11/28-12/1:  Somewhat personal--Since we will be participating in the Arctic Gas Symposium the balance of the week, Northern Gas Pipelines has prepared for faithful readers the following useful reports to satisfy your demand for information.  Read three exclusive reports below for a Senator's take on Congressional action, a report on yesterday's meeting of economists, and the latest outlook from the Alaska Gas Producers Pipeline Team, with our comments.  (Please take a moment during the next few days to Email us with your ideas: what should we be covering that we aren't?  What are we doing well or not so well?  What isn't anyone covering that should be?  What ideas do you have for improving this simple but content rich website?  Would you like to be a volunteer reporter and supply stories/photos of gas pipeline-related events?  Did you at one time work on one of the gas pipeline projects; if so, would you please provide us with your own story, 2-20 pages!)  Lastly, let us tease you.  One of our Canadian readers is a 9th grader named Jeremy who has assumed responsibility for producing a school paper on Arctic gas pipelines.  We have assisted him with contacts and web links.  By mid-December we look forward to sharing with you the correspondence and final product; we are sure that it will reinforce your confidence in the generation for whom we are really working on pipeline projects.  If you are willing to offer your help or expertise to Jeremy, please email us at the link above and we'll put you in touch.  This thoughtful young man would deeply appreciate your help.    *     CBC, Yellowknife, N.W.T. - Politicians and business people from the Northwest Territories are selling Texans on their territory today.     *    DALLAS - Team Canada's latest trade mission to the United States...   *          Inuvik, N.W.T. - About thirty scientists from around the world will be in the Mackenzie Delta this winter...drilling for natural gas hydrates.

*******

  (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record.  -dh   ...Draft Revision: 11-28-01)

Northern Gas Pipelines-Senator Frank Murkowski said this week that he intends to attach an energy bill to a $110 billion agriculture bill and that ANWR exploration will be a component.  Failing that, he said, “We also have some other strategies for adding ANWR to other legislation.” (Photo, 11-3-01)

In answer to questions posed by Northern Gas Pipelines, Murkowski’s office provided a statement quoting the Senator as saying he was pleased with movement in the development of an Alaska Natural Gas Transportation System. 

"I am happy to say that less than two weeks ago,” he said, “I stood shoulder to shoulder with eight of North America's premier energy transportation companies as they announced reconstitution of the Alaska Highway natural gas transportation system partnership.  (See our earlier story.)

"This effort comes in addition to the work already put forth by a consortium of Alaska North Slope producers, Phillips, Exxon, and British Petroleum.  These companies have invested over $100 million dollars in analyzing the technological and economic feasibility of constructing the gas transportation system,” he said.  "While the producers' initial findings indicate that the project is still marginally uneconomic, I am encouraged by the level of effort they have invested….”

Murkowski said that reconstitution of the pipeline companies' partnership and continued efforts by producers set the stage for joining forces in the development of the gas transportation system.  "I have always believed that construction of this $20 billion mega-project is going to take the combined efforts of both pipeline and energy production companies.” 

He said that the re-emergence of the transportation companies should end speculation regarding a northern route.  "The Highway route affords Alaska access to a vast reserve of clean energy and feedstock for future industrial applications,” he said. 

Murkowski believes the highway route protects options to bring LNG into Valdez and gas feedstocks into the Kenai to further develop petrochemicals.  “While this effort proceeds,” he said, “I will continue to consider introducing any legislative changes needed at the federal level to make a gasline a reality for Alaskans."

Murkowski added that the U.S. needs a comprehensive energy policy and that, following 9-11 less dependency on foreign nations in unstable areas is vital.

WASHINGTON, D.C. (Late last night, this came in.  –dh)-- Alaska Sen. Frank H. Murkowski…, released the following statement after Senate Majority Leader Tom Daschle said that he would not move an energy bill until next year.  (HOUSTON CHRONICLE-"I don't know that we'll have the opportunity to complete work on the energy bill before the end of this session," Daschle, D-S.D., told the Senate....; Anchorage Daily News)

"Next year is not soon enough for energy.  These are volatile times.  To be so dependent on such an uncertain corner of the world places American lives at risk and our economic future in jeopardy.  …I still believe we have an obligation to solve this problem.  I remain committed to bringing about a vote on energy - if the leadership will not set a date certain this year, I will use whatever procedural means are available to make that occur.
       "Just yesterday President Bush explained more of Iraq's role in harboring terror and discussed  their refusal to allow in weapons inspectors.  Yet, in the midst of September's attacks, we imported a record 1.192 million barrels of oil a day from Iraq, the most since July 1990.   If Baghdad is our next target after Kandahar, what's going to happen to that oil?  Can we replace it?  …
      "Last week we lost two American sailors who had stopped a tanker smuggling Iraqi oil.  Our dangerous reliance on Saddam's oil is not only putting too many Americans in harm's way, it further strengthens his rule. 
      "With a comprehensive, national energy policy with solutions that begin at home, we can ensure our energy security and our national security….
      "…  If we have time to deal with the railroads, we certainly have time to do energy…."

Northern Gas Pipelines-“Alaska Energy Economists Discuss Cook Inlet Gas Supply and Relationship to North Slope Gas Decision.”  Yesterday the Anchorage chapter of the International Association for Energy Economists gathered to hear a joint presentation by three State Division of Oil and Gas officials representing the Department of Natural Resources.  SEE FULL STORY AND PRESENTATION LINKS HERE.

Comment:  Just as Cook Inlet production is declining, so are state revenues.  Alaska currently spends more than it takes in, making up the balance from fast depleting savings accounts.  The savings account reserves are on an even sharper decline than Cook Inlet gas reserves and will be used up before the end of the decade.  Even revenue from an ANS gas pipeline would only slow the decline in revenue, not reverse it.  The concern for Cook Inlet production, the industry jobs/tax base it supports and gas supply for Fairbanks are only a few of the reasons why political leaders in Alaska are so focused on enabling an Alaska Highway or Trans-Alaska LNG project.  Either could bring the huge ANS reserves closer to major population centers.  Now, readers outside Alaska may come to understand why there continues to be tension between the desire to achieve maximum value for ANS gas—maximum income for the state--and the desire to keep Alaskans employed and their homes warm.   A long delay of an ANS gas project, however, would jeopardize both goals...the worst outcome.  -dh

ANCHORAGE-Alaska Gas Producers Pipeline Team (AGPPT) Year-long Feasibility Project Approaches Conclusion  (Northern Gas Pipelines Report and commentary). 

Not surprisingly, the political leaders of Alaska, Northwest Territories and Yukon Territory have made their political support known for various project routings based on what they perceive to be the best interests of their constituents.  It is valid for politicians to reflect their political views in regulation and law.  It is also true that political acts cannot necessarily command economic feasibility nor compel private investment.

Various companies bought the leases in Arctic areas, explored, found oil and/or gas.  Their constituencies are shareholders who provided the exploration funds expecting a fair investment return.  If governments did not specify route and mode for transporting resource in the original lease agreements, companies are entitled--indeed required--to produce the most efficient system in faith with shareholder expectations.  Accordingly, the companies are obligated to make rational, non-political decisions for moving their resource to market. 

The AGPPT feasibility study for commercialization of Alaska North Slope gas was scheduled for completion at the end of 2001.   The final route was also expected to be identified and an application filed with Canadian and U.S. governments by year-end or shortly thereafter.  Several things have happened over the last year including a dramatic slide in the market demand and price for gas.  Also, the AGPPT has argued that a keystone in project feasibility is fiscal/regulatory 'clarity' in Alaska and Federal legislation, neither of which has occurred.  Neither does it look likely that the AGPPT will file project applications with the two Federal governments by year-end, or shortly thereafter as earlier planned.

So, the team has announced no final routing or feasibility conclusions, though there are interim conclusions we can deduce from statements and actions:

• Neither the Northern or Southern routes have yet been found economically viable but the shorter Northern route is probably cheaper unless the study produces unanticipated surprises.

