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Northern Gas Pipelines, (Alaska Gas Pipeline, Denali - The Alaska Gas Pipeline, Mackenzie Valley Gas Pipeline, Alaska Highway Gas Pipeline, Northern Route Gas Pipeline, Arctic Gas, LNG, GTL) is your public service, objective, unbiased 1-stop-shop for Arctic gas pipeline projects and people, informal and rich with new information, updated 30 times weekly and best Northern Oil & Gas Industry Links on the Internet.  Find AAGPC, AAGSC, ANGTL, ANNGTC,  ANGDA, ANS, APG, APWG, ANGTA, ANGTS, AGPPT, ANWR, ARC, CARC, CAGPL, CAGSL, FPC, FERC, GTL, IAEE, LNG, NEB, NPA, TAGS, TAPS, NARUC, IOGCC, CONSUMER ENERGY ALLIANCE, AOGA,AOGCC, RCA and more...

2009 LINKS: FERC Reports to Congress, 1, 2, 3, 4, 5, 6, 7....; USGS Arctic Gas Estimates; MMS hearings: RDC, Our NGP, AJOC, DH, ADN, KTUU; Enstar Bullet Line: Map and News Links; ANGDA; Alaska Energy Forum; Prosperity Alaska

2008 LINKS: Shell Alaska OCS Study; Mackenzie Gas Project EIS; Join the Alaska Gas Pipeline Blog Discussion; Governor Sarah Palin's AGIA Links; 2007 ACES tax bill links; Department of Revenue 2007 ACES tax documents;  2007 ACES tax Presentations; 2007 ACES tax news; Alaska Gas Pipeline Training and Jobs; Gas Pipeline and Economic Development; Andrew Halcro; Bjørn Lomborg; FERC's Natural Gas Website Links

WASHINGTON: Alaska Natural Gas Pipeline Act; History of H.R. 4; DOE Energy Bill Position, 6-02; Daschle-Bingaman Energy Bill (Alaska, Sec. 1236 & tax credit, Sec. 2503 & H.R. 4 Conferees), Tax Credit; See amendments, "Energy Policy Act of 2002";  "Alaska Natural Gas Pipeline Act of 2001 (Draft)" & Background Paper, 8-9-01;Alaska Legislature Joint Committee position; Governor's position; Governor's 10-Point Plan; Anadarko Analysis; U.S. Senate Energy Committee Testimony, 10-2-01 - text version;  U.S. Senate Energy Committee Testimony, 9-14-00; Report on the Alaska Natural Gas Transportation Act of 1971, prepared by staff of the Federal Energy Regulatory Commission, 1-18-01

ALASKA: 1-23-03, Governor Frank Murkowski's State of the State Speech; 2002 DRAFT Recommendations to 2003 Legislature; '02 Alaska Legislation; Alaska Highway Natural Gas Pipeline Policy Council; Joint Legislative Gas Pipeline Committee; 9-01 Alaska Models: Canadian Routes, LNG, GTL; HR 4 Story; Cook Inlet Supply-Demand Report: AEDC; Commonwealth North Investigation & Our Article; Report: Backbone; Legislature Contacts; State Gas Pipeline Financing Study; 5-02 Alaska Producer Update; Kenai: "Oil & Gas Industry Issues and Activities Report, 11-02"; Alaska Oil & Gas Tax Structure; 2-27-02 Royalty Sale Background; Alaska Gas Pipeline Office opens, 7-01, and closes, 5-02; Betty Galbraith's 1997-1998 Chronology Our copy.

