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Duke withdraws from Alaska Highway gasline MOU; Williams says action weakens agreement Both pipeline firms say ANGTS dead but will continue to work with stakeholders to commercialize North Slope gas, support Alaska Highway route Gary Park & Kristen Nelson PNA Canadian Correspondent & PNA Editor
Duke Energy has withdrawn from the Nov. 15, 2001, memorandum of understanding between six major American energy firms and three Canadian firms which established principles for re-enlisting in the Alaska partnership to construct the Alaska portion of the Alaska Highway natural gas pipeline project.
“A key element of the MOU,” Foothills said Nov. 15, “is that the current and re-enlisting parties are committed to eliminating historic and other commercial barriers to construction of the Alaska Highway project.”
Williams, one of the withdrawn partners signing the MOU, said that with Duke’s withdrawal the document no longer has any strength. Objectives not met within targeted timeframe Sarah McIntosh, manager of public affairs for Duke Energy Gas Transmission in Vancouver, British Columbia, told PNA July 18 that Duke Energy had notified the MOU parties of its intention to withdraw from the non-binding MOU “because it did not achieve the objectives agreed to by the parties within the targeted timeframe.”
McIntosh said the MOU was related to development of the Alaska portion of the Alaska Highway gas system.
“The detailed objectives of the MOU and the timelines attached are subject to confidentiality and are commercially proprietary,” she said.
PNA sources in another pipeline company which is part of the MOU said there were two failed objectives, including “lack of progress in … discussions with the producers” following the presentation to them by the pipeline companies of an “economic proposal” for the Alaska Highway gasline from the North Slope to Alberta and the inability of the group to eliminate “historic and other commercial barriers to construct the Alaska Highway pipeline project.”
McIntosh told PNA that “Duke Energy will continue to work with Alaska producers and other stakeholders to develop a successful Alaskan natural gas pipeline project.”
She said “Duke Energy is continuing to work diligently to develop a commercially viable Alaska Highway pipeline project,” and noted that the Canadian section of the pipeline is not affected by the MOU, which addressed only the Alaska portion of the line. Williams says MOU not truly in effect anymore Peter Thomas of Williams’ Arctic project team told PNA July 23 that contrary to rumors, Williams has not withdrawn from the MOU.
“Williams did not withdraw,” he said, “but when one of the major partners, such as Duke, withdraws… the document or the non-binding memorandum of understanding… is truly not in effect any more, or is not as functional as it was…”
One of the strengths of the MOU, he said, was the involvement of “the strong, true owners of ANGTS, such as Duke.”
Duke is an existing partner in the Alaska Highway natural gas pipeline project, while Williams is a withdrawn partner, Thomas noted.
Williams still believes North Slope gas will be required to meet North American demand and that the Alaska Highway route is the best option to transport it to markets. The company will continue to work with stakeholders to commercialize the gas.
U.S. companies signing the MOU in November were subsidiaries of Williams, Duke Energy, Sempra Energy International, Enron, PG&E Corp. and El Paso Corp. The three Canadian signers were TransCanada PipeLines, Westcoast Energy and Foothills Pipe Lines, all of whom have remained active partners in the project.
Duke completed its purchase of Westcoast Energy in March. Policy council concerned One of those commercial barriers was discussed by the Governor’s Alaska Highway Natural Gas Policy Council last year.
A number of partners in the original 1980s Alaska Highway gasline project dropped out over the years — after investing money.
The council’s federal/international action subcommittee queried Foothills’ attorney Curt Moffatt about the money previously invested at a Sept. 7, 2001, meeting. Charlie Cole, subcommittee chairman, told Moffatt that the subcommittee had heard amounts of investment by withdrawn partners ranging from $500 million to $4 billion.
Carl Marrs said the subcommittee had also heard $2.5 billion and asked how money already spent on the project would figure into gas pipeline tariff rates.
Cole said it was time the issue was resolved, “because this project cannot withstand an overhang of a billion dollars, let alone $4 billion. It just creates too much uncertainty out there financially and it’s a shackle, if you will, on the ability of people to go forward with this project.”
John Katz, director of state-federal relations and special council to the governor in Washington, D.C., told the subcommittee the administration was very concerned about the $4 billion contingent liability. Congress would be unlikely to legislate away the $4 billion, Katz said, because if the claim were ruled valid in court, the federal government would then be liable.
Moffatt told the subcommittee that the original cash outlay was some $280 million and that figures of $2.5 billion to $4 billion come from interpretation of documents and rate-making practices; he also said the current partners were in negotiations with the withdrawn partners over the sunk cost.
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