British Columbia tells U.S. not to throw subsidies at Alaska natural gas pipeline

Enbridge official suggests National Energy Board-Federal Energy Regulatory Commission joint review process for pipeline

Don Whiteley

Petroleum News Contributing Writer

While oil industry officials are recommending a joint regulatory process for permitting both the Alaska and Mackenzie Valley natural gas pipelines, the Premier of British Columbia is telling the United States not to throw subsidies at the Alaska project.

Pat Daniel, chief executive officer at Calgary-based Enbridge Inc., said at a gas conference in Calgary Nov. 3 that Canada and the United States should find a way to streamline the regulatory approach to both projects.

Arguing that both projects impact both countries — and are in both countries’ best interests — Daniel suggested some form of joint review process involving the National Energy Board of Canada and the Federal Energy Regulatory Commission in the United States.

Daniel told reporters he understood that U.S.-Canada relations have been strained in recent years, conceding that President George W. Bush and Prime Minister Jean Chrétien don’t see eye to eye on foreign policy, particularly with regard to Iraq.

In addition, trade relations have been equally strained as the U.S. Department of Commerce has imposed stiff countervailing and anti-dumping duties on Canadian softwood lumber and certain types of wheat, affecting billions of dollars of cross-border trade.

The $20 billion Alaska Highway natural gas pipeline proposal is one of the more contentious parts of the draft energy bill now working its way through Congress. Republicans have been divided over what is an appropriate level of subsidy for the line, in particular whether or not to impose an effective floor price of about $3.50 per thousand cubic feet for Alaska gas.

Canadian officials oppose subsidies

British Columbia Premier Gordon Campbell voiced his opposition to the Alaska subsidies in a recent meeting with Vice President Dick Cheney and Commerce Secretary Don Evans.

“I said we’re not in favor of subsidies,” Campbell said in an interview. “Our position has always been that the pipelines — both of them will be needed and planned and put in place when the economic decision making drove them.”

The Alaska Highway pipeline, assuming it is built along the route preferred by Alaska, would cross through both the Yukon and British Columbia before running through Alberta and into the United States.

“We want to work with everyone to make sure these opportunities are available, but we’re not in favor of subsidies,” Campbell said. “I think if they have a substantial subsidy to the Alaska pipeline, it will throw a wrench into a lot of the potential energy development in B.C. and the Mackenzie Valley.

“The (Bush) Administration is on track with us on the subsidies, and that’s encouraging,” Campbell said. “But they didn’t tell me they were sure it wouldn’t happen — they were both quite straightforward, it seemed to me. It’s important to them and their energy future that it be resolved.”

Campbell said he emphasized to the vice president that British Columbia and Alberta can still help the United States with energy security issues.

“We think Canada has an awful lot to offer in terms of energy security — in fact energy security is critical for the entire continent,” he said. “They can choose between Saudi Arabia and Canada — but if they work closely with us, we thought B.C. and Alberta had ample resources to meet their needs for the foreseeable future.”

British Columbia has resource of 115 tcf plus coalbed methane

While Campbell offered no hint that the province would stand in the way of a subsidized Alaska pipeline, British Columbia Energy Minister Richard Neufeld was not quite so sure. In an earlier interview he would not rule out taking action against a highly subsidized line.

“We are not in favor of any subsidies for the prices — none whatsoever — that’s totally foreign to markets, that’s the wrong thing to do,” Neufeld said. “It’s got to stand on its own two feet. I guess there’s always someone who would say we could hinder the progress of it coming through B.C. — that would have to be a decision I wouldn’t make on my own — that would be a government decision. That’s something we’d have to discuss, but I’m not ruling it out.”

Campbell’s visit to Washington was as much about softwood lumber as it was about energy projects — in fact, that was the principle reason for the high level visit in the first place. The U.S. Commerce Department has imposed punishing duties on the province’s softwood lumber exports, throwing thousands of British Columbia mill workers out on the street.

Asked if he connected lumber to energy, Campbell said: “No — well, not in a trade way. What I point out all the time is the reason energy is a powerful economic engine for Canada and the U.S. is that there’s open access to the resources. There’s ample U.S. investment in our energy fields in Canada, and I point out that the strength of that is the same strength we should have with softwood. Open access to markets always works better — provides more jobs, growth, opportunity — we’re consistent on all those things.”