CANADA: 1-10-03, "Arctic Gas Pipeline Construction Impacts On Northern Transp."-Transport Canada-PROLOG Canada Inc.-The Van Horne Institute;Hill Times Reports, 8-30-02; 9-30-02, Cons. Info. Requirements; CBC Archives, Berger Commission; GNWT Economic Impact Study, 5-13-02; GNWT-Purvin & Gertz Study, 5-8-02; Alberta-Alaska MOU 6-02; Draft Pan- Northern Protocol for Oil and Gas Development; Yukon Government Economic Effects: 4-02 & PPT; Gas Pipeline Cooperation Plan Draft & Mackenzie Valley Environmental Impact Review Board Mackenzie Valley Pipeline MOU Draft, 6-01; FirstEnergy Analysis: 10-19-01; Integrated Delta Studies; National Post on Mackenzie Pipeline, 1-02;Northern Pipeline Act;  Haida Nation v. British Columbia; Indian Claims Commission; Skeena Cellulose decision -- aboriginal consultations required, 12-02; Misc. Pipeline Studies '02

COMPANIES: Alaska Gas Producers Pipeline Team Newsletter, 7-27-01; APG Newsletter: 5-02, 7-02 & 9-02; ArctiGas NEB PIP Filing Background; NRGPC Newsletter: Fall-02;  4-02 ArctiGas Reduces Field Work; BP's Natural Gas Page; Enbridge Perspective; Foothills Perspective; Williams Perspective; YPC Perspective, 7-02

 MEDIA REFERENCE: Alaska Journal of Commerce; Alaska Inc. Magazine; Anchorage Daily News; Canadian Broadcasting Corporation; Fairbanks Daily News Miner, Juneau Empire; Northern News Services; Oil & Gas Reporter; Petroleum News Alaska; Whitehorse Star, etc.

EXTENDED CONFERENCE NEWS: Alaska Support Industry Alliance, Anchorage Chamber of Commerce Canadian Institute, Insight Information, Inuvik Petroleum Shows, International Association of Energy Economists, Resource Development Council for Alaska, Ziff Energy Group











Northern Gas Pipelines: Author's 2001 Opinion Page

4.  Editorial: Note:  all editorial material contained in these pages is provided by the author as a public service and based upon his experience within the oil and gas industry in Alaska, Canada and the Lower 48 since 1972.  Editorials are independently conceived.  Editorial comment provided by companies, individuals or any special interest parties will be appropriately labeled.  See ANWR editorials here.

a.  Public Policy Editorials: Northern Gas Pipelines.

12-29/30 (Weekend):   Anchorage Daily News commentary, by Rep. Jim Whitaker, calling for state ownership of a gas pipeline. - Astute readers will appreciate that this is an outstanding example of the prevailing, "my way or no way" Alaska political mentality described above, earlier referenced in these news reportsA detailed research project has recently recommended against state ownership of a gas pipeline.  Other recent news suggests that a state government with a +/-$1 billion\year deficit would have difficulty obtaining investment funds, even if the investment were attractive. -dh

12-24 (Christmas Eve):  Gas pipeline news this week is light as all gas pipeline stakeholder thoughts turn to home.  Before news afresh begins breaking after the holidays, perhaps it would be well to spend a quality moment or two reflecting on where we've been this year and where we wish to be in 2002.  After all, our millions of individual decisions in the coming year will produce some grand, cosmic formula revealing the future of northern gas pipelines.  -dh

"All I Want for Christmas"

Dear Santa:

I'd like an Alaska gas pipeline for Christmas.  It should be in place, producing money by 2004, please, in time to supply 1/4 of Alaska's $1 billion+ budget deficit; and let our politicians balance the rest without increasing my taxes or reducing my services.  I'd like the pipeline to be 'diversified', too.  It should go to a Fairbanks 'HUB' (where I'd like a new petrochemical industry established by someone for some market).  I'd also like someone to put an inexpensive gas distribution line to every home in Fairbanks.  To be fair, I'd like someone to take propane from the HUB and ship it to 230 Alaska villages at a reasonable cost, somehow.  Then, I'd like someone to build a line from the HUB on down to Valdez and arrange for Tokyo Gas to sign a 20 year, "take or pay"  contract at a price high enough to pay for the pipeline as well as another petrochemical facility in Valdez.  To take care of my friends in Southeast Alaska, I'd like propane and maybe LNG to be provided by barges or small cryogenic tankers to all our coastal citizens at a reasonable price, by someone.  Since Southcentral Alaska may be running short of Cook Inlet gas, I'd like someone to build a branch of the pipeline from the Fairbanks HUB down to Anchorage.  See, that would displace enough gas that the Kenai Peninsula would retain adequate supplies for its residential / industrial users for another 20 years.  Lastly, I would like for most of the gas to move from the HUB on down the Alaska Highway to make sure that the folks in the Lower 48 have plenty, but I'd want to make sure there were enough liquid gasses in the high pressure line that we could profitably supply Alberta with some of the petrochemical feedstock she needs to be supportive.  Oh, and I almost forgot, please make the price of gas high enough so we can afford subsidies, generous rights-of-way payments to 10,000 landowners, and still have plenty of money for our state government and please build a separate Mackenzie Valley Pipeline for Canada. 

And, I'd rather not have the gas produced at all unless it's done my way. 



P.S.  If you have money left over, could we have some to invest as equity in the gas pipeline and would you please make sure we get at least a 12-15% return on our investment?

Dear Wishing:

All fathers, including Father Santa, instinctively want their children to have all that they wish for.  However, one responsibility a father has is to lovingly tell his children that we don't always get everything we wish for at Christmas.  Sometimes, you get a present you think you'd rather not have and it turns out the be the best one after all.  (See P.S., below.)  I don't know if that will be the case this year, but on this Christmas Eve, I can now divulge your gifts.

1.  You will be blessed--more than most--with another year of freedom and life in the wondrous North.

2.  You will be given intelligence, courage, friends, armaments and vast resources.

3.  You will be given the freedom to break your own trail, to direct your own future path in the wonderful frontier before you.

4.  You will be blessed with the politicians that you, yourself, choose to help lead the quest.

5.  The above, basic gifts will enable you through your own wisdom, ingenuity and integrity to successfully confront your challenges.  Success, the greatest gift, will be highly savored for you will have earned it and you will pass this knowledge to your heirs.  Your failure, also shouldered by your children, will only come with misuse of the gifts.

My greatest hope for you is that you embrace the true spirit of Christmas, use well what you have been given, make good decisions, treat everyone with respect, teach your own children well, and endeavor toward 'endless progress'.  Obtained as you have so presumptuously wished, the presents you requested would not delight you, would not eliminate the fundamental budget problems you have created, would shackle free enterprise and deliver the generations following you into debt and misery.  They represent a child's irrational thinking, depending as they do on the imprudent acts of others and requiring no effort or risk on your part.



P.S.  One Christmas long, long ago, I asked for a new bicycle and a 410 shotgun.  Being a poor 11-year-old did not prevent the dreaming.  After a humble family service around our Nativity scene, wise Father gave me a snow shovel and a box of shotgun shells, my only presents.  I did not appreciate these gifts at the time, but by spring I had earned enough from the neighbors to buy a new bike and a used shotgun.  To this day, I love my Father as much as I respect him; and, he has never worried that I would ever confront a reasonable challenge I could not overcome.  That year I emerged into the real world, began absorbing the true Christmas message and took the first small steps toward a lifelong appreciation for free enterprise.  (Additional reference: Voice of the Times, by William J. Tobin)

12-22/23 (Weekend): Regarding the ominous fiscal reports from Alaska in last week's/weekend's news (which must impact gas pipeline investor opinions), here is the Kenai Peninsula Clarion's view"The longer Alaskans avoid the difficult choices involved in a long-range financial plan, the worse the pain is going to be. The longer we wait, the fewer options we will have."  There is also this Clarion letter-to-the-editor: "It's time for Alaskans to realize that if we want a "future" some tough decisions have to be made now!"     *     Fairbanks Daily News-Miner (Re: Rep. Jim Whitaker)- Whitaker will also keep pushing his proposal from last year to make the companies that hold state leases for the gas on the North Slope pay a combined total of at least a billion dollars a year (Underline added) to state coffers if they do not soon bring the gas to market. ... He is reviving his 2-year-old proposal to create a state-owned corporation to finance and own a pipeline to bring Alaska natural gas to market if it is economically feasible, which Whitaker insists it is. 