• Based on an application process in both countries during the 70s, the Alaska Highway, southern route was approved as an exclusive route for Alaska gas and the company selected to manage the project was a predecessor to current southern route standard bearers.   Those approvals, memorialized in international agreements and legislation, have never been changed; to change them would seem to require Congressional and other action.  Southern route proponents have said that updated revisions to the nearly 30-year-old 'ANGTA regime' could be helpful even for the Highway route.  An Alaska gas project built by any other sponsor, or using any other route, would require Congressional and other action.  No such action has occurred.

• The routes, if completed, would supply significant revenue to Canadian and U.S. Federal and local governments; the cheaper route could provide slightly more government revenue.  Many argue, however, that royalty and tax value could be secondary to other stakeholder benefits (See Cook Inlet story above).

• The Canadian government has stated it is route-neutral, will not offer special incentives but will expedite the regulatory process (See here).  Company opinion varies on the need for Federal incentives.

Affecting the final outcome must surely be the recent announcement of a ConocoPhillips merger combining North Slope and Mackenzie Delta gas reserves of the joined companies.  Three major producers share the significant 35 TCF proven North Slope gas reserves.  Two of the three now have proven reserves in the Mackenzie Delta while the other has exploratory interest there.  Accordingly, shareholders would properly insist that any decision on gas commercialization routing and timing consider company reserves and potential on the North Slope and in the Delta.  Also affecting the outcome are recent announcements that the Alaska Highway Project sponsors have reestablished their partnership (See here) and entered into a cooperative process with the Kaska Nation (See here) and that much Alaska sentiment still supports an LNG system (See here). 

Northern Gas Pipelines this week questioned David MacDowell, External Affairs Manager (Photo, 10-25-01) for AGPPT on the current status of the feasibility study, and next steps.   "We're on track for year-end delivery of engineering, cost, and environmental information," he said.  "These updated costs will provide the basis for evaluation of project feasibility."  We asked MacDowell about timing of the final report.  He said, "the joint team will consolidate all of the data developed during the year, and will forward it to the three sponsor companies for review. It's a lot of information - around $100 million worth.  The sponsor companies will analyze the results and determine potential next steps."  MacDowell said they hope to be in a position to share information about forward plans early in the new year.  He said it is too early to speculate on how year-end results might differ from earlier releases of interim data.  The producers all along have said the individual companies would determine final project feasibility and that this phase of the study effort would be complete around year-end.  Both of these positions remain consistent.  But there seems to be a continuing public expectation that some grand release of routing choice and feasibility will occur at year-end.  If one is guided by actual statements of producers, including this latest one, it seems more likely that:

• The AGPPT feasibility work will be completed, as stated, by year-end but not likely released publicly at that time.

• The completed study will be provided to the three sponsoring companies for internal analysis.

• The individual companies will indicate their assessment of economic feasibility and could indicate preference for a pipeline route and their opinion as to the timetable for filing any resulting applications, for holding open seasons to determine reserve capacity for shippers, etc.  This could occur in the new year, date uncertain.

Some of the possible 2002 scenarios could include:

• The companies could pursue individual projects or not pursue any projects or delay consideration of projects.

• Some or all of the producers could work among themselves and/or others to form a new consortium to engage in the regulatory--and subsequently, the pre-construction--phases of one or more projects.

• The AGPPT could continue its study partnership and evolve into a consortium or disband, having completed its mission.  Note: the AGPPT consists of about 100 employees 'borrowed' from sponsoring companies and about 500 contractors on term assignments.  Dissolving AGPPT should not necessarily be regarded as abandonment of interest in developing a gas pipeline project or as an unexpected event.

• The Alaska Highway Pipeline Project proponents could, with their reconstituted partnership, respond to a producer invitation and submit an economically viable project proposal (See here).

• Delta producers could continue momentum of a Mackenzie Valley pipeline regardless of Alaska developments.

Both AGPPT and the Canadian government have logically stated that government roadblocks to any project are more likely to bring down a project than facilitate one.  One scenario could envision government legislation providing legislative incentives for a politically preferred route or disincentives/prohibitions for a politically unpopular route.  Were this to happen, as a trade-off benefiting certain interests, all outcomes could have negative impact on some combination of royalty owners, taxpayers and/or shareholders, future investors contemplating the investment climate of northern, North America.

Northern Gas Pipelines readers, including the author, might instinctively prefer a combination of three routes: (1) an Alaska LNG project "Y" leg from Fairbanks to Valdez; splintering off from (2) an Alaska Highway Pipeline Project route which intercepts gas from (3) a Mackenzie Valley Pipeline.  But were we told we could have that scenario if we were willing to pay for it, chances are we'd commission a study to determine what scenario would produce the best return for our investment of billions of dollars.

Viewing the results of that study, we'd then decide if the perfect project also provided an economic return; if it didn't we'd be obligated to commit our money to a feasible project.  If politicians erected roadblocks to that project, we’d be out of options. 

That very process seems to be playing out now among the primary investors.   We don’t know whether their final decision will turn out to be the most popular conclusion from their viewpoint or ours.  But following an expensive process of prudence and due diligence the results will reflect a scientific approach…and reality (On this subject, here's an economist's opinion).  -dh

11/27: Gov. Tony Knowles' (10-31 photo) office sent Northern Gas Pipelines a notice that yesterday in New York City he met with several Wall Street bond-rating firms and lending and investment institutions to tell them Alaska is on solid financial footing. He also met with The Wall Street Journal Editorial Board and is meeting with the New York Times board today to discuss his support for construction of an Alaska Highway natural gas pipeline.          *       Fox News, WASHINGTON — The oil and gas industry is on especially high alert after an FBI warning that Usama bin Laden may have ordered retaliatory strikes against North American natural gas facilities in event of his capture or death, industry sources said Monday...  (See our earlier editorial.).      *     Northern Gas Pipelines readers will recall we considered the North Slope Borough story very significant, and gave the other side of it last week.  Then, yesterday, Tom Kizzia provided his Anchorage Daily News , in-depth coverage.  The end of the story might be found sometime during the upcoming session of the Alaska State Legislature.  -dh         *      CBC, CALGARY  - Premier Ralph Klein left for Texas and California on a Team Canada West trade mission, Monday.  Klein says energy will be the primary focus of the mission.  The group hopes to attract more investment dollars for Alberta from US energy companies.   Klein also will pitch US firms on the idea of moving high-tech jobs to the province....     *     Northern News Services by Derek Neary, Fort Simpson - The Deh Cho First Nations want 50 per cent of royalties from development in the region. The federal government is offering the same formula proposed through the failed Dene/Metis claim.  Because the Deh Cho comprise 25.5 per cent of the Mackenzie Valley's Dene/Metis population, that would translate into between $1 million-$3 million annually for the Deh Cho, based on 12.25 per cent of the first $2 million in royalties received by the federal government from the entire Mackenzie Valley and 2.45 per cent on anything thereafter.   "The federal government's never put money on the table prior to a final agreement before. It has always flowed after ... I'm definitely walking on egg shells from a federal perspective," federal negotiator Robin Aitken said Monday. "Given what we're trying to do in the interim, we see that as showing a lot of flexibility."   Chris Reid, chief negotiator for the Deh Cho First Nations (DCFN) said the Deh Cho perceives an existing land claims formula as unacceptable, even as an interim measure.   "It's not so much the amount of money that's the issue. It's the fact that, at this point, they haven't recognized any unique revenue sharing arrangement for Deh Cho oil and gas," Reid argued....Both sides targeted March 31 as a date by when they will have an Interim Resource Development Agreement (IRDA) signed....

