Foothills owners say Alaska Highway route is going to win hands down

Westcoast Energy, TransCanada execs see Alaska gas moving first, followed by Mackenzie Delta gas as drilling establishes NWT reserve base

Gary Park

PNA Canadian Correspondent

TransCanada PipeLines and Westcoast Energy, joint owners of Foothills Pipe Lines, the front runner to build an Alaska Highway gas pipeline, are both emerging as strong advocates of tapping Mackenzie Delta gas at an early date.

Westcoast chairman and chief executive officer Michael Phelps said Alaska gas will be the first connected to market, but the Delta will be close behind once drilling establishes the reserve base in the Northwest Territories.

TransCanada’s retiring president and chief executive office Doug Baldwin said a gas pipeline in the Mackenzie Valley would not suffer a drastic setback if a highway pipeline proceeded first.

Phelps told shareholders at Westcoast’s annual meeting he expects Foothills to be a key player in any Arctic gas development because it offers the quickest, most efficient link down the Alaska Highway to get badly needed Alaska gas to U.S. customers.

“I anticipate that we will be involved in providing transportation services for these two new sources,” he said. “I expect that Alaska will be connected first, the reserves are there. Soon thereafter, as drilling proves up the required reserves, the Mackenzie Delta will be connected.”

He said there have been no assurances yet from the North Slope’s big three producers — ExxonMobil, BP and Phillips — but Foothills has been in regular contact with the producers who have said they like the Alaska Highway proposal.

“If you have a balanced look at all of the options, the Alaska Highway route is going to win hands down,” Phelps said.

The project , which was approved by Canadian and U.S. regulators in the 1970s, could be quickly constructed and in production as early as 2007, he said.

Timing on lines could be close

“Our ownership in Foothills and in Alaska Northwest Natural Gas Transmission Co. provides us with a lead position in moving Alaska North Slope gas to market. We are also taking steps to utilize our strategic position in northern Alberta to participate in the transport of gas via the Mackenzie Valley,” he said.

Baldwin said TransCanada — which already dominates the shipment of Western Canadian gas to the U.S. — is strategically and operationally “well-positioned to link (North Slope and Mackenzie Delta) supplies of gas to the growing North American marketplace. TransCanada will be there when the northern gas flows.”

However, Phelps is plainly skeptical about the “over-the-top” option.

“I see little prospect of connecting Alaska and the Mackenzie Delta gas to markets by one pipeline,” he said. “The technical and environmental hurdles are simply too great and Alaska is adamantly opposed to using this option.”

FirstEnergy Capital analyst John Mawdsley agrees that an “over-the-top” pipeline is a long shot, pointing out that there is only a small window of opportunity to actually install pipelines under the Beaufort — ranging from 70 to 30 days a year, depending on the number of ice-free days.

In addition, whether real or imagined, he said there are environmental hurdles to clear, meaning that regulatory hearings for a proposal to connect the North Slope and Mackenzie Delta reserves would take far longer than the Alaska Highway route or a stand-alone line from the Delta down the Mackenzie Valley.

Mawdsley said there is one scenario that could see an Alaska Highway line come on-stream by 2006, although most observers think 2007 or 2009 is more likely, with the Mackenzie Valley system starting up as late as 2011.