Northern Gas Pipelines wonders so many things as 2001 makes way for a new year of opportunity..  We wonder how rational state leaders on the edge of fiscal crisis could even take time to consider investment in a multi-billion dollar pipeline.  If the money were available, would there be a budget crisis?  If investment money magically appeared, why would politicians rush to invest it in a pipeline when the experts say the feasibility is unproven?  We've also stood in amazement over the last year as several political leaders competed for attention in criticizing the very producers who provide the majority of state revenue and have the ability to invest in a pipeline and other projects.  We wonder what politicians hope to gain by again pushing for a new, $1 billion/year tax on the gas producers if  it is not feasible to produce the gas.  We wonder, in the face of fiscal crisis, why Alaskan politicians are not talking about "incentives", "improving Alaska's investment climate", "tax stability", "regulatory clarity", "public/private partnership".  Lacking budget discipline and free-market creativity, Alaska's elected leaders at all levels seem fixed on bluffing companies right up to the edge of the 2004 fiscal cliff, hoping to earn more general fund revenues or a favored pipeline route--before it's too late--with intimidation.  We wonder why we've seen so many sticks and not one carrot.  We wonder if free enterprise is still alive and well on the Last Frontier.  We wonder if elected leaders have any idea of the negative seeds they might be planting now, as companies forecast multi-year spending priorities in Alaska and elsewhere.  Finally, we don't wonder that Alaska's reputation is at risk.    -dh 

(Please review the news items last week and weekend, if you haven't.  It is factual, not alarmist, to say that the fiscal crisis looming in the State's future soon threatens to overshadow and impact virtually all other issues).  

12-18:  "NEW ARCTIC GAS STUDY--University of Houston Professors Ronald Oligney and James Longbottom announced completion of their study, "The Imperatives of Arctic Natural Gas Development" at the Canadian Institute's recent Arctic Gas Symposium.  "Primary Messages" of the study are: 

  • The Unites States must pursue 12 Bcfd of natural gas production from the Arctic, not 4 or 6 Bcfd--America needs the gas!
  • Oil or natural gas supply disruptions--whether geopolitical or infrastructure related--quickly destroy 10 million U.S. jobs.
  • The $3 Mcf price floor for natural gas necessary to support Arctic pipeline development will emerge in the next 24 months.
  • Risk and uncertainty are the greatest roadblocks to Arctic pipeline construction, not the much-debated standard financial variables.
  • Staged pipeline construction is the obvious mechanism to materially reduce costs, risk and uncertainty.
  • Under almost any political, financial or price scenario, a natural gas pipeline down the Mackenzie corridor will be developed first.

Oligney and Longbottom, both with Arctic technical backgrounds, have produced a thorough study, rich with charts, graphs and references.  While construction cost estimates are yet to be verified by other technical studies, the phased concept is intriguing.  The professors have kindly made the study available to Northern Gas Pipeline readers.  Readers with technical critiques and responses--preferred over simple opinion statements--are invited to send them here where we will post them.  Readers may download the full study here.

12-13:  Comment on this day's news:  "Such is the nature of political struggle as governments become highly dependent on resource revenue or government grants, when resource prices fall and/or when rates of production and/or national revenues diminish.  In such situations, political leaders should beware of becoming too tax-dependent on a few resource industries or other governments.  Industries should, in turn, be cautious about--and must discount-- investment into an economy that could become too dependent on them.  With the stroke of a tax pen, project economics can change overnight, and even retroactively, after investment dollars have been locked and frozen into a permafrost trench."  -dh 

11-28: Murkowski Takes ANWR - Gas Pipeline Lead

11-28/12-2: 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.

