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‘Over-the-top’ pipeline proposal delivered to Canadian regulator Hoglund says Northern Route is the ‘right project, right structure, right time’; hopes Alaska government, North Slope and Mackenzie Delta producers will be swayed by economic arguments Gary Park PNA Canadian Correspondent
Backers of the “over-the-top” gas pipeline, determined not to finish up “down-under,” have filed their first documents with Canada’s federal regulator and expect to do the same shortly in the United States.
The plans calls for two 36-inch pipelines to be introduced in four phases from 2007 to 2010 and delivering 5.2 billion cubic feet per day.
A “preliminary information package” was submitted Jan. 16 to Canada’s National Energy Board — the first of the three pipeline proposals to make a preliminary filing to the board.
A National Energy Board spokesman said the paperwork is needed to determine which agencies should be involved in any public review, but does not constitute a formal application.
The filing was made by Calgary-based ArctiGas Resources LP, the Canadian affiliate of Houston-based Arctic Resources Co., on behalf of the Northern Route Gas Pipeline Corp.
Difficulties political “We’re proceeding,” said ArctiGas chairman Harvie Andre, a former cabinet minister in the Canadian government. “This alerts everybody that this project is under way, under consideration. The permitting difficulties are all arbitrary, they’re all political.”
Arctic Resources chairman and chief executive officer Forrest Hoglund, a former CEO of Enron Oil & Gas Inc., told a Calgary news conference that the Northern Route, or “over-the-top” proposal is the “right project, with the right structure at the right time.”
As a former vice president with Exxon 25 years ago, when the first attempt was made to bring Arctic gas to market, Hoglund said he found out then “how not to do things.”
He described the proposed US$7.8 billion undertaking as the most important energy project in North America, with access to 35 trillion cubic feet of Alaska gas and 6 to 9 trillion cubic feet of Mackenzie Delta gas and the potential to triple that amount. “It is the only source of gas left to grow in the United States,” he said.
Hoglund said having separate pipelines — the Alaska Highway and Mackenzie Valley systems — would “cost almost twice as much” as the Northern Route and create unnecessary conflict between the United States and Canada over which should be built first.
Only by combining Alaska and Canadian reserves could a pipeline be economic, he said.
Hoglund also argued that the pipeline should proceed “as fast as possible,” while costs and interest rates are low.
No Alaska, producer support He conceded Arctic Resources does not have the support of either the Alaska government, or producers in the North Slope and Mackenzie Delta, but expressed high confidence that both could be persuaded to join.
Andre estimated the lower construction costs of the Northern Route line would save Delta producers C$130 million a year at the wellhead and North Slope producers US$1 billion a year.
He insisted the 350-mile link under the Beaufort Sea would be “environmentally benign” once it was installed and shrugged off claims that a subsea pipeline would never be approved. “If that is so why are there regulations in place in Canada for an offshore pipeline?” he said.
The combined 1,650-mile pipeline system would be introduced in four phases — 800 million cubic feet per day from the Delta in the third quarter of 2007, 2 billion cubic feet from the North Slope in 2008, another 400 million cubic feet from the Delta in 2009 and 2 billion cubic feet from Alaska in 2010.
ArctiGas said the orderly ramping up would avoid supply shock to gas markets and allow time for the development of takeaway capacity in Alberta.
100 percent debt financing The novel feature of the Northern Route project is the proposal for aboriginal ownership in the Northwest Territories and 100 percent debt financing.
ArctiGas said that although it was not aware of any parallel financing of energy pipelines, US$1 trillion in municipal infrastructure projects have been financed through 100 percent debt.
“If one thinks of the aboriginal groups as similar to municipalities ... then our proposal is not at all unique,” the company said.
But, so far, the only aboriginal participation has come from the Northern Route Gas Pipeline Corp., representing communities in the Norman Wells area of the central Northwest Territories.
Other aboriginal leaders along the Mackenzie Valley right of way have opted to join the Mackenzie Valley Aboriginal Pipeline Corp., which has been offered up to one-third equity in a standalone Canadian pipeline if they can negotiate contracts for up to 500 million cubic feet per day of production.
A spokesman for the Mackenzie Valley Aboriginal Pipeline said the ArctiGas proposal is “quite confusing to a lot of northerners,” while a spokesman for the Northwest Territories government said the “economics are questionable,” given that ArctiGas has no committed production.
However, Wayne Sartore, vice president of northern pipeline development with Calgary-based pipeline company Enbridge Inc., said an “over-the-top” line could be built with minimal environment risk and would be cheaper than other alternatives. “We absolutely believe it can be done,” he said.
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