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Alaska gasline could be economic bonanza for Canada says BP official Conference told that pipelines are needed from both the North Slope and Mackenzie Delta, but Canada should give priority to a ‘clear, reliable regulatory path’ Gary Park PNA Canadian Correspondent
With North America facing a natural gas supply crunch, two pipelines will be needed to tap both the North Slope and Mackenzie Delta supply basins, said a number of speakers at a Far North Oil & Gas Conference in Calgary Oct. 2.
And from a purely economic standpoint, Canada should be supporting, rather than fighting, an Alaska Highway route, said Ken MacDonald, director, Canadian regulatory, for BP Alaska Canada Gas.
Noting that about two-thirds of the 1,200-mile Alaska Highway project would cross through Canadian territory, he said that could translate into $15 billion worth of spending in Canada, far outstripping the $3.5 billion investment a Mackenzie Valley system.
As well, the southern pipeline would be a major source of tax revenue, a boost to regional economic activity and strengthen Alberta’s status as a continental energy trading center.
But if Canada is to enjoy the benefits of an Alaska Highway project, the federal government’s first priority is to provide a “clear, reliable regulatory path,” MacDonald said.
Producers believe both lines doable He said the North Slope producers, BP, ExxonMobil and ConocoPhillips, have studied both the Alaska Highway and the northern, or “over-the-top” proposals and believe “they are both doable,” with no significant difference in cost. The price tag on the southern pipeline has been estimated at $20 billion.
The producers believe the Mackenzie Valley project “is on schedule to proceed first ... we don’t think that’s an issue now,” MacDonald told Petroleum News Alaska.
He said construction of the Alaska project could start once the Mackenzie Valley line was completed in late 2007 to 2008, and could itself be finished in late 2011.
Of greater importance to the North Slope producers, before they embark on spending $400 million to complete an application, is a regulatory plan in Canada similar to the federal initiative in bringing together all of the regulators in the Northwest Territories to accelerate Mackenzie Delta development, he said.
A parallel process should be achievable, given that the Yukon has fewer agencies involved, MacDonald suggested.
Regulatory, fiscal uncertainties for Alaska line On the U.S. side, he said the Alaska pipeline is gaining momentum, but because of remaining regulatory and fiscal uncertainties, the project is not inevitable, he said.
MacDonald strongly defended proposed U.S. government assistance for the Alaska Highway project, arguing it was no different from various forms of risk-sharing by the public and private sectors in both the United States and Canada.
He said a marginal gas credit of 52 cents per million British thermal units coupled with a phaseout provision, a government loan guarantee and seven-year pipeline depreciation was based on existing precedents in both countries.
He dismissed attempts to equate the proposed level of assistance with a project subsidy, noting that the industry would receive only 16 percent of project discounted gas flow, while the U.S. government would collect 68 percent and the various Canadian governments 16 percent.
Capital the challenge Brad Reese, senior vice president with Duke Energy and co-chief executive officer of Foothills Pipe Lines Ltd., said the greater challenge for both pipelines would be to raise the necessary capital.
“We will need all the gas we can get from the Far North,” he said, describing the region as a linchpin of North American energy security.
“Both (projects) have to be done,” Reese said, adding that government incentives are a necessary element, as they have been with other frontier development. Without assistance, North American markets could face supply shortfalls, he warned.
Doug Black, an attorney with the Calgary firm of Fraser Milner Casgrain, told the conference that although the competition for capital is intense, it is more likely that an extremely complicated regulatory regime could stall Arctic resource development in Canada.
Based on his own experience, he said “it’s not money that sends people packing from the frontiers ... it is the inability to get through the regulatory and environmental regime,” given that there are separate regulators to deal with in both the Far North and the Canadian government.
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