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Pressure builds for Canada to counter “over-the-top” gasline bill
Gary Park
The Northwest Territories government and Arctic Resources Corp. say Alaska legislation banning an “over-the-top” gas pipeline route won’t stand up to legal scrutiny, but are having trouble getting the Canadian government to support their argument.
Harvie Andre, chairman of Arctigas Resources Canada, the Canadian arm of Houston-based Arctic Resources, is calling for tit-for-tat legislation that would forbid an Alaska Highway pipeline through Canadian territory until six months after a Mackenzie Valley line is in place and operating.
“When push comes to shove, I think the (Canadian) government has a responsibility to preserve and indeed to maximize the value of a Canadian resource — and that means making sure there is some way of getting it to market,” he said.
Andre, a former Canadian government cabinet minister in the 1980s and 1990s, said construction of the highway project would dominate the market initially and could strand Mackenzie Delta gas reserves for years.
He argued the Alaska government’s position is heavily influenced by construction unions and will change once the producer groups’ feasibility studies show which route provides the greatest economic benefit.
“We’re very confident that any objective look at the economic benefits to the state of Alaska will show clearly that the over-the-top route is the one that’s most beneficial,” said Andre.
Alaska bill called “Banana Republic” law
Both he and NWT Energy Minister Joseph Handley described the Alaska legislation as “Banana Republic” law that would be unlikely to stand up under North American Free Trade Agreement scrutiny, could be a violation of other U.S. law and contravenes prior Canada-U.S. treaties requiring Arctic gas producers fully weigh all pipeline options.
They indicated the route selection could easily be tied up in a two- or three-year court battle.
Handley told the Calgary Herald editorial board in late April that “it’s important that we move the Mackenzie Delta gas quickly and, in my view, ahead of Alaska gas.”
If the NWT sits back it could end up waiting 10 or 15 years for Mackenzie Delta gas to become marketable, he said.
However, he conceded Alaska is out-lobbying NWT interests and blamed the Canadian government for not rallying behind the Mackenzie Valley option, arguing that the Delta gas has a current market value of about C$400 billion (US$260 billion), of which the federal government could collect C$70 billion (US$45.5 billion) in royalties.
“If we miss this one, then our gas could end up stranded and that is our concern,” Handley told a conference of industrial gas users. “It doesn’t make sense to me that, as Canadians, we would promote the sale of Alaska gas, and allow a pipeline to run through our territory allowing their gas to get to market while ours sits on the shelf.” Mackenzie gas could be stranded He said that although many industry leaders are arguing there is sufficient demand for both developments to proceed, it is unlikely the Mackenzie Delta project will move ahead if Alaska wins the race.
Handley said a pipeline from the North Slope would likely carry up to 4 billion cubic feet per day, temporarily flooding the market, while the capital requirement of US$7 billion to US$15 billion and the demand for labor and steel for an Alaska Highway line would make it almost impossible to launch a second project.
“We are looking at six or seven years for the Alaska pipeline to be built and we would have to wait our turn after that. With the probable depression in prices, we’d be looking at 10 or 15 years from now and who knows what the market would be like then,” he said.
On the other hand, the Mackenzie Valley pipeline would be less expensive by US$2.3 billion to US$3 billion and could be operational without four or five years if there was co-operation among all stakeholders, Handley said.
The only response from the Canadian government has been a promise by Natural Resources Minister Ralph Goodale to examine the legality of the Alaska legislation to determine of it violates any international trade agreements, with no indication when he might make those findings public.
Otherwise, Goodale and Prime Minister Jean Chretien have insisted their government must remain neutral to avoid any appearance of conflict of interest or undue influence over regulatory rulings by the National Energy Board on pipeline rights of way or gas export permits.
They have steadfastly defended the right of Arctic gas owners to determine the most economically feasible methods of developing the resources and to declare the pipeline options they favor.
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