January 15, 2002 --- Vol. 8, No. 6January 2002

North Slope producers, pipeline companies initiate meetings on gasline

The North Slope producers' gas study team met last week with the pipeline companies interested in building a natural gas pipeline from the North Slope to Canada and the Lower 48 via the Alaska Highway.

Neither side is saying much about the results of that meeting.

"We have initiated discussion with the North Slope producers. We have put a commercial proposal in front of them," Cavan Carlton, Arctic project director of gas pipeline business development for Williams, told PNA Jan. 15. "We will have further discussions with them." Williams is set to have the largest ownership position - 21 percent - in the consortium of major U.S. and Canadian pipeline companies that signed a memorandum of understanding in mid-November to proceed with the development of an Alaska Highway gas pipeline project.

The pipeline companies did NOT present the North Slope producers with a scaled down version for the gasline. Although Carlton would not reveal the price tag on the pipeline proposal presented to the producers, he said it was in the range of what has been "quoted all along in the press." (Costs have ranged from $9.7 billion, quoted Nov. 15 by Foothills Pipe Lines Ltd. spokesman Rocco Ciancio for a 42-inch, 4 billion cubic feet per day line that would connect with existing pipelines in Alberta, to $17.2 billion, quoted last summer by the North Slope producers gas study team for a 52-inch, 4 to 6 billion cubic feet per day line that includes new pipe from Alberta to Chicago.)

Dave MacDowell, external affairs manager for the North Slope producer's gas study group, told PNA the pipeline companies had presented the producers with more of "a framework for discussion," versus a proposal.

"Neither of the groups (producers or pipeline companies) has identified a commercially viable project," MacDowell said. "But this was one in a series of meetings. We're in the early stages. There will be more meetings in the future."

Arctic Resources Ltd., widely rated as the long-shot among the Arctic gas pipeline options, is about to test the regulatory waters with its "over-the-top" proposal.

The Houston-based company has scheduled a news conference for Wednesday in Calgary to announce the filing of a preliminary information package covering the Canadian portion of the project.

The announcement of Arctic Resources' intention to file with Canada's National Energy Board will be made by Arctigas Resources Canada, whose president is Harvie Andre, a former federal cabinet minister in Canada.

Arctic Resources, with Forrest Hoglund as chairman and chief executive officer, surfaced in late 1999 with its scheme to build a pipeline from the North Slope under the shallow waters of the Beaufort Sea to the Mackenzie Delta, where it would link up with Delta gas shipments along the Mackenzie Valley.

From the outset the idea was been opposed by the Alaska and Yukon governments and scorned by environmentalists, who have argued that two subsea lines would be needed in the event of a rupture during winter.

But a Canadian Energy Research Institute study commissioned by the Northwest Territories government in 2000 said that of several potential pipeline routes an "over-the-top" project carrying 4 billion cubic feet per day would result in the lowest pipeline tolls and highest producer revenue due to a lower capital cost than an Alaska Highway system.

Andre has repeatedly said Arctic Resources won't back down from lobbying the Northwest Territories government and offering Northwest Territories aboriginals 100 percent ownership of a pipeline across their land.

He said that could be achieved by issuing bonds, using the proceeds to build the pipeline. Tolls from transporting the gas would pay back the bondholders and generate up to C$150 million a year in profits for the pipeline owners and Arctic Resources for setting up and managing the deal.

Andre claimed last year that "companies are lining up to buy. The major Wall Street bankers have indicated this is the kind of project they would and could be interested in financing."

Although Arctic Resources has taken a low-key stance recently, Arctic analysts suggest last week's decision by the Mackenzie Delta Producers Group to embark on a regulatory application might have reopened a window on the "over-the-top" line, which they say would make economic sense if a Mackenzie Valley pipeline was already in place.

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