Alaska North Slope producers open Calgary office

Gary Park

With debate raging over which route Arctic gas will take to reach Lower 48 markets, a whirlwind of developments hit the Canadian side in April.

In less than a week, one bridge of cooperation was opened, another was partly demolished and an unexpected pothole was filled on the road to final decisions by the gas owners.

• The North American Natural Gas Pipeline Group, representing the Big Three North Slope producers, opened an office in downtown Calgary to build a bridge to possible Canadian participants in a pipeline.

• Northwest Territories Premier Stephen Kakfwi took a few planks out of another bridge, accusing the Alaska Legislature of taking a “parochial” approach in promoting Senate Bill 164 to prohibit any “over-the-top” option to ship gas from the North Slope under the Beaufort Sea and along the Mackenzie Valley. In the process, he suggested Alaska Gov. Tony Knowles has not lived up to the terms of a March peace pact to share information on Arctic gas developments.

• The Kaska Tribal Council, consisting of five first nations in southeastern Yukon and northern British Columbia, agreed to resume land claims negotiations and shelve lawsuits that it threatened to use in blocking an Alaska Highway pipeline.

Producers open Calgary office

“There is a huge Canadian component to moving gas ... and a lot of work will come out of Canada,” group project manager John Carruthers told a Canadian Energy Research Institute conference in Calgary.

Setting up shop in Calgary was proof of the sponsors’ commitment to developing Arctic gas, although the group was still weighing all options despite Alaska legislation refusing a right of way for an “over-the-top” route, he said.

“We’re well aware of Alaska’s preference for the southern route,” Carruthers said. “But clearly before we make an investment of billions of dollars we need to understand the implications of both routes.”

He said the project must be “fundamentally sound over the longer term,” especially given that it will be greater in size than the 1,800 mile Alliance pipeline from northern British Columbia to the Chicago market.

An Arctic pipeline could be twice as big as Alliance, capable of carrying 3 billion to 5 billion cubic feet per day, compared with Alliance’s 1.3 billion cubic feet per day when it opened last December, Carruthers said.

An Arctic line could also eventually tie into Alliance, or it could trigger the need for a new pipeline from Alberta to the Lower 48.

“You would be looking to do a greenfield line that would get to Chicago,” he said. “Alliance is pretty much a straight line to Chicago.”

Carruthers said the feasibility study by the North Slope producers will determine cost and impact of both an Alaska Highway route and an “over-the-top” option, which would tap into discovered reserves of 31 trillion cubic feet in Alaska and 9 trillion cubic feet in the Mackenzie Delta.

Doug Matthews, the Northwest Territories’ director of minerals, oil and gas, told the CERI conference that an “over-the-top” line could cost C$7 billion compared with C$10 billion for the Alaska Highway.

He said “we welcome American producers to come with us. We realize that’s their decision, but frankly we’re not shy about providing them with information to help them make the correct decision, which we believe to be an over-the-top route.”

Delta could move 800 million cubic feet

Both producer groups have indicated they will come up with cost totals and could file for regulatory approvals by late this year.

Meanwhile, Kakfwi made no efforts to disguise his unhappiness with Knowles when he accused the Alaska Legislature of taking a “parochial” approach in legislating a ban on an “over-the-top” route.

“A continental energy policy (along the lines advocated by President George W. Bush) developed to ensure a secure supply of reasonably priced energy to North America, is not compatible with parochial interests,” he told a Houston conference, sponsored by Ziff Energy Group.

“Whatever happened to free enterprise?” he said. “The Americans are supposed to be the champions of free enterprise, yet they are wiping out pipeline options for major (Arctic) gas producers.”

Despite a March agreement with Yukon Premier Pat Duncan and Knowles that the three Arctic leaders would share more information, Kakfwi said the Alaska bill “came completely out of the blue” for him.

In a later Edmonton conference, Kakfwi said he was growing weary of waiting for the Canadian government to back NWT gas development, especially since Bush had announced he was willing to work with Canada to tap NWT reserves.

“Even the President of the United States said he wants to see a pipeline taking Canadian gas down the Mackenzie Valley. I want to hear the Prime Minister (Jean Chretien) say that,” he said.

But federal Energy Minister Ralph Goodale, who was also at the Edmonton conference, reiterated that the federal government will stay out of the debate over pipeline routes, leaving that decision to the gas owners and pipeline companies.

Kaska back in negotiations

But, within less than a week, federal Northern and Indian Affairs Minister Robert Nault persuaded the Kaska to put four lawsuits in abeyance and return to land claims negotiations.

Because the claims involve trans-boundary negotiations, crossing into British Columbia, the deal still requires approval from the federal cabinet, but Nault said he was “very optimistic ... we can make some progress (with the Kaska).”

Dave Porter, chief negotiator for the 3,000-strong Kaska community, warned earlier that “we can assist in the expeditious processing of these projects, or we can be their worst nightmare.”

An Alaska Highway line would run through a large slice of Kaska land — 330 miles in the Yukon and 150 miles in British Columbia.

But the Canadian government, which first accepted the Kaska land claim in 1973, has yet to negotiate a final agreement, Porter said. “We are saying it’s time to settle up; it has been too long.”

Duncan, who has made land claims one of her chief priorities, urged the Kaska to stop litigating their claim with the federal government and return to negotiations. “My message has been, ‘Get out of court with Canada and we can get on with it,’” she said.

If the Canadian and Yukon governments attempt to push ahead with a pipeline before land claims settlements are in place, the Kaska will go to court, said Porter.

“Any delay will cost them millions of dollars,” he said. “We don’t even have to win. The fact we can go to court and we can launch these actions will cause stoppages in the permitting process.”

Porter, along with Kaska chiefs, attended the Ziff Energy Group conference in Houston. None belongs to the Council of Yukon First Nations, which negotiated an umbrella agreement that has so far resulted in seven of 14 land claims settlements for the territory and an eighth has resulted in a tentative deal for the Ta’an Kwach’an covering 300 square miles near Whitehorse.

Porter said the company executives he spoke with in Houston weren’t aware of the provisions of Section 25 of Canada’s Northern Pipeline Act of 1978 that specifies any Native “claim, right, title or interest” that existed before 1978 relating to the pipeline right of way continues until those matters are settled.

The act also says that any Native land claim on pipeline land must be “dealt with in a just and equitable manner.”

“My sense is that they thought things were just peachy and all the right of way questions had been answered and it was now just a question of financing this thing,” said Porter.

He said the Kaska is not “out to undermine the Yukon. But, by the same token, we want our settlement.”

Grand Chief Ed Schultz of the Council of Yukon First Nations told a subsequent Yukon economic summit that aboriginal communities want to be in a position to benefit from a gas pipeline, regardless of whether it is built along the Alaska Highway or the Mackenzie Valley.

He said the first nations want to align themselves so that they are not competing but complementing each other’s ability to take advantage of business opportunities.

For that reason, the Council of Yukon First Nations does not want to declare a preference for one route over the other and will not stand beside the Yukon government in its campaign to have the highway project selected.

Against the backdrop of threatened court action, Northwest Territories Energy Minister Joe Hanley saw hope for the NWT’s lobbying to ensure Mackenzie Delta gas is developed along with North Slope gas.

“Industry is not very eager to get into big delays,” he said, suggesting that the Kaska controversy might have caused more people to take a closer look at the Mackenzie Valley project.

He said that although the NWT has unsettled land claims, all of the region’s aboriginal leaders are solidly behind plans to develop NWT gas and will not attempt to block progress.