11/26: This will be another significant week in the life of Arctic gas pipeline discourse:  Arctic Gas Symposium Participants, 11/29-30, Houston: Judy Brady, Executive Director, Alaska Oil & Gas Association--Matt Janisch, Managing Director, BMO Nesbitt Burns Inc.-Ministers Jim Antoine (Northwest Territories), Scott Kent (Yukon Territory), and Murray Smith (Alberta)-Corry Woolington, Land Manager-Alaska, Chevron U.S.A. Inc.-Robert Purgason, Vice President, Hydrocarbon Development, Williams-John Burdek, Chairperson, Ta'an Kwach'an Council-Jacob Adams, Chair & President Arctic Slope Regional Corporation- Marty Cheyne, President & Chief Executive Officer, Devlan Exploration-Dave Harbour, Publisher, Northern Gas Pipelines-David McClement, Former President, NANA-Colt/Colt Engineering-Forrest E. Hoglund, Chair & Chief Executive Officer, Arctic Resources Inc.-Stephen J. Wuori, Group Vice President, Planning & Development, Enbridge Inc.-Marty Heeg, Vice President, Business Development, Foothills Pipe Lines Ltd.-Bob Reid, Executive Director, Mackenzie Valley Initiative, TransCanada PipeLines Limited-Brian Fraser, Business Manager, Shehtah Drilling Limited, Kerry Wilson, Operations Manager, Shehtah Drilling Limited-Roland George, Principal, Purvin & Gertz, Inc.-Jeff Bigger Business Development Manager, Syntroleum Corporation******The International Association of Energy Economists Alaska Chapter program features Cook Inlet gas supply and demand at its monthly luncheon meeting Tuesday, Nov. 27 in BP's 1st-floor conference rooms B & C at 900 E. Benson Blvd. in Anchorage.  Featured speakers include: Bill Van Dyke, petroleum manager for the Division of Oil and Gas; Tim Ryherd, Division of Oil and Gas geologist, and IAEE President William Nebesky, the Division's Commercial Analyst.******Greg Mattson, performance unit manager, Alaska New Developments, BP Exploration (Alaska) Inc. is the featured speaker for the Alaska Support Industry Alliance Thursday breakfast meeting scheduled for 7 a.m., Nov. 29 at the Petroleum Club of Anchorage. 907-563-2226.******Resource Development Council for Alaska Conference, in Anchorage: "Alaska Resources 2002: Can Alaska Compete?" Robert Stiles, RDC President-Steve Marshall, President, BP Exploration Alaska Inc.-Rick Mott, Vice President Exploration and Land, Phillips Alaska, Inc.-Jack Williams, Production Manager-Alaska, ExxonMobil-Mark Hanley, Public Affairs Manager-Alaska, Anadarko Petroleum Company-Charles Pierce, Vice President, UNOCAL Alaska-John Barnes, Alaska Regional Manager, Marathon Oil Company-Gary Carlson, Senior Vice President, Forest Oil Company-Tony Fountain, President, BP Gas and Power, North America-AK Sen. John Torgerson, Chair, Joint Committee on Natural Gas Pipelines-Roger Simmons, Consul General of Canada-Rob Shoaf, Senior Executive, Alyeska Pipeline Service Company-Ira Perman, Executive Director, Alaska Humanities Forum-Ernie Hall, President, Alaskans United-Jamie Kenworthy, Executive Director, AK Science & Technology Foundation-Cavan Carlton, Arctic Project Director-Wayne Sartore, Vice President, Northern Pipeline Development, Enbridge-John Ellwood, Executive Vice President & Chief Operating Officer, Foothills Pipe Lines, Ltd.-Representative(s) from Alaska Gas Producers-D r. Sung Sohn, Chief Economist, Wells Fargo & Company-John VanBrunt, President and CEO, Agrium, Inc.-Ernesta Ballard, Principal, Ballard and Associates-John Rense, Chief Operating Officer, NANA Development Corporation-Bob Maynard, Attorney, Perkins Coie LLP-Governor Tony Knowles******DECEMBER 3^rd, 2001 MANAGING COMMUNITY CONSULTATIONS & STAKEHOLDER RELATIONS, Calgary: David Savage, President, Savage Management Ltd.-Gerry DeSorcy, Former Chair, Public Safety and Sour Gas Committee-Harry Lillo, Implementation Team Leader for Public Safety & Sour Gas, Alberta Energy & Utilities Board (AEUB)-Richard Neufeld, Partner, Fraser Milner Casgrain-Maureen Payne, Senior Vice President, GPC International-Richard Roberts, President, Praxis-Bill Remmer, ADR Co-ordinator, Alberta Energy & Utilities Board (AEUB)-Ken Shipley, Director, The Fort McKay Industry Relations Corporation-Christine Burton, Manager Regional Consultation, Suncor Energy Inc.-Tom Marr-Laing, Director, Energy Watch Program of the Pembina Institute- Joanne D. Nutter, Socio-economic Manager, Mackenzie Delta Opportunity, Imperial Oil Resources-Jeff Rath, Barrister & Solicitor, Rath & Co.-Chief James Ahnassay, of the Dene Tha' First Nation-R.W. Taylor, Assistant Deputy Minister, Oil Development Division, Alberta Energy, David Luff, Vice President Environment & Operations, Canadian Association of Petroleum Producers (CAPP-Brian Vermeulen, Manager Surface Land & Aboriginal, and Community Relations-Robert Hunt, Senior Vice President, Akita Drilling Ltd.-OD Hansen, Public Affairs Advisor, WesternGeco-Bee Schadeck, consulting for Anadarko Canada and Northstar Energy-Barbara Shumsky, Manager Public Affairs, Syncrude Canada Ltd.- Jane Newlands, Community Relations Manager, BC Hydro.

11/24-25 (Weekend):  Gas Prices, Henry Hub: 11-23, $1.87; 11-16, $2.28; Year ago, $6.37.     *     Houston Chronicle By IAN MCKINNON (Reuters News Service), CALGARY, Alberta -- The energy industry is gearing up for an active winter drilling season on the tundra of Canada's Far North, but soft natural gas prices and a weak economy have deflated expectations of a full-fledged boom. ... "Short-term price fluctuations are something that we're not concerned with because we're looking at the long term," said Chris Dawson, a Petro-Canada spokesman.  ... Petro-Canada and Devon plan to drill three 9,840-foot deep wells between the small Mackenzie River Delta towns of Inuvik and Tuktoyaktuk. Paramount intends to drill two wells farther south, near Fort Liard, below the Arctic Circle. ... In recent federally supervised land sales, producers committed to spending $406 million on exploration over the next few years just in the Mackenzie Delta.  ... A Northwest Territories official said overall activity is robust, with about 20 seismic programs set for this winter, which will be used to target wells in upcoming drilling seasons. "Aside from the central Mackenzie Valley, it looks like projects are up all ... around," said Chuck Parker, an assistant deputy minister in the government's resources department. "We're working to maximize northern employment but it looks like there will be lots of opportunities for work."  ... Oil-field service provider Akita Drilling Ltd. is keeping two new rigs in Alberta this winter and delaying the move of the $11.24 million units to the Mackenzie Delta until later in 2002.  "It looks like the number of wells that will be drilled this year (in the Arctic) will be similar to what was drilled last year," said Murray Roth, Akita's vice-president of finance. "I would say it's a disappointment. We would have liked to have seen some additional growth there." ... "The reality of the situation is that when the prices are low, like they are now, the companies start to ask themselves what the prices are going to look like in the future," said gas analyst Roland George of consultants Purvin & Gertz Inc.  Imperial Oil Ltd., Shell Canada Ltd. and the Canadian unit of Conoco are studying building a $1.9 billion pipeline to transport about one billion cubic feet a day of Arctic gas to southern Canadian and U.S. consumers. Additional finds by Petro-Canada and other firms would improve the viability of the project.       *     GAS PIPELINE MEETINGS GALORE: Next week will be extremely active for the gas pipeline community.  Stay tuned for our Monday report on the events and the players convening in Anchorage, Calgary and Houston.

