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Bilateral cooperation urged Meyers pitches shorter Alaskagas line, idea eagerly received by Kvisle Gary Park Petroleum News Calgary Correspondent
Getting natural gas out of the Arctic — the North Slope or Mackenzie Delta — needs closer U.S.-Canada cooperation and regulatory streamlining on both sides of the border, say a number of industry and government experts.
The issues got a heavy workout in Calgary speeches the first week of November that explored ways to cut the costs of shipping gas out of the north and thus help avert future price spikes.
Topping the list was a vigorous case by ConocoPhillips Alaska President Kevin Meyers for passage of the U.S. energy bill before year’s end to offer the needed financial incentives for an Alaska pipeline along with a scheme to slash US$5 billion off the construction costs. (See news brief in last week’s Petroleum News, page 3.)
Meyers told The Globe and Mail that building a US$20 billion delivery system from the North Slope to Chicago would not be necessary if the pipeline ended in Alberta and the gas was fed into TransCanada’s network out of Alberta.
If the energy bill includes $5 billion in tax credits for the Alaska project, the cost of building a line just to Alberta would be about $11.8 billion, he estimated, adding that another $2.6 billion would be spent on a gas treatment plant in Alaska and $600 million on a plant to remove gas liquids in Alberta.
Such an arrangement would eliminate the need for about 1,400 miles of pipeline from Alberta to Chicago, leaving the proponents to concentrate on the 2,000-odd miles from Alaska to Alberta. Only ‘reasonable’ tolls needed from TransCanada The idea was eagerly received by TransCanada Chief Executive Officer Hal Kvisle, who has repeatedly warned that depletion of Western Canada’s conventional gas fields threatens to leave his company with substantial unused capacity on its connections to Eastern Canada and the United States.
Meyers said the tie-in to TransCanada needs only “reasonable” tolls to gain the attention of ConocoPhillips, BP and ExxonMobil.
He reiterated the commonly held belief that the C$5 billion Mackenzie Gas Project is likely to proceed first, but that both are vital to North America’s needs.
On the regulatory front, Paul Cellucci, the U.S. ambassador to Canada, and Enbridge Chief Executive Officer Pat Daniel both hammered on the urgent need to streamline approvals and clear away barriers.
Cellucci said Canada has a dominant role to play in U.S. energy security, although there are “many regulatory, technical, managerial and political challenges to sustaining the growth in cross-border energy trade.”
“As the United States looks for secure and reliable energy sources to meet growth in future demand, Canada is positioned to be an increasingly important player,” he said. “Canada looms large.”
However, Cellucci, a close friend of President George W. Bush, said both governments must work to “break down barriers to investment both within and between our countries.
“It’s not just a problem in the U.S., it’s an issue here in Canada and both national governments have an important role to play in encouraging that positive regulatory climate so we can get this investment,” he said. Combined regulatory hearings Daniel, echoing the view that the regulatory process hinders the growth of gas supply and promotes volatile commodity prices, called for multiple reviews of project applications.
Canada and the United States could set aside some of their sovereignty concerns and “try to combine some of our regulatory hearings around environmental issues, financial approvals and maybe even look at some joint hearings.”
He suggested a joint National Energy Board-Federal Energy Regulatory Commission review could hasten the Alaska project, while further streamlining could have a similar outcome for the Mackenzie pipeline.
“This is where we need some leadership,” Daniel argued. “Why can’t we work together as two countries and get this done?
“Without that leadership we are going to have a high degree of volatility and acrimony as we attempt to respond to that demand,” he said.
Even so, Daniel conceded there would likely be political resistance to a combined approach to work normally done by independent agencies in both countries.
Daniel said he was not advocating a steamroller approach to the environment, but noted that land access and siting liquefied natural gas facilities can interfere with the operation of the marketplace.
Dave Collyer, Shell Canada’s frontier vice president, cautioned that overlapping the Alaska and Mackenzie projects could have unwanted consequences.
If the two “start to butt into each other” there could be problems in ordering steel and hiring thousands of construction workers, he said.
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