Cook Inlet Gas and State Fiscal Reserves on Downward Slide As Politicians Say, "All or Nothing"

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

11/17:   Phillips and Conoco Merge Into Third Largest U.S. Integrated Energy Company(Commentary: In July 2001, Conoco acquired Gulf Canada Resources Limited.  It was Conocothe 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)

11/7 Mr. Chrétien said he will raise the softwood dispute with George W. Bush in a phone call this week.     (Comment:  On last check, Canada and the US were each other's largest trading partner.  Northern gas pipeline projects absolutely depend on having a solid partnership foundation.   This softwood issue reveals a lack of partner communications.  The war on terrorism and building of gas pipelines require communication repairs which could begin with NAFTA issues.  Our leaders, including Alaskan, Provincial, Territorial and National would do well to reserve their nationalistic fervor for use with non-North American issues.  Within our continental borders, we need peace more than ever.  With international challenges testing our strength, we need to conserve it.  To waste our strength on such sibling rivalry is to injure the partnership that could otherwise produce victory against terrorism and construction of northern pipelines.  Let us resolve to repair our relatively minor differences quietly and effectively, especially now.  -dh)


Web posted Wednesday, November 7, 2001

Gas pipeline stakeholders: Getting the act together
By Dave Harbour
For the Alaska Oil & Gas Reporter

Let's say you're a member of the Senate Energy and Natural Resources Committee. It is Oct. 2 and your schedule says you'll be hearing testimony from a bunch of government and industry executives interested in an Arctic gas pipeline.

Your broad order of priorities hovers around national security in the aftermath of the Sept. 11 attacks on America. You are dealing with the most weighty array of issues imaginable: Subsidies for the airline industry, general support for a world-wide war on terrorism, tax initiatives supporting an economy in recession . . . and the usual variety of constituent demands.

The witnesses appear, each confident and unshakable in his position. One says build a pipeline over the top. One says take the highway. One says let us go either way, but provide some incentives. One says he needs no incentives. One says he has an exclusive franchise. One says the franchise should go to the most efficient project. One says America should forget Canadian overland systems and build an "All American" LNG system.

In response, one Senator wonders why the Congress should give incentives to an Alaska pipeline and not Lower 48 pipelines. One wonders why Congress should provide incentives when the Alaska Legislature has not. One wonders why any action should be taken before the producers have completed feasibility studies. One wonders about relationships with Canada. One wonders what route offers greatest national security. All, including you, profess that for an Alaska Gas Pipeline, "it's not a question of 'if', but of 'when.' " That's a safe position to take, in light of the confusion.

Meanwhile, you hear some lobbyists say developing ANWR now is in the national interest and the same ones saying putting a pipeline near ANWR threatens the environment. You've heard some Canadian aboriginals favor the northern route and some favor the southern route. You've heard the Canadian government is committed to an Alaska highway route, earlier approved; but you hear from some that Canada's leadership favors a northern route near ANWR, while opposing ANWR development itself.

In short, you are conflicted. And no large constituency will rise up to defeat your re-election if nothing is done; several opponents will awaken if you support a particular project.

You and your colleagues, elected officials in Alaska, the provinces, territories and Parliament, are similarly conflicted.

You decide that until more consensus develops among stakeholders, you are under no obligation to act quickly. The gas will still be there when the dust settles. Fighting terrorists takes first priority . . . and on that issue, there is consensus.

Meanwhile, Alaska witnesses return home to face a budget shortfall reaching $1 billion a year or more before 2005, and the Canadian government will continue to pour subsidies into the North as its own Arctic royalty gas remains hostage to disagreement.