11/23: Whitehorse Star by Chuck Tobin-The Yukon government is looking to the Whitehorse trough as the next area to make available for oil and gas exploration, says the manager of the territory’s oil and gas branch.  John Masterson pointed out earlier this week....   *      CBC, Whitehorse, Yukon - The Yukon government has spent $18,000 to prove something it has long claimed. (Download the report here. -dh) The economic development minister says it gives him hard evidence the so called "Over the Top Route" is not viable.   The territorial government insists building a pipeline across the Beaufort Sea can't be done. If that were the case, it would bolster the Yukon's efforts to have Alaskan gas shipped down an Alaskan highway pipeline through the territory.  .... The minister, Scott Kent (Photo), says the money was well spent. "We'll get good bang for our buck on it," he says.  "The money that we spent on it, you know if we can get a $2-billion direct investment in the Yukon for the money we spent on it, that's a pretty good investment," Kent says.  ....  (See official release, here.)     *     "Let's Develop Alaska's Gas Wisely," Op-Ed, Anchorage Daily News by Jim Sykes.

11/22: YELLOWKNIFE -- Premier Stephen Kakfwi has appointed Melody Morrison as Principal Secretary to Cabinet. Morrison is from Whitehorse, Yukon where she has worked since 1995 as an advisor to the Kaska Nation in land claims, self-government and treaty negotiations. She has worked for the Council of Yukon First Nations (formally the Council Yukon Indians) and served as Executive Assistant to the Minister of Renewable Resources and Tourism for the Yukon Government.  From 1992-1995 Ms. Morrison was Principal Secretary to the Premier of Ontario, co-ordinating all operations of the Premier’s Office, and providing advice and support to the Ontario Premier in strategic planning, communications and the implementation of government priorities and planning.  “Ms. Morrison is an astute and energetic advisor, negotiator and team leader,” the Premier noted. “She has extensive and diverse experience with issues across Canada and particularly in the North. Her insight and guidance will be a valuable and welcome resource ....”  Morrison has supported the public service communications efforts of Northern Gas Pipelines and will assume her new duties January 3, 2001.  We wish her well.  -dh       *     ANCHORAGE: Ad valorem tax collections in Alaska compose a major source of revenue for the state and certain communities, most notably the North Slope Borough and Valdez.  Since ad valorem taxes will apply to the value of gas pipeline related property and affect overall economics of any project, we provide some insight here into a growing debate.  The legislature, which spends more than it takes in, currently makes up the difference from savings accounts, now fast depleting.  It has introduced Senate Bill 186 for the purpose of gradually reducing the percent of the property tax a local community can claim, effectively increasing the state government share.  North Slope Borough Mayor George N. Ahmaogak, Sr., has spoken strongly on this subject, urging defeat of the bill (Please review this earlier story), and implying a linkage to gas pipeline routing and ANWR issues.  Senator Dave Donley recently reacted to the criticism with a detailed rationale for the legislation (Please review the response here).      *      Northern News Services, by Thorunn Howatt, Yellowknife - Last week Premier Stephen Kakfwi took a trip south to reassure oil and gas representatives that the territorial government is stable and the North is open for business.  "I was interested in connecting to some of the people in the oil and gas business. I think some of them were tuned into this motion of confidence that we had," said Kakfwi, referring to a recent special committee report that rocked the government.  "It was important to reconnect and let them know I'm a premier with even a stronger mandate than before and that there is very strong support from my cabinet, the MLAs and as well from the public."  Kakfwi met with members from Enbridge Pipeline Inc., Northrock Resources Ltd., Imperial Oil's K.C. Williams and Paramount Resources.   The trip was meant to update industry as well as government on future plans regarding energy exploration and issues regarding a Mackenzie Valley pipeline.   The Kakfwi government has strongly endorsed a proposal to take arctic natural gas from the Mackenzie Delta Beaufort Sea southward following the Mackenzie Valley. Low energy prices have caused some companies to cancel exploration and drilling plans.  "Northrock has cancelled some activity in the Sahtu," said Kakfwi. But he explained that Paramount is looking to activity in the Deh Cho region.  ... Another message carried by Kakfwi was the change in the territorial oil and gas portfolio. The Deh Cho region's Jim Antoine (Photo) took over from Joe Handley. ....

11/21:  ANCHORAGE (SPECIAL REPORT; readers may skip story and move directly to gas pipeline remarks by clicking here.)-Consul General of Canada, Roger Simmons (Photo) PC, told Commonwealth North members yesterday that after 17 trips to the 49th State he appreciates a message President John F. Kennedy delivered to Canada's Parliament.  In that message over 30 years ago, Kennedy characterized the relationship of the two countries as one shared by "neighbors, friends, partners and allies".  Simmons gave the North American Air Defense Command (NORAD) as a "unique example of how the two countries trust each other (Note: In another forum today, LTG Norton A. Schwartz reported that 35 members of the Canadian military work in his Alaska Command headquarters, protecting North American air space.) 

As further examples of the countries' interdependence, Simmons noted they share about $1.4 billion in trade daily.  The U.S., he said, has invested over $200 billion in Canada while Canadians have invested over $150 billion in America (i.e. proportionally, more).  "Our relationship is based on facilitated border relationships," he said.  On the subject of terrorism, Simmons observed that the countries need to "...build a wall not between us but around us...," referring to Canada's successful strategy of preventing persons deemed security risks from boarding airplanes to Canada rather than attempting to track them once they began melting into the North American population. (Photo: Alaska's Lt. Gov. Fran Ulmer greets Simmons before meeting.)

Simmons was optimistic about energy development and said that the Alberta tar sands contain more oil than Saudi Arabia, 300 billion barrels.  Canada sells 80% of its products to the U.S. and 90% of its energy.  He said that within this decade the North American market will require both Prudhoe Bay and Mackenzie Delta gas to satisfy growing demand.  "Canada is supportive of delivering gas to the market by pipeline," he said, "but neutral as to the route".  He acknowledged ongoing producer studies and said that if they revive the Alaska Highway routing the Canadian government would revive the Northern Pipeline Agency and regulatory support required by the project.  "Prime Minister Chrétien has committed to have the proper regulatory mechanisms in place," he said.  "We believe that delivering Arctic gas to market is doable." (Photo-CWN Chairman Joe Griffith standing at podium, with left-right: gas study group chairman Dick Barnes, Governor Walter J. Hickel, Michael Porcaro and Simmons)

In answer to an audience question regarding project complexity, Simmons said, "Getting gas through Canada will not be a problem; it will be facilitated."  In answer to a question about incentives, Simmons said that Canada withdrew from the "subsidy business" years ago, but "...we can facilitate the process."  He added that in returning to basic principles, if a project is uneconomic, "...it will not work anyway."  Then, he cautioned about too much government interference.  He said he'd been in politics long enough to know that government can destroy a project by creating too many rules around it.  He did acknowledge that continuing settlement of Aboriginal land claims have produced an environment in which First Peoples want to be a part of the process.  Aboriginal control of lands would create, "...more jurisdictions to work with,"  he said, but land claims would not be an impediment to a gas pipeline.  Responding to a question about use of Alaska/Canadian labor on a gas pipeline project, Simmons indicated that he is encouraged by training and educational relationships growing between Canada and Alaska, citing a Yukon College/University of Alaska-Fairbanks program.  "The problem will not be finding enough jobs for the people," he said, "but finding enough skilled workers to meet the requirements."  (Obtain Consul General Simmons' prepared speech here.)

