a “modern, efficient and transparent regulatory process.”
It says the Alaska pipeline proposal needs to be updated to dovetail with U.S. Federal Energy Regulatory Commission policies and the North American Free Trade Agreement.
And says only through an open competition can the project achieve the full economic benefits that are available, ensure full aboriginal participation and comply with contemporary environmental assessments and practices.
Enbridge is emphatic that “no company has the exclusive right to move Alaska gas in Canada.”
It argues that the Alaska system needs to face key issues of economics, supply and competition that have changed so drastically since the 1977 NPA was passed.
Government support an issue TransCanada believes it has tacit Canadian government approval in a letter from former Prime Minister Jean Chretien, who left office in 2005, supporting the firm’s rights under the NPA.
Enbridge has drawn strength in recent years from comments by ExxonMobil that this is the time to consider all options to commercialize Alaska gas and improve the chances of developing the North Slope’s stranded gas.
While the NPA may have been far-sighted a generation ago, the current administration of Prime Minister Stephen Harper has been reluctant to take a stand, despite more than two years in office.
Three years ago, Enbridge Chief Executive Officer Pat Daniel said he understood the government was close to declaring its intentions. In a letter at that time to 10 federal cabinet ministers, he said relying on the NPA would not gain the “commercial support required” for a pipeline.
“The regulatory and litigation risks associated with the NPA will result in the project not moving forward, with consequential lost benefits to Canada and higher gas costs for Canadian consumers,” Daniel said.
Enbridge made several overtures to cooperate with TransCanada, the Alaska producers and other stakeholders in forming a partnership — an offer TransCanada spurned, saying Enbridge had not established itself as a “critical player” in the project.
While the waiting game goes on, Enbridge is back on the public debate trail, with a company executive appearing for the first time in more than a year outside government chambers in Alaska to speak to the Alaska Support Industry Alliance in late May.
| 