September 21, 2001 --- Vol. 7, No. 123September 2001

Duke blazes trail into Canada by grabbing Westcoast Energy

Duke Energy has made the first raid from the United States on Canada's pipeline infrastructure by bidding $8.5 billion for Westcoast Energy that might give it a major role in shipping Arctic gas from the North Slope and Mackenzie Delta.

With the backing of Westcoast's board of directors, Duke is offering C$43.80 a share, a 15 percent premium on the Sept. 20 closing price, and is ready to assume $4 billion of Westcoast debt.

Duke president, chairman and CEO Richard B. Priory said his company's goal is to build a North American energy network using Westcoast's 75 percent stake in the pipeline delivering Sable gas field from offshore Nova Scotia to New England and its proposals to build pipelines out of the Arctic.

Vancouver-based Westcoast is a joint partner with TransCanada PipeLines in Foothills Pipe Lines, which has the only firm proposal to build an Alaska Highway line. The two major shippers of Canadian gas are also negotiating with Mackenzie Delta producers on a possible Mackenzie Valley line.

Duke said the combination will enable Duke to build a new transportation infrastructure "that will strengthen our ability to connect energy supply and energy markets in Canada and the United States."

"This is the construction of the first major gas and electricity company across" the Canada-U.S. border, he said.

Westcoast chairman and CEO Michael Phelps said that despite the slump in gas prices and uncertainty stemming from the terrorist attacks on the United States, he has a high level of confidence "about the growth requirement for energy, energy infrastructure and specially for the role of gas in that economy."

He said a Duke takeover of Westcoast would be an "ideal marriage," providing a solid U.S. infrastructure platform, access to premium markets in the United States, along with Canadian infrastructure which can access Canadian supplies.

If the deal is approved by shareholders and regulators, the new company will have 30,000 kilometers of major pipelines, 122,000 kilometers of gathering and distribution pipelines, 241 billion cubic feet of gas storage and annual revenues of $89 billion.

FirstEnergy Capital pipeline analyst William Lacy said pipeline deals are extremely rare because of the many regulatory hurdles.

But he said completion of the deal could trigger consolidation of other pipelines as well as utilities.

Disputes, gas prices could shelve Arctic project: Enbridge president

Talk of Arctic gas pipelines could be pushed to the back burner because of "self-interest" by a number of parties, including Alaska's political opposition to an "over-the-top" route, said Enbridge president and CEO Pat Daniel.

In addition, he said the downward spiral in gas prices, demands from aboriginal groups, a prolonged regulatory process and legislative roadblocks to route proposals all combine to raise doubts about the viability of a pipeline.

Speaking at the Northern Oil & Gas conference in Calgary, Daniel said a key issue is U.S. opposition to a pipeline from the North Slope, under the Beaufort Sea, to the Mackenzie Delta.

"It appears the state of Alaska and even the House of Representatives in the U.S. is taking a very firm position against one particular route and I think that's too local in terms of an interest," Daniel said. "I think you have to think a little more broadly."

Calgary-based Enbridge is one of Canada's three largest pipeline companies and although primarily a crude oil shipper, it operates a short gas line to Inuvik, Northwest Territories, and is talking with Mackenzie Delta gas producers about an Arctic line.

Daniel said "it's very important that people keep in mind that (shelving the project) is a definite possibility if we don't all work together."

Although still optimistic either the North Slope or Delta project will proceed, he said it may not occur as early as most people believe.

Daniel said he is concerned that rejecting an "over-the-top" line could cost producers C$2 billion in construction savings, which could boost the price of delivered gas by 30 cents a thousand cubic feet.

Mackenzie pipeline doesn't need total aboriginal backing

The success of a proposed Mackenzie Valley pipeline does not depend on the consent of all aboriginal groups, says Northwest Territories cabinet minister Jake Ootes.

Speaking at the Far North Oil & Gas conference in Calgary, he said the Deh Cho First Nations, which has refused to sign a memorandum of understanding setting the stage for one-third native ownership of a C$3 billion line, will not derail a process that he expects will result in a decision later this year to proceed with Mackenzie Delta gas development and pipeline construction.

He said Northwest Territories Premier Stephen Kakfwi spoke with the Deh Cho leaders last week and will meet again later this month.

Ootes said Kakfwi will provide an assurance that Deh Cho land claims concerns will be dealt with before completion of the pipeline and will urge the community to join the Aboriginal Pipeline Group in an agreement with the Mackenzie Delta gas producers.

He said a pipeline pact would mean huge economic benefits for a poverty-stricken region.

"There's always concern on our part that the needs of the Deh Cho are met and we are working towards that end," he said.

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