11/20:  At 7 a.m. this morning, The Honourable Roger Simmons, PC, Consul General of Canada, appeared in Anchorage at Commonwealth North to address: Canada's economic interests in natural gas development, Canadian hurdles and opportunities, role of First Nations, North vs. South line, and internal Canadian politics.  We're preparing a report for faithful readers....     *     Anchorage Daily News, by Ben Spiess-The proposed $35 billion merger of Phillips Petroleum Co. and Conoco Inc. will have minimal impact on the company's Alaska business, Kevin Meyers, president of Phillips Alaska Inc., said Monday.     *     Northern News Services, by Jorge Barrera, Yellowknife - Deh Cho Grand Chief Michael Nadli said he expects a royalties sharing agreement with the federal government next summer.   "Hopefully by this summer, we'll have an interim resource revenue sharing agreement with the federal government," said Nadli during a stop in Yellowknife for land and resource revenue negotiations with the federal government. ...   Nadli said the Deh Cho Nation is united anew in solidarity opposing constructing of the Mackenzie Valley pipeline under current terms.   Around 40 per cent of a proposed pipeline from the Beaufort Delta through the Mackenzie Valley cuts through Deh Cho territory.  The Deh Cho wants their own royalty deal with the federal government.  ... "(Fort Simpson Chief Rita Cli) reaffirmed her support for resolution (signed in Wrigley)," said Nadli while in Yellowknife for land and resource revenue negotiations. "She wanted to strengthen the resolution even more."   The Wrigley resolution opposing the pipeline under current terms was singed this summer by the Deh Cho Nation. ...  Nadli said the Nation is organizing a strategic planning session to formalize a game plan.   The Deh Cho Fort Liard band recently jumped to the Aboriginal Pipeline Group which just signed a deal with four major Oil Companies to build a pipeline.      *       CBC, Inuvik, N.W.T. - At least four oil and gas companies have decided not to drill in the Northwest Territories or the Yukon this winter. They're blaming a drop in oil and natural gas prices.     *     Northern News Services by Dave  Sullivan, Hay River - Residents of Hay River's Dene Reserve made a smart move joining the oil and gas industry, speakers at a grand opening said Thursday.   After eyeing successful moves by Fort Liard into the booming energy industry, the Hay River Reserve waded in with a $750,000 investment. The community borrowed the cash to build a warehouse for Northern headquarters of two Alberta oil patch companies -- Chinook Testing Inc. and IROC Systems.   Chinook, a pipe-testing company, has gone into partnership with Hay River's Doug Cardinal and Fort Liard's Honourary Chief Harry Deneron to form Chinook Testing Inc (NWT) Ltd., jointly owned by Chinook Testing Inc. and 4859 Northwest Territories Ltd., a numbered company owned and operated by Cardinal and Deneron. They hold 51 per cent of shares in the joint ventures.   The territorial government gave $100,000 to the companies for training, and gave up title to about three hectares of land. ... Hay River Chief Pat Martel told over 100 people gathered Thursday in the new building "If you talk about education for young people, you've got to have something for them to look forward to. I can go back into the bush and do the things my father taught me, but that's not the way it is today. We have to move forward. In order to do something like this, you have to involve the people who know how." ... With no customers yet, Chinook Testing's half-million dollar investment in the region so far means "rolling the dice," President and CEO John Roth said in an interview. ... Roth says his company's investment does not depend on a Mackenzie Valley pipeline going ahead, and he isn't too worried about cuts to Northern drilling programs this winter. "The slowdown will make things more manageable. There was already a shortage of qualified manpower," he said....

11/19:   ConocoPhillips merger: please see our full report with links and comment (additional links to other related news and commentary will be added during the day).   *   CBC's Randy Henderson (Photo-right, with production support from Stacey McGaghey and Phil Morck) honored Northern Gas Pipelines this morning by interviewing us (click here to listen) about our public service web page. If you'd like to tune in to CBC Yellowknife, first click here, then on "North" (bottom of blue box), then on "Yellowknife" {Real Audio required}  -dh (Photo-left)    *     CBC, Yellowknife, N.W.T. - The possibility of building a natural gas pipeline from Alaska isn't dead, even though Alaskan producers have said the line isn't economically feasible. A consortium of energy and pipeline companies involved in the original Alaska Highway pipeline 25 years ago have come back to the table. (See our 11/15 story.)

11/17-18:  Anchorage Daily News, by David Reaume (Photo): ...  With a combined market capitalization exceeding $450 billion, the team of BP, Exxon and Phillips forms one of the financially strongest private-sector consortiums on the planet. Further, it would be hard to find potential investors in an Alaska gas pipeline who are better informed as to the project's strengths and weaknesses. Under these circumstances, it seems reasonable to conclude that if this group declines to proceed, the project is very, very unlikely to be attractive to any other reasonably well-informed and prudent private-sector investors, none of whom is likely to be as well informed or as financially strong as the BP-Exxon-Phillips consortium. ...  (Note: as suggested in our commentary (11/18, below), the ConocoPhillips merger could affect the focus and outcome of gas pipeline projects to which Reaume refers.  This is especially true at a time in which recessionary trends have delayed projected strengthening of North American natural gas demand/prices and the timetable for potential gas transportation projects.  -dh)          *         WEEKEND SPECIAL REPORT, Phillips and Conoco Merge Into Third Largest U.S. Integrated Energy Company:  (Commentary: In July 2001, Conoco acquired Gulf Canada Resources Limited.  It was the largest oil and gas deal in Canadian history. It immediately increased Conoco's North American natural gas production and proven natural gas reserves by 50 percent, and worldwide total reserves - oil, natural gas and Syncrude - by 40 percent.  Of more interest to Northern Gas Pipelines readers, are the Mackenzie Delta gas reserves which flowed into the new entity.  In 2000, Phillips Petroleum Company had earlier completed the largest acquisition in its history – the purchase of ARCO Alaska Inc., transforming Phillips overnight into one of Alaska's major oil and gas producers.  Until this week, Conoco has been primarily concerned with commercializing Mackenzie Delta reserves while Phillips has been focused on studying the feasibility of transporting its Arco-acquired North Slope gas reserves to market.  The new corporate personality potentially combines split interests: feasible commercialization of stranded gas reserves in  Canada's Mackenzie Delta and on Alaska's North Slope, until now a dilemma shouldered by ExxonMobil and Imperial Oil Limited {See our maps, here and the less discussed, important bitumen link, here}.  Corporate strategy could remain unchanged: that is, a Mackenzie Delta gas pipeline strategy and a separate Prudhoe Bay strategy.  However, one cannot assume ConocoPhillips shareholders, consumers, pipeline companies, governmental tax collectors and royalty owners (i.e. who share many interests) will ignore the economies of scale some joint transportation project could create in this brave new world.  -dh)

Houston, Texas and Bartlesville, Oklahoma (Nov. 18, 2001, from official releases) - Conoco Inc. (NYSE:COC, motto "Think Big, Move Fast") and Phillips Petroleum Company (NYSE:P, motto "The Performance Company") today announced that their boards of directors have unanimously approved a merger of equals, and that the companies have signed a definitive merger agreement.  The new company, which will be named ConocoPhillips, will be a strong competitor with enhanced returns and accelerated growth opportunities from an excellent financial and operational position. Upon completion of the merger, Archie W. Dunham (Photo-left), Conoco chairman and chief executive officer, will serve as chairman of ConocoPhillips and will delay his scheduled retirement to 2004.  James J. Mulva (Photo-right), Phillips chairman and chief executive officer, will be president and chief executive officer of the combined company, and also become chairman upon Mr. Dunham's retirement.  (PLEASE SEE OUR COMPLETE COVERAGE WITH LINKS HERE.   This is a good time to repeat what regular readers know: we extend an open invitation for anyone to supply additions or corrections to all news/editorial/reference materials shown on this public service website.  -dh)     

Globe and Mail-Scott Kent (Photo, right-with author 2-01) the Minister of Economic Development for Yukon, a vocal proponent of the proposed pipeline, said the removal of the legal question lifts a huge barrier to the project.  (See our news below, 11-15/16.  -dh)  "There was a chance this could have ended up in a lengthy court battle that would have significantly hampered" the project, he said. "It's certainly very good news."     *     Representative Jeanette James reports on Canadian/Alaska rail connection which could impact gas pipeline plans.  1. Conference urges the United States / Canada Bilateral Commission, authorized by Sen. Frank Murkowski's 'Rails to Resources' legislation be fully implemented as soon as possible.  2. Conference supports Rep. Jeannette James' HB 241 authorizing extension of a rail / utility corridor from Eielson AFB to Whitehorse, Yukon, Canada.  3. Conference requests clarification from Sen. Ted Stevens regarding efforts to extend the Alaska Railroad approximately 70 miles from Eielson AFB to Fort Greely.     *     CBC, Yellowknife, N.W.T. - The Deh Cho First Nations in the Northwest Territories have come together again on the pipeline issue, after a closed door meeting in Fort Providence. A split appeared in the organization last week when Liidlii Kue First Nation indicated it was ready to sign a pipeline ownership deal.      *     CBC, Inuvik, N.W.T. - Oil and gas companies say the lack of a northern pipeline is contributing to their decision to scale back operations this winter. ...  Marty Cheyne is the president of Devlan Exploration. He admits the lower prices have affected his drilling programs more in the north than in the south. ...   Alan Boras is with Alberta Energy Company. He says the availability of a pipeline is an essential element in deciding on whether a company will explore in the north....    *    D.H. alerted us to this  Oil and Gas Journal story on the ANGTS reformed partnership story covered below.

