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Property rights: fighting words for North Slope gas pipeline proponents TransCanada claims rights on route, regulatory process; Enbridge wants cooperation; BP, Conoco say too early for right of way Kristen Nelson Petroleum News Editor-in-Chief
If blunt speaking is any indication the Alaska gas pipeline project is definitely moving forward.
Pipeline and gas owners argued their cases in front of the Alaska Support Industry Alliance “Meet Alaska” conference Jan. 27 in Anchorage — complete with threats of court action.
It isn’t just an issue of who can put together a project today, it’s an issue of decisions made in the 1970s when a gas pipeline from the North Slope into the Midwest was first proposed.
TransCanada, one of the two pipeline companies represented at the conference, holds certificates and rights of way dating from the earlier project, and is in the process of acquiring a right of way over state lands in Alaska.
Another Canadian pipeline company, Enbridge, is also working the Alaska gas pipeline project.
BP, ConocoPhillips and ExxonMobil, the major North Slope gas owners, are pursuing a gas pipeline project of their own. The producers, and TransCanada, are negotiating with the state under the Alaska Stranded Gas Development Act for project fiscal terms. Enbridge: working with producers Patrick Daniel, president and chief executive officer of Enbridge Inc., told the conference that cooperation will be one of “the key ingredients in order to get the Alaska gas pipeline project under way and to make it a reality.” Enbridge has applied under Alaska’s stranded gas act, but has not signed the required payment agreement to begin negotiations.
“We haven’t been as active on our application as some others have because we’re working very closely with the producers…,” Daniels said. “We think there are enough proposals on the table. We’d rather focus on working with the resource owners today.”
Daniels said Enbridge believes that because of the capital investment required and the risk involved it will take “a broad coalition” to do this project, a coalition involving the producers, pipeline companies, Native organizations, the state of Alaska and natural gas customers.
The challenges for a project today include more interested stakeholders than in years past for energy projects, Daniels said, requiring cooperation among diverse parties which is “getting harder and harder to achieve.”
Cooperation is also going to be key among project participants, he said: “All parties also need to give very due consideration to what is really required, rather than just what is optimum for them. And we’ve had far too much self-interest so far in this project. I don’t think it’s going to get off the ground until we can individually get over that and get on with the broader view.”
The market will need to be involved, he said, and existing pipeline systems will have to be optimized to take Alaska gas from Alberta to markets farther south. And while natural gas liquids could be processed in Alaska, Daniels said Enbridge thinks “the market will demand that a large amount of those liquids be transported south …” Alberta, he noted, has excess NGL processing capacity. NPA vs. green-field The “raging debate” in Canada, Daniels said, is between using the Northern Pipeline Act “vs. a more green-field approach … subject to the normal National Energy Board and Canadian Environmental Assessment Act oversight.” Enbridge believes “that if the Canadian government relies solely on the old Northern Pipeline Act, this is going to create a lot of project uncertainty and delay, if not stall it completely in its tracks if we go that route.”
The “traditional and up-to-date NEB-led process” would reduce “the total legislation and litigation and regulatory uncertainty involved in the project, he said.
If the Canadian government decides to allow applications under either the Northern Pipeline Act or the National Energy Board, Daniels said, that would be similar to the decision by the U.S. Congress to allow “either a FERC application or an application under the Alaska Natural Gas Transportation Act…” Foothills has right to build first line TransCanada’s view is different.
“The Canadian regulatory structure for an Alaska gas pipeline is already in place,” said Dennis McConaghy, TransCanada’s executive vice president for gas development. Competitive hearings before the National Energy Board in Canada in the 1970s “resulted in a grant to the Foothills company, which is now wholly owned by TransCanada.”
That regulatory decision, he said, was “enshrined” in a treaty with the United States and by the Canadian Parliament in the Northern Pipeline Act. “And that act bestowed on Foothills the right to build the first pipeline to carry Alaska gas across Canada.”
The Northern Pipeline Act was used for the “pre-build” lines into the United States, and “is a regulatory model unique in Canada in terms of a single-window approach,” he said.