The bottoming of natural gas prices, currently due to lower demand and high production levels, will reverse in time. Gas stakeholders on both sides of the border may need that time to grapple with reality and Œget their acts together,' implying a greater level of compromise, goodwill and logic than now characterizes the debate.

Dave Harbour is a former director of government relations for Atlantic Richfield Co. He served as public affairs director for Alaskan Arctic Gas Pipeline Co. He is a private consultant who also operates a public service Website documenting the progress of "Northern Gas Pipelines": .

9/22-23 (Weekend)

“The Attack on America: The Lesson of Unity” 

            Against the backdrop of calm skies and a nation at work, four flashes of horror on September 11 changed the landscape, future and innocence of free nations for generations to come.  As the distance of time separates us from this historical event, more subtle changes will emerge, some of them in resource-rich Alaska and western Canada..

            A profound change affecting America, Canada and the world is the way we look at security.  We now know that such freedom to live, travel and work as we have known will be modified with the now certain knowledge that those wishing us harm have the means and power to execute their plans.

            The top priority of North American leaders is now national security.  The first manifestations of that security are war plans and protection of political leaders, institutions and the aviation industry.  In coming weeks, we should see more diligent security efforts undertaken by industry, education, state, provincial and municipal governments.

            An exceptional level of cooperation and unity has also emerged.  Parochial and provincial matters of great concern before September 11 pale in the hierarchy of values now and are forgotten as citizens and leaders focus on survival.

            Other foundations of civilization’s survival include the uninterrupted flow of energy.  Accordingly, officials may now be expected to look upon energy issues such as gas pipelines and ANWR development as components of national security as opposed to political and socio-economic debate topics. 

            Opponents of ANWR will find it difficult to defend their prior position that developing 2,000 acres within the borders of an area the size of North Carolina is an attack on the “Serengeti of the North”.  But the knife cuts both ways.  Proponents of any single pipeline route will now find credibility in arguments only as they apply to national security.  This is so for a number of reasons:

·        Alaska’s Congressional Delegation, Congress-at-large, Canada's Parliament, and Legislative Assemblies will appropriately be preoccupied with security and defense issues for the foreseeable future; and

·        North Americans in general will have less patience with self-serving advocacies in wake of both the loss of life and the exclusive need to focus on defense of world democracy. 

It would credit our state, provincial and territorial leaders to observe the bipartisan unity demonstrated since September 11 and strive with national leaders to develop both ANWR and an Arctic gas transportation project which conform to defense requirements.  -dh  (See our earlier, related editorial: "The Attack on America: Effect on Northern Resources")

9/11:  Another Day to Live in Infamy.

The Attack on America: Effect on Northern Resources

“Lest We Forget.”  How many times have we said it…in different ways and following different aggressions:  “Remember the Alamo, “ “Remember the Maine”, “Pearl Harbor”, “Iraq Invades Kuwait 8/2/90; Desert Storm Unleashed: 1/17/91”.

We’ve all seen the nature videos of the African herds coming to a jungle or desert oasis.  A pride of patient lions, or lurking crocodile strikes out and brings one down.  The herd briefly retreats then returns to drink.  And the cycle repeats.

On September 11, 2001 twisted aggressors targeted two towers of corporate strength and America’s Pentagon.  The lurking enemy had probed the towers a decade earlier.  The towers remained and memories dimmed.  One survivor of both assaults said, “I didn’t think it would happen again.”

The herd now hypnotically focuses on New York and Washington and apprehending perpetrators.  What other symbols and realities of civilization offer appetizing targets to wealthy aggressors with worldwide capabilities and which of these may be in the natural resource rich western and northern areas of our continent?  Or, is it our belief that, “It can’t happen here?”

If we wish not to forget, what can we do?  Unlike animal herds, humans have the ability to remember and to extrapolate.

·         Companies are well advised to amass greater physical and electronic security measures designed to protect life and property.  Never can security be taken for granted as an “optional overhead expense”, to be cut or compromised following a period of relative calm.