11/16: Northern Gas Pipelines asked the Alaska Gas Producers Pipeline Team for its reaction to the Alaska Natural Gas Transportation System (ANGTS) reformed partnership more fully reported in yesterday's news below.  The statement that they provided reinforced earlier statements made before government agencies during the past year: "We understand that the pipeline companies have signed an MOU that may begin to address some of the historical issues associated with ANGTS.   Our goal is to identify an economic project.  We would be pleased if this announcement ultimately furthers development of an economic project to move Alaska's North Slope gas to market."  The statement went on to conclude that, "We hope they are able to develop specific tariff proposals to be considered by our sponsor companies.  We have consistently said that we're interested in any and all competitive proposals."  See other stories: Anchorage Daily News, Fairbanks Daily News-Miner, Vancouver Sun....    *     Northern News Services, Yellowknife - Conoco Canada, formerly Gulf, is planning to conduct a 3D seismic exploration program in the Delta (late this year, finishing Spring 2002).  The program will involve about 586 square kilometres of land surrounding Parsons Lake, on Crown and private Inuvialuit 7(1)(b) lands within the Inuvialuit Settlement Region.  ...  Western Geco has been contracted to do the seismic work. One 60-person sleigh camp will be used. A 225-person weatherhaven camp will be set up on the west side of Parsons Lake.   Conoco representatives attended a community consultation meeting in Tuktoyaktuk recently on the proposed program. A few days later, representative Ray Prudholme explained the program is being done in conjunction with 3D seismic work being conducted by Petro-Canada.  ... While in Inuvik, Brian Plesuk, team leader, community and aboriginal relations, made a $15,000 donation on behalf of Conoco to Aurora College, to help pay for the oil rig floorhand and service rig training programs it conducted earlier this year. ... Campus director Miki O'Kane said final costs aren't in yet, but that the college did overspend on the programs....     *     Northern News Services, by Derek Neary, Fort Providence - The Liidlii Kue First Nation won't be signing any proposed pipeline agreements until an independent consultant reviews the documents, Chief Rita Cli said Tuesday.   Through a survey of band members last month, the LKFN determined a mandate existed to sign the Aboriginal Pipeline Group's memorandum of understanding (MOU). However, Cli said she won't rush into it.   "Once you sign on the dotted line it's final," she said. "Just to get clarity I want to get this second opinion. Everything's on hold."  Cli said she's expecting to have a consultant review the MOU and the Arctigas Resources Corp. (ARC) pipeline proposal before Christmas. She and her council will rely on the consultant's recommendation in making a final decision, she said. ... The pipeline issue arose once again at last week's Deh Cho First Nations leadership assembly in Fort Providence. ... Cli is determined to have a clause changed in the Wrigley special assembly resolution so that harvesters' consent is not a requirement for a Mackenzie Valley pipeline. Instead, the clause would be stronger if it stated that First Nations membership's consent is needed, she argued.  DCFN Grand Chief Michael Nadli is holding Cli to the Wrigley resolution.

11/15:  PLEASE SCROLL DOWN TO SEE YESTERDAY'S REPORT: The Alaska Oil and Gas Royalty Development Advisory Board met to review a "Preliminary Finding for A Competitive Sale of North Slope Royalty Gas".     *     Calgary, November 15, 2001 -- Alaska Highway natural gas pipeline project participants today signed a memorandum of understanding (MOU) between six major American energy firms and three Canadian firms, according to a project news release issued this afternoon.  The companies are proceeding immediately with development of a proposal for transporting Alaskan natural gas to markets and they expect to present a proposal to the Alaska North Slope producers by year-end.  Once agreement is reached with the producers, the companies intend to move forward with the project, with the goal of delivering Alaskan gas to Canada and the Lower 48 states by 2008.  “All the MOU signatories were involved in developing the Alaska Highway project at one point,” says Dennis McConaghy, co-Chief Executive Officer of Foothills Pipe Lines and Executive Vice President for Gas Development,  TransCanada PipeLines, Ltd. (Photo-left, See 7-11 presentation ), joined by other representatives of Foothills' owner companies: D. Michael G. Stewart, Executive Vice President, Westcoast Energy Inc. (Photo-right), and John R. Ellwood, Vice President, Engineering and Operations of Foothills Pipe Lines Ltd. (Photo-middle).  “Through this agreement, the companies are demonstrating their intent to renew their commitment to the commercialization of vital natural gas infrastructure from the Alaska North Slope to Canada and the Lower 48 states.”  The six U.S.  companies include subsidiaries of Williams, Duke Energy, Sempra Energy International, Enron, PG&E Corporation and El Paso Corporation.  The three Canadian companies, TransCanada PipeLines, Westcoast Energy and Foothills Pipe Lines, have remained active partners in the Alaska Natural Gas Transportation System (ANGTS) from its inception.  The parties have executed an MOU establishing key principles for re-enlisting in the Alaskan partnership to construct the Alaskan portion of the Alaska Highway natural gas pipeline project.  A key element of the MOU is that the current and re-enlisting parties are committed to eliminating historic and other commercial barriers to construction of the Alaska Highway project.  (See this week's related Kaska story.)

Governor Tony Knowles' office responded today: Gov. Tony Knowles (Photo, 10-31-01) hailed today's agreement among six major American energy firms and three Canadian firms as a major step toward development .... Foothills Pipeline Company of Calgary announced today the signing of a memorandum of understanding that sets out principles for regrouping the former partnership ....  "Today's announcement by Foothills and other pipeline companies that a major hurdle has been cleared is great news for the Alaska Highway natural gas pipeline project", Knowles said. "These major international pipeline companies have now endorsed the pipeline route and are bullish about the project. It's time to get on with the business of advancing a project that's good for Alaska and good for America."   "The Alaska Highway natural gas pipeline", knowles added," will put America to work at a time when the Lower 48 economy is teetering on a recession and when American consumers are demanding affordable, environmentally friendly energy. Alaskans overwhelmingly support this project because it will provide good jobs for Alaskans, affordable energy for our communities and revenues to pay for vital services."