The Northern Pipeline Act “has the full authority over the Canadian portion of the Alaska gas project in Canada. … It is the only authority that can do that… So this is very much from the TransCanada perspective a matter of property rights,” he said, property rights which TransCanada will defend. On U.S. side, either legislation works TransCanada did not become involved in the enabling legislation passed by the U.S. Congress in October, McConaghy said, even though TransCanada holds the certificate under the Alaska Natural Gas Transportation Act, “and its related property and entitlement,” because TransCanada believes the enabling legislation “was a positive contribution to the project and one that we did not wish to thwart, as that was essentially the business of the U.S. Congress to deal with that in U.S. interests.
“But Canada will be different,” McConaghy said. “And if there is an assault on the (Canadian Northern Pipeline Act) there will be an obvious reaction and if the objective is to move the project forward as quickly as possible, the NPA is the only way to do that.”
Either ANGTA or the enabling legislation will work on the U.S. side, he said, “but in Canada there is only one recipe to do it quickly and without protracted litigation and that is the NPA.”
In Alaska, TransCanada already has a federal right of way for the pipeline and reactivated its state right of way application last year, McConaghy said, an application covering some 370 miles of state land. Hearings are complete, and the commissioner of the Alaska Department of Natural Resources is reviewing public comments.
“And we’re optimistic that that right of way will be granted this spring,” he said. Canadian decision on target Canadian Counsel General Jeffrey Parker, based at Canada’s consulate in Seattle, said he understands the Canadian Minister of Natural Resources is “on target” to bring a recommendation to the cabinet “for consideration very quickly” on whether Canada would continue to use the Northern Pipeline Act and the Northern Pipeline Agency or use “a different kind of regulatory process.”
Parker said the government of Canada “takes this very seriously” and recognizes that “it has to provide clarity and it has to do so very quickly in order to ensure that there is no confusion and to ensure that there is as little delay as possible” in moving the gas pipeline project forward.
Parker said he is frequently asked about the role Canada’s Native people would play in such a project.
He said it is his point of view that over the last 25 years “there has been an incredible amount of maturity that has occurred in aboriginal governance and aboriginal politics and in the capacity of these organizations to be able to look at, negotiate and deal with and identify what their interests are with respect to resource development as well as economic development throughout the North …”
Canada’s Native communities, he said, are not looking for “an all-or-nothing solution,” but rather for an opportunity to participate in projects, perhaps in joint ventures, and also for participation on regulatory bodies making “choices and decisions in terms of land use planning and routing and those sorts of things.”
Canadian aboriginal leadership is “very capable and very sophisticated,” Parker said. “I think that they want to participate and I think they know how they can do that, and so therefore I don’t believe that there will be a delay factor…” BP objects to unconditional right of way BP Exploration (Alaska) President Steve Marshall told the conference that BP believes a grant by the state of Alaska of an unconditional right of way to TransCanada across state lands for a North Slope gas pipeline “could prematurely eliminate competition and prevent the best project from being built.”
BP, along with ConocoPhillips and ExxonMobil, is negotiating fiscal terms for an Alaska gas pipeline with the state, and Marshall said the state’s proposal to grant an unconditional right of way to TransCanada is “a new wild card” in the negotiations.
“At worst, an unconditional right of way would eliminate the project proposed by the sponsors. At best, it would cause significant delays as inevitable challenges are raised,” he said. Marshall said high tariffs benefit pipeline companies, because tariffs are their source of income. “That, coupled with an ‘exclusive’ right to build, means they have no incentive to build the lowest-cost, most efficient pipeline.”
At this stage in the project, he said, “only a conditional, non-exclusive right of way should be considered for any company or group.” Not a property right Jim Bowles, president of ConocoPhillips Alaska, also had issues with the state granting a right of way. “We see that the project is not at a stage where any company could go in and look at a right of way.” The project, he said, is not far enough along in its development for the state to look at “granting an unconditional right of way at this time to any company.”
Bowles said ConocoPhillips is also concerned about TransCanada’s position on the Northern Pipeline Act, particularly its assertion that it has property rights over the project. “That if we challenge those rights that will be considered an assault on that company … (defended) with protracted litigation.”
That is part of the risk the state is taking, he said, if it grants a right of way “to any company” at this stage. “And we’d ask the state to consider very carefully before taking any action along those lines.”
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