·         Every northern hunter, hiker, fisherman, surveyor, geologist, pilot—and, indeed, every citizen--should no longer assume “all is well”, reporting all suspicious persons and activities to proper authorities.

In this way, Northerners may have the luxury of learning from the horrific experience of others and avoiding a personal lesson in disaster.  Such vigilance could also be yet another act of honor to the many who did not die in vain.  -dh  (Photo: MSNBC)

9/9: "Gas Pipeline Analysis: September 2001"

The ball game moved to the Wrigley, NWT court last week, landing in Deh Cho hands.  Other First Nations, Northwest and Yukon Territories governments, several provinces, the Canadian federal government, U.S. consumers and Alaska stakeholders were all affected by the outcome as the ball now bounces to Washington’s court for a September play-off

The Deh Cho held a meeting last week of members who would be affected by the various pipeline proposals.  At the meeting, they heard from Arctic Resources Corporation (ARC), The Aboriginal Pipeline Group (APG) and the Mackenzie Delta Producers.  (See our Archive reports, 8-31 &  9-3.) No decisions were made, pending additional discussions within Deh Cho communities and more formal meetings scheduled for October.

ARC is a private promoter of the northern route tapping Mackenzie Delta and Prudhoe Bay gas.  It advocates a non-recourse revenue bond approach: 100% debt financed aboriginal ownership of the pipeline “subject to the legal and business constraints of its indenture and long-term tariff agreements,” according to ARC President, Bob Murphy.  ARC could have used Deh Cho endorsement this week to attempt negotiating with Prudhoe Bay and Mackenzie Delta producers who, after all, have the gas, though producer interest in ARC is unclear.  ARC is still optimistic, because it has support from some Sahtu constituencies and hope for eventual Deh Cho support, but there is still talk in Washington of banning the Beaufort concept.

APG’s First Nation landowners have been intent on moving Mackenzie Delta gas regardless of what happens to Prudhoe reserves (35 TCF proven, three times more estimated).  The major producers there hold  5.8 TCF in proven reserves. A consortium led by the Inuvialuit currently sells a small portion of Delta gas to Inuvik.  Much more, possibly 60 TCF, is thought to be available for eventual discovery and production, assuming a transmission system can be built. 

Delta producers, working with APG during the past year, constructed a private operating company concept for the Mackenzie Valley Pipeline involving 33 1/3% ownership for aboriginal stakeholders, including the Inuvialuit, Gwitch’in, Sahtu and Deh Cho through whose lands the route would traverse.  (Click left column for copy.) The APG has equity investment and throughput requirements.  Observers thought the Delta producers could have completed most of their feasibility work by this fall.  The involvement of the Deh Cho in signing the APG-Producers Group MOU would have helped the process.   According to a CBC report, "This could affect our readiness to move forward to the next phase, which includes the preparation of regulatory applications," says Hart Searle. "But we're going to have to assess, we're going to have to really consider what's come out of this assembly in Wrigley before we decide what we do next."  Searle says that unanimous support may not be necessary, as five of six aboriginal groups support the pipeline. But he also says that producers would prefer it if Deh Cho leaders are on board.

Though its profile in Alaska has been low, ARC established a branch of its Houston office in Calgary, vigorously pursuing aboriginal support.  Last spring, of 7 Sahtu landowners (communities divided into 3 District Land Corporations), some expressed support for the ARC concept.  Ernie MacDonald Land Corp., joined by Tulita (Fort Norman) Metis Land Corporation, issued a public notice that their approval would be necessary before any project could cross their lands.  Some Deh Cho, intrigued with the ARC 100% ownership concept or concerned about land negotiations (the Deh Cho Process) and other issues remain uncommitted.

With APG and ARC competitors failing to seal Deh Cho support now, neither the Delta-only or northern route proponents gained ground in Canada, possibly creating delay for both efforts.  More formal Deh Cho October meetings may come after Senate Energy Committee action has occurred.