WASHINGTON - A release this afternoon from Alaska Sen. Frank Murkowski's office commented on the agreement to reconstitute a partnership to transport Alaska natural gas to markets in the Lower 48.  Murkowski, after a meeting with the major natural gas transmission companies announced that Foothills Pipeline Inc., TransCanada Pipelines, Duke Energy, El Paso Pipeline Group, Pacific Gas and Electric (PG&E), National Energy Group, Sempra Energy, Westcoast Energy, Williams Gas Pipeline and Enron, have agreed to principles to return to the Alaskan gas transportation system partnership, and are proceeding immediately with development of a proposal to present to the Alaska North Slope producers by year's end.  "This is a big step forward in bringing Alaska's natural gas to markets in the Lower 48.  I always have believed that construction of an Alaskan gas transportation system to the Lower 48 is going to take the synergistic efforts of pipeline companies and the oil and gas production companies in cooperation with the State, the federal government and Canada. These companies bring huge financial and engineer capability, along with the existing federal permits for the highway project, to the gas line effort.  "While this does not guarantee construction of a North Slope gas delivery system, it is a big step in the right direction," said Murkowski.   "Alaska's oil and gas reserves hold the keys to a future of dependence."  He said the principals agreed to resolve an outstanding $4 billion liability against the system, which has clouded the companies participation with Alaska's oil and gas producers in recent efforts to construct an Alaska gas line.  Today's announcement, Murkowski said, sets the stage for constructive discussions between gas production and transportation companies over the economic feasibility and routing of the gas line to move Alaska's estimated 36 trillion cubic feet of natural gas to market.  The companies, who today rejoined the Alaska Natural Gas Transportation Consortium, were original members of the Northwest Energy Co. led-consortium that won permits and presidential approval in 1976 to move Alaska gas to market through a pipeline that paralleled the trans-Alaska oil pipeline to Delta and then followed the Alaska Highway south through. The companies over the years had dropped out of the project. There return markedly improves the chances for financing of an Alaska project. It should also help Alaska's efforts to make sure any gas line allows the possibility for an all-Alaska extension to Valdez or the Kenai Peninsula to permit LNG gas exports from Alaska.

 Anchorage Daily News, by Liz Ruskin-Washington -- Sen. Frank Murkowski, in his continuing endeavor to show there is broad support for drilling in ANWR, assembled black and Latino business leaders, Orthodox Jews, organized labor, seniors, veterans and Inupiat Eskimos for a press conference Wednesday on the Capitol lawn.     *     Yesterday, U.S. Senator Ted Stevens' office (Photo, 8-14-01, Anchorage) sent Northern Gas Pipelines this statement regarding ANWR status: "Recently, I've made statements on the Senate floor regarding the importance of opening ANWR, pointing out that it is a matter of national security and that there is increasing political instability among oil producing countries,” he said.  “Our dependence on foreign oil has created a national security crisis.  Alaska oil from the coastal plain could be sufficient to replace the quantity of oil America buys from Iraq, Saudi Arabia or Venezuela. We import nearly 60 percent of our oil daily, with over 700,000 barrels per day coming from Iraq.   It is projected that we will import nearly 230 million barrels of crude from Iraq by the end of this year.  Almost 40 million of those barrels will be unloaded in California alone.  At $20 per barrel, we will send over $5 billion to Iraq this year.  During peacetime operations the Department of Defense uses approximately 300,000 barrels of oil a day - most of it jet fuel.  That increased by over 200,000 barrels per day during the Gulf War and defense fuel usage is again increasing as a result of our ongoing actions in Afghanistan….  It is important to note that unlike ANWR other national security issues are not facing the threat of a filibuster on the floor of the U.S. Senate.  In 1973 when the Senate debated an amendment to create a right-of-way for the Alaska pipeline there was a tacit understanding in the Senate that any item dealing with national security would not be filibustered.  I shared with my colleagues something I originally told them during the debate on the Alaska pipeline in 1973 - we cannot afford to bury our heads in the snow and freeze, nor can we allow our economy and the jobs of thousands to be endangered while we stand idly by - it was true in 1973 and is even more true now."     *      CBC, Inuvik, N.W.T. - At least four oil and gas companies have decided not to drill in the Northwest Territories or the Yukon this winter. They're blaming a drop in oil and natural gas prices.       *     An important reference added to our bibliography: Resource Development and the Mackenzie Valley Resource Management Act: The New Regime by John Donihee (Contributing Editor), Jeff Gilmour and Doug Burch, 2000. 281 pp. ISBN 0-919269-49-4.

11/14:  Late yesterday, The Department of Natural Resources' Division of Oil and Gas has approved an expansion of the North Slope Point Thomson Unit (PTU) which coupled with the current plan of development, should result in production from the unit by 2008, Commissioner Pat Pourchot announced today. The operator of the unit, ExxonMobil Corporation, estimates the high-pressure Thomson Reservoir contains more than 8 trillion cubic feet of gas and over 200 million barrels of recoverable condensate.      *     Whitehorse Star, by Chuck Tobin-The Kaska Nation has signed an agreement with Foothills Pipe Lines Ltd.; also, CBC story (See our stories, yesterday, below.)     *     Peninsula Clarion-Senate Majority Leader Tom Daschle has pushed to the back of the line the energy legislation that includes opening ANWR, saying the Senate should now be focused on the priorities of economic recovery efforts, aviation security and passing appropriations bills. That leaves no room for an ANWR debate....     *    

REPORT: The Alaska Oil and Gas Royalty Development Advisory Board Met yesterday to review a "Preliminary Finding for A Competitive Sale of North Slope Royalty Gas".

The meeting included election of Chairman Mike Navarre (i.e. who also served on the Alaska Highway Natural Gas Pipeline Policy Council; photo, with Member Lynne Aleshire), a briefing by Natural Resources Commissioner Pat Pourchot, process review by Oil And Gas Division Deputy Director, Bonnie Robson and testimony given by Alan Sharp, Alberta Energy Corporation Marketing's Director of Northern Business Development and Anadarko Petroleum Corporation's Alaska Public Affairs Manager, Mark Hanley.

Pourchot opened the meeting, facilitating election of the Chairman and announced the purpose of the meeting: to review the preliminary finding linked above.  He emphasized the state’s interest in attracting public comment during the next month, including testimony to be offered by witnesses at this meeting.  The final best interest finding, he said, would be followed by issuance of an RFP, then a bid opening, a final review of the Advisory Board and the Governor’s submission of contracts to the Legislature for approval.  (Click on Photo, right to left: Pourchot; Department of Community and Economic Development Commissioner Member Deborah Sedwick; Department of Revenue's Member Dan Dickinson; public Members Aleshire and Gordon Severson.)  

Robson (Photo) said interest in North Slope royalty gas began intensifying in the last year with Netricity’s interest in on-site use supporting power requirements for a Prudhoe Bay, high-technology application.  Interest increased, she said, as the Governor’s Alaska Highway Natural Gas Pipeline Policy Council’s In-State Use committee investigated royalty gas applications, then as the major gas producers indicated the potential for a gas pipeline ‘open season’ occurring as soon as the first quarter 2002.  She said that if the state’s process for determining interest in royalty gas sales were not underway via the current process, it could miss the open season schedule.

She briefed members on several aspects of a potential sale, including:

• Gas quantity.  Of a potential 4-4.5Bcf/day required by a gas pipeline, the state’s 1/8th share would be in the .5Bcf/d range.  She said it would be prudent for the State to retain a portion of its share for sale ‘in-value’ by producers to maintain a ‘benchmark’ of value.
• Duration.  While gas sales contracts could span 10-25 years, she said the state could maintain a ‘fairly large flexibility’, due to the inability to forecast price and demand so far into the future.
• Price.  Robson anticipates a potential royalty gas sale contract will provide for a base price (roughly equal to the in-value benchmark), a bonus bid (a fixed dollar amount), and a premium (allowing bidders maximum flexibility).
• Additional terms.  These might include intent language triggering renegotiations in the event of unanticipated developments.
• Payment security.  In the past royalty purchasers have sometimes been unable or unwilling to pay required prices.  It may be that modern contracts will require payment of fees within 30 days, with support of interest penalties for late payment.
• Conditions.  Possible conditions precedent might include: gas flowing by a date certain, execution of an open season by a date certain, contract made effective when a certain route/mode of pipeline transportation system is approved.
• Other.  Possible options, cancellation requirements, field delivery points, gas conditioning arrangements, etc.

