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Vol. 10, No. 6 Week of February 06, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Bold strokes

TransCanada rebuffs claims that 1978 legislation is flawed; says it’s best mechanism for Canada; company ready to build entire Alaska gas pipeline

Gary Park

Petroleum News Calgary Correspondent

TransCanada will not only cling to 27-year-old legislation giving it the right to build the Canadian segment of the proposed Alaska gas pipeline but is ready to build the entire system if that’s what the Alaska government wants, company executives said Feb. 1.

They were unyielding in their view that the 1978 Northern Pipeline Act is the only valid mechanism to build the Canadian portion, and that it offers what the marketplace wants — certainty.

Chief Executive Officer Hal Kvisle told a conference call that the act “remains in effect and it is the mechanism under which the balance of the Canadian section of the Alaska pipeline will be constructed.”

He said other parties suggest the legislation is “somehow flawed or out of date … we don’t agree with that. We are confident that the NPA will prove its worth as the very best regulatory mechanism for the construction of the Alaska pipeline.”

Chief Financial Officer Russ Girling said TransCanada is committed to building the pipeline from the Alaska-Yukon border to central Alberta, where it would feed into the TransCanada-owned Foothills Pipe Line system to the United States.

He said TransCanada has “certain rights and certificates” for the pipeline route across Alaska state lands that it is “willing to share with anyone who wants to collaborate with us.”

If the Alaska government wants TransCanada to build the entire pipeline “we have the capacity to do that,” Girling said.

Kvisle and Girling said TransCanada will continue working with the state of Alaska, the government of Canada and the North Slope gas producers to “bring the project to fruition.”

Kvisle said the Northern Pipeline Act is an “extraordinarily efficient regulatory mechanism, a special purpose mechanism to expedite the approval and construction of the Alaska pipeline through Canada.

“That is the arrangement and that is what TransCanada intends to do,” he said.

Kvisle also noted that TransCanada is strongly placed to get Alaska gas to Lower 48 markets through its US$1.7 billion purchase last year of Gas Transmission Northwest, which can ship up to 3 billion cubic feet per day to California from the British Columbia-Idaho border.

Robert Day, TransCanada’s vice president of government relations, said the so-called “pre-build” legs from west-central Alberta to markets in the U.S. Midwest, the Pacific Northwest and California have been expanded five times under the Northern Pipeline Act and now export 3.3 billion cubic feet per day of gas from Western Canada, establishing the validity of the act.

“We are very confident it is going to provide the regulatory certainty that producers are looking for,” he said.

Day said TransCanada has asked the Canadian government to ensure the marketplace understands that there is a mechanism in place that will answer the certainty sought by the market.

The “pre-build” is part of about C$2 billion Foothills, now wholly owned by TransCanada, has invested in the hope of eventually carrying gas from the North Slope.

Enbridge disagrees

On the other side of the fence, Enbridge, with BP Canada as a vocal supporter, wants Canada’s National Energy Board to take over responsibility for approving and regulating a pipeline, supplanting the Northern Pipeline Agency, which was created under the Northern Pipeline Act to oversee planning and construction of the Alaska pipeline through Canada.

Arguing the 1978 legislation is outdated, Enbridge is lobbying for a green-field project to be permitted under the National Energy Board.

Enbridge Chief Executive Officer Patrick Daniel warned the week of Jan. 24 that if the Canadian government relies exclusively on the Northern Pipeline Act it will cause uncertainty and delay that could even stall the pipeline project.

He said that using a more traditional approval process led by the National Energy Board would significantly reduce “legislative, litigation and regulatory uncertainty.”

Canada’s Natural Resources Minister John Efford said in January he had ordered a review of the Northern Pipeline Act, but his department is unable to say when a recommendation will be taken to the federal cabinet.

In answer to an analyst’s question, Girling declined to speculate which option the government is likely to favor or whether an adverse decision would result in legal action by TransCanada.

“We will assess our options at that time,” he said.

But Girling rejected a suggestion by one analyst that TransCanada is in a dispute with Enbridge, or that ill-will built up over recent years between TransCanada and gas producers during toll hearings for TransCanada’s mainline system are “starting to impact its other businesses.”

He said the Alaska tensions stem from “differing views of history” over the Alaska pipeline and are not connected to rate-of-return issues in Alberta.



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