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Mackenzie Delta pipeline could be victim of climate change treaty
Gary Park, PNA Canadian Correspondent
For the first time, the specter of the Kyoto Protocol as a threat to the Canadian pipeline industry has been raised by Alberta Energy Minister Murray Smith, with a blunt warning that the climate change treaty, if implemented in Canada, could put plans for a Mackenzie gas pipeline in doubt.
While arguing the case for Alberta as a hub for gas from both the North Slope and Mackenzie Delta, Smith told an international pipeline conference Sept. 30 that Kyoto would be an “economic rock” on the pipeline sector’s shoulders that could impair new development.
Implementing Kyoto would retard oil sands and conventional development “to the point that pipelines would not need to be built,” he said.
Because much of the natural gas demand spurring Mackenzie Delta pipeline development would be driven by the need for feedstock to power new oil sands projects, the protocol creates uncertainty for the proposed line along the Mackenzie valley, Smith said.
He said the only short-term boon stemming from Kyoto could be the construction of pipelines to deliver raw bitumen from northern Alberta to upgrading facilities in the United States.
Demand for pipelines an opportunity Smith pointed out that Kyoto is a source of uncertainty for a sector at a time when the demand for pipelines presents a “major opportunity.”
The U.S. Energy Information Administration, he noted, has predicted that North America will need about 53,000 miles of new transmission by 2010, requiring spending of more than US$80 billion.
Kyoto aside, he said Alberta supports free and open markets for bringing northern gas to markets, without favoring either the North Slope or Delta projects.
“We want other jurisdictions to follow market-based principles as well,” Smith said. “Government intervention in the energy market place is usually counterproductive.”
But he insisted the best opportunity for unlocking the potential of both northern basins is to utilize an Alberta hub, taking advantage of a “sophisticated network” of producers, processors, pipeline companies, storage operators, markets, natural gas liquids extractors, electricity and oil sands producers and regulators.
Alberta hub to six major markets The Alberta hub offers northern producers access to six major markets “rather than the more restricted markets they would reach with a bullet line straight through to Chicago,” Smith said.
He said the benefits are liquidity and efficiency — lower costs, more opportunity and better cash flows — with the ability to grow and adapt as supply and demand shift.
Industry players have made major additions to Alberta’s take-away pipeline capacity by expanding service to traditional markets such as Chicago and opening up new markets, such as the U.S. Northeast.
On the technology front, Smith said advances in pipeline materials, construction, design methodologies, rights-of-way management and satellite imagery increase the attractiveness of proposed northern pipeline development.
However, the costs of complying with Kyoto get in the way of decision-making and progress. Smith said he had been told that a politician in Alaska recently said his state “would be crazy to route a new gas pipeline through (Canada) if we ratify Kyoto.”
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