Robson said completion of this initial phase inviting public comment will occur by month’s end.  A firm contract form with fixed terms and conditions will be issued with a Final Best Interest Finding by mid-December and Request for Proposals.  By mid-January there could be a public bid opening.  Contract negotiations, review by the board and final contract submission to the Legislature would follow. (Photo-Peter Stokes, Unocal's Project Manager for Business Development & North Slope was one of a dozen oil industry executives and journalists attending the meeting.)

In response to questioning by Chairman Navarre, Robson said the Division was “somewhat concerned” about a sales contract obligating the state for decades when gas won’t flow until late in the decade and contracts would be signed in 2002.  The volatility of world and Lower 48 gas prices required that the state retain flexibility.  Responding to member Dan Dickinson’s (Department of Revenue representative; Photo-with Sedwick) comment regarding effect on the State and producers on exercising state sale options, Robson said, “Every oil and gas lease in the State gives the State the option of changing its in-kind/in-value preference with six months’ notice.  Every producer in the State knew this requirement before bidding on leases.”

Anadarko’s Hanley testified that his company wished to express support for the State’s going forward with the North Slope royalty gas sale process.  “Holding a sale now provides the State with maximum flexibility,” he said. 

He provided the board a letter from David Anderson, Anadarko’s Manager of International Commercial Development, saying that the bid process “…creates an opportunity for the State to capture real economic value for its royalty gas volumes years before the State will actually have royalty gas volumes available to sell.   …there appears to be absolutely no downside to this initiative by the Department of Natural Resources.”  As to Anadarko’s interest of using royalty gas contracts as a means of assuring pipeline capacity for its future discoveries, Anderson’s letter said that “…failure to secure firm transportation now could result in Anadarko’s prospective gas discoveries being stranded without any means to produce and sell the gas.”

Hanley added that obtaining royalty gas is a way of obtaining capacity on a gas pipeline which reduces—but does not eliminate—his company’s risk.  “It is critical that we obtain capacity,” he said.  “If we cannot obtain capacity it makes no sense to explore for gas.”  (Photo-Hanley-left, and Sharp during interview after meeting)

The second witness appearing before the Board, Sharp of AEC Marketing, had much the same message as a new but significant gas exploration participant on Alaska’s North Slope.  In a cover letter to the Board, he said “…now is an opportune time for the State to capture the maximum benefit from…royalty gas.  …initiating the royalty-in-kind process and finalizing the awarded gas sales contracts as soon as possible is critical for current and future gas exploration in Alaska.”

In his testimony, Sharp familiarized the Board with his company, Canada’s largest natural gas producer holding reserves in Western Canada, the U.S. Rockey Mountain area and Ecuador.  Then, turning to the principal points, he said the Alaska gas producers intended to conduct an open season for gas pipeline capacity as early as the first quarter of 2002.  “AEC’s U.S. subsidiary and Anadarko are actively exploring in the Foothills of the Brooks Range, however, we will not have proven gas reserves by 2002.  Therefore, nominating for firm capacity in the open season is extremely risky…,” he said. “Without some assurance concerning pipeline capacity, continued investment in new Alaska gas exploration is unlikely.”  He added that a royalty gas sale’s benefits to Alaska were significant: the State could achieve new gas reserves, more royalty revenue, stimulate new gas exploration and achieve a higher level of competition without obligation or risk.  (You may download Sharp's testimony here.)

11/13: Whitehorse-Dave Porter, National Negotiator for the Kaska Nation told the Canadian Aboriginal Mining Congress yesterday that Aboriginal Nations must, "...reach out and work together to forge strong alliances and an historic common agenda.”   Porter quoted Harry Deneron, honorary Chief for Life of Acho Dene Koe earlier this year, “Ownership in the pipeline is for our children tomorrow.  Royalties will be our trust for the future.”   (Deneron's vision seems to be taking form.  See the balance of Porter's speech here and note the ANGTS development reported below. -dh)     *     BREAKING NEWS... TODAY ......VANCOUVER--The Kaska Nation and Foothills Pipe Lines Ltd. today announced the signing of a cooperation agreement for the Kaska’s potential involvement in the Alaska Highway Pipeline Project (AHPP).  The agreement completes the first phase of a three-phase process between the Kaska Nation and Foothills Pipe Lines. The second and third phases of the process are structured with a view to concluding a participation agreement by March 31, 2002.  “March 31 is significant because concluding our land claims, self-government and trans-boundary agreements is our highest priority,” said Peter Stone, CEO of  Kayeh Nan Petroleum Inc., who signed on behalf of the Kaska Nation (Photo: Stone-right, Ellwood-left; click for full size).  “The cooperation agreement with Foothills signals the Kaska’s optimism about achieving those agreements and paves the way for our potential participation in the Alaska Highway Pipeline Project.”  John Ellwood, Executive Vice President and Chief Operating Officer of Foothills Pipe Lines, Ltd., said the cooperation agreement is an example of how industry and First Nations can work together to maximize the benefits of a major construction project.  “Foothills is pleased to have reached this important milestone in our relationship with the Kaska people, and we look forward to working closely together on pipeline development in Kaska territory,” said Ellwood.  The Kaska Nation is composed of five First Nations: the Liard First Nation and the Ross River Dena Council, both in the south-eastern Yukon; and in northern British Columbia the First Nations of Lower Post, Dease River, and Kwadacha. The Kaska traditional territory stretches from the MacMillan Pass at the Yukon/NWT border to Williston Lake in British Columbia.  Foothills Pipe Lines, jointly owned by TransCanada PipeLines Ltd. and Westcoast Energy Inc., is the Canadian sponsor of the AHPP and is also a partner in the Alaska Northwest Natural Gas Transportation Company (ANNGTC) in the State of Alaska.  (Download Kaska and Foothills releases.)

11/12:  Henry Hub natural gas prices: 11/9: $2.63    11/2: $2.97    Year ago: $5.38  (Caveat emptor plumbum.  -dh)     *     PLEASE SEE JOINT GAS PIPELINE COMMITTEE REPORTS BELOW      *      Northern News Services, by Thorunn Howatt, Port Providence - Deh Cho First Nations leaders want to settle land and self-government talks before signing on to a Mackenzie Valley natural gas pipeline. … "The pipeline is on everyone's mind," said Grand Chief Michael Nadli. He said the Deh Cho Process must be resolved first.   "We're not anti-development," said Nadli. He insisted the Deh Cho will "roll out the red carpet" for pipeline and development once the region is closer to its goal. … So far, just one DCFN chief has signed -- Fort Liard's Judy Kotchea. …  Although it was rumored that Liidlii Kue First Nation Chief Rita Cli would announce her intention to sign the MOU, she remained non-committal. … Hay River Chief Pat Martel didn't push hard to sign the MOU but urged Aboriginal Pipeline Group supporter Harry Deneron to speak about oil and gas opportunities for the region. … Members from ArctiGas were present for the leadership meeting.  … ArctiGas' managing director Bruce Hall said the corporation has spent millions of dollars on its project since 1999.   During an ArctiGas presentation, the company reminded Deh Cho leaders that up to $100,000 is available to communities toward the investigation and legal fees associated with checking out the proposal.

11/10-11, Weekend-WASHINGTON - Alaska Sen. Frank Murkowski (Photo-right, 11-3-01) Friday took the Democratic Senate Leadership to task for failing to see the potential for economic stimulus represented by oil and gas exploration in the Arctic coastal plain of Alaska.  "A spokesman for the Democratic Leader (Sen. Thomas Daschle, Photo-left) is quoted in today's Washington Post as stating that 'everyone knows we won't get a drop of oil out of Alaska for a decade and it won't last more than a few days.'  The reality is that if it ranges between the estimates 5.6 billion and 16 billion barrels of recoverable oil, it would be as much as we would import at current levels from Saudi Arabia  in 30 years or from Iraq over 50 years," Murkowski said.  "It is the largest potential oil field that we could possibly find in North America and it can flow within 18 months of opening as a consequence the process of simply moving the permitting process along."     *    Whitehorse Star-The