December 20, 2001 --- Vol. 7, No. 157December 2001

Foothills prepares plan for scaled-down Alaska pipeline

Foothills Pipe Lines Ltd. is about to deliver a proposal for a scaled-down Alaska Highway natural gas pipeline costing about $8 billion - about half most other estimates.

Hal Kvisle, chief executive officer of TransCanada PipeLines Ltd. - the joint venture partner in Foothills with Westcoast Energy Inc. (which is being taken over by Duke Energy Corp.) - said Dec. 19 a "commercial proposal will be submitted to the Alaska producers very shortly ... within a couple of weeks actually."

He said Foothills hopes to persuade the producers to get part of the pipeline engineered and then "see how gas supply and demand unfolds."

Initially, Kvisle said, the new proposal would be for a line to carry about 2.5 billion cubic feet per day from the North Slope, compared with the 4 billion cubic feet that has generally been recommended.

At that level, he said it would cost $7 billion to build a delivery system to Alberta and, at most, another $1 billion to expand TransCanada's existing export network to the United States.

Kvisle said the new pipeline would end at Empress, on the Alberta-Saskatchewan border, where the gas liquids would be stripped for Alberta's petrochemical industry and the remaining gas would be shipped to the U.S. Midwest.

"It's a relatively simple thing for us to incrementally expand our very large pipeline system to move 3 to 5 billion cubic feet a day through Alberta to Empress," he said.

He said that if gas prices were higher than $2 per thousand cubic feet "it would be highly certain the project would go ahead. If it was a dollar lower than it is today, then there would be virtually no way it would go ahead."

Kvisle said that if the Alaska producers opted to build their own pipeline to Chicago they would have to "commit to the whole thing in one shot. I think the big issue for the producers in Prudhoe Bay is whether or not a pipeline will be built. It's a lesser issue to them whether or not they build it."

He said talk of an "over-the-top" route appears to have been shelved and his reading now is that the Alaska producers are "leaning more towards a highway route than they were before."

Kenai Kachemak Pipeline begins open season

Kenai Kachemak Pipeline LLC is holding an open season to solicit "good faith expressions of interest from persons interested in shipping gas on a firm basis" on the proposed pipeline. Kenai Kachemak Pipeline said Dec. 20 that it anticipates filing an application with the Regulatory Commission of Alaska in the first quarter of next year for a certificate of public convenience and necessity for authorization to construct and operate the proposed facilities.

The 58-mile pipeline will run between the Kenai gas field to a point near the town of Anchor Point and is intended primarily to transport natural gas from new fields developed on the southern part of the Kenai Peninsula to the existing pipeline system serving the northern part of the Kenai Peninsula and Anchorage.

Kenai Kachemak Pipeline said expressions of interest will be accepted through Jan. 25 from "those persons potentially interested in shipping gas on a firm basis on the pipeline system."

An open season terms sheet and additional information is available from John Zager, Kenai Kachemak Pipeline LLC, phone (907) 263-7662; e-mail [email protected]

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