Canada urges Washington to reject ban on “over-the-top” line

Letter to U.S. Energy Secretary calls for “equal, fair consideration” of all route alternatives; Foothills suggests Canada has “shifted from its legal obligations”

Gary Park

PNA Canadian Correspondent

The Canadian government has put itself in the thick of a raging controversy over preferred Arctic gas pipeline routes by calling on Washington to derail any legislative attempt to block an “over-the-top” option.

While insisting it has not dropped its proclaimed neutrality on the route, Canada said it wants all routes to be “afforded equal, fair consideration.”

It made the case in response to an amendment passed by the U.S. House of Representatives in August to prevent an offshore line from being built.

Canada’s Ambassador to the U.S. Michael Kergin, in a Sept. 5 letter to U.S. Energy Secretary Spencer Abraham, urged the Bush administration to take whatever action it could to block the resolution.

“Canada’s position ... is that industry should not be restricted in its assessment of routing proposals,” said Kergin’s letter, which has just been made public.

Natural Resources Minister Ralph Goodale, talking with reporters on Oct. 4, said the ambassador’s letter merely reinforced Canada’s position that politicians should not meddle in the regulatory process.

Legislative intervention called “inappropriate”

But the stand has angered Calgary-based Foothills Pipe Lines Ltd., which has the rights from both the United States and Canada, dating from the late 1970s, to build the Alaska Highway pipeline.

In a Sept. 18 letter to Canada’s Foreign Affairs Minister John Manley, Foothills accused Kergin of making statements that “are fundamentally at odds with the Canadian government’s obligations to Foothills and also to the United States and appear to us to represent a significant policy change by Canada.

“A change in policy, as contemplated by Ambassador Kergin, would, in fact, represent market interference,” said the letter signed by Michael Phelps, chairman and chief executive officer of Westcoast Energy Inc. (which is in the midst of a takeover bid by Duke Energy Corp.) and Hal Kvisle, president and chief executive officer of TransCanada PipeLines Ltd. Westcoast and TransCanada are joint owners of Foothills.

“We are extremely disappointed that Ambassador Kergin now seems to be signaling that Canada has shifted from its legal obligations and is prepared to consider other routes for the movement of Alaska gas,” the letter said. “We respectfully request that the Canadian government reiterate to the United States its historic position in support of the (Alaska Highway) route.”

C$1.5 billion in pre-build

The “pre-build” has been operating for almost 20 years from central Alberta, and is now shipping 2.2 billion cubic feet per day in an eastern leg to the U.S. Midwest and 1.1 billion cubic feet per day in a western leg to California and the Pacific Northwest.

But Kergin’s letter was greeted as “quite wonderful” by Doug Matthews, director of oil and gas for the Northwest Territories government.

He suggested the comments show that Canada has finally “joined this debate” over pipeline routes.

The Northwest Territories has repeatedly pressed the Canadian government to declare its support for a Mackenzie Valley pipeline over the Alaska Highway project to ensure that Mackenzie Delta gas gets developed before the North Slope comes on stream.

It has contended that if the North Slope leads the way, the Delta reserves might get shelved indefinitely.

As well, the Northwest Territories has been making a case for federal aid of C$200 million to help create the infrastructure needed to boost Delta exploration and development.