BP official: Window is closing on pipeline, but hope remains

Gary Park, PNA Canadian correspondent

Time is running out for crucial regulatory decisions that will keep alive plans for an Alaska Highway gas pipeline, but an answer to the Canada-U.S. clash over subsidies could be within sight, a senior official of BP PLC said July 23.

David Welch, president of BP Alaska-Canada Gas Pipelines, told reporters in Whitehorse, Yukon, that although the desire to build a pipeline is strong, progress is urgently needed on the regulatory and fiscal fronts by the United States, Canada and the state of Alaska.

He indicated that patience is wearing thin among the North Slope gas producers — BP, ExxonMobil Corp. and Phillips Petroleum Co.

“One of the concerns I have about the project is that if nothing happens this year and maybe the year after, then all of a sudden the companies do start losing momentum,” Welch said.

But he also expressed confidence that pressure from the U.S. Energy Secretary Spencer Abraham on U.S. senators and representatives to develop an alternative to a guaranteed floor price for gas shipped along the highway route will lead to a solution that satisfies the Canadian government and backers of a Mackenzie Valley pipeline.

Loan guarantee could lower borrowing costs

But he expressed cautious optimism that the U.S. government will include provisions in its energy bill that meet the producers’ desire to reduce project costs and risks, while satisfying opponents of direct subsidies.

That could include a federal loan guarantee to lower borrowing costs — an almost standard practice for governments involved in opening up new resource areas and a measure that would be more in line with Canada’s thinking, Welch said.

A highway system would open up basins in the North Slope, Alaska’s foothills, the Yukon and British Columbia, so that gas discovered along the route could be fed into a delivery system to southern Canada and the Lower 48, he said.

Although an Alaska Highway and “over-the-top” route would each cost about $19 billion, BP favors the highway option to avoid conflict with the Alaska government and environmentalists who oppose a link across the Beaufort Sea to Canada’s Mackenzie Delta, Welch said.

For now, he said the North Slope producers are anxious to open talks for “everybody that has a stake in the pipeline” in an effort to meet their needs, thus avoiding litigation during the regulatory phase.

He said that if the North Slope consortium can find a way to lower its costs to about $17 billion, the project could move ahead.