After the long Labor Day weekend, the spotlight and play action shifts to the U.S. Senate Energy Committee considering the House-passed “Securing America's Future Energy Act of 2001, H.R. 4”.  The bill, sponsored by Chairman Hansen, Energy and Commerce Chairman Tauzin, Transportation Chairman Young, and Energy and Minerals Subcommittee Chairman Cubin would implement parts of President George Bush’s energy policy.   The Senate is likely to produce its own version of the bill, resulting in final decisions via conference committee between the two houses.

The House version has a provision, introduced by Tauzin, banning the northern route.  U.S. Senator Frank Murkowski told Northern Gas Pipelines last month that he had asked the Prudhoe Bay producers, now studying both the southern and northern route alternatives, for draft legislation to assist in moving a gas pipeline forward.  He said that, while not surprising, the draft went farther than he expected, that no member of the Delegation would introduce it, but that portions of it could be considered.  The draft, available for review (Click left column for copy) would expedite construction of a northern pipeline, giving equal weight to southern or northern routes.  Meanwhile, members of Governor Tony Knowles’ Alaska Highway Natural Gas Pipeline Policy Council have strongly advocated providing state endorsed amendments for Senate consideration, as has the Legislature’s Joint Pipeline Committee.  On August 30, Knowles issued a 10-Point Plan (Click left column for copy) designed for use by the Senate Energy Committee and Alaska's Washington office in support of the Alaska Highway, southern route.  Lastly, Alaska LNG project proponents continue vigorous promotion of an export project while GTL technology appears, with growing cost efficiency, to provide an easier long-term solution--at least for North Slope gas.

With gas prices in early September at the lowest levels since early 1999, current northern gas pipeline projects face the common competitor of falling demand and failing economics (i.e. Henry Hub Gas Prices: 8/31/01, $2.17; Year ago, $4.77).  While unaligned with any route, Northern Gas Pipelines has long counseled a policy of diligence, diplomacy and compromise due to the complexity of projects and stakeholders.  This policy is especially well suited to the current low-price environment.  Failing consensus and approval of some project in the next year, northerners may have to wait for falling gas prices to effect less production and higher prices again sometime in the coming decade.   

While officially favoring the concept of pipelines to move Mackenzie Delta and Alaska gas, the Canadian government has yet to fully enter the arena.  The gloomy economy has affected Canada as well as the U.S.; we should expect Canada's government to become more active this fall in advocating production of Delta gas, which has royalty and tax implications for the country and its northern communities.

Unlike a true ball game, the admission fee, venue, official rules, ball size and type are negotiable and there are no referees or game schedules.   Do northern economies prefer stalemate and delay to compromise?  The players will likely decide before year-end.  -dh


Web posted Saturday, September 1, 2001

Web site becomes clearinghouse for gas pipeline issues

By Dave Harbour
For the Alaska Oil & Gas Reporter

photo: editor_comment


Dave Harbour

Created last winter as a modest effort to put gas pipeline history, research and current events on a public interest Web site, the Northern Gas Pipelines' site ( has become a one-stop shop for thousands of government, industry, academic and media surfers throughout the United States and Canada. Produced from Anchorage, it features cyber news and newsmakers from Ottawa, Washington, D.C. and Houston to Calgary, Yellowknife, Barrow, Inuvik, Whitehorse, Fairbanks and Juneau.

In the 1970s only three gas commercialization projects were of primary interest in Alaska -- Alcan, Arctic Gas and El Paso -- and three in Canada -- Alcan, Arctic Gas and Maple Leaf. It was Northern Gas Pipelines' objective to identify these historical projects, hoping 25-year-old lessons might help resolve the more complex challenge of freeing 21st century stranded Arctic gas reserves. Today's gas discussions involve:

* Alaska. Two overland pipeline advocates (northern and southern routes), a gas producer overland pipeline study effort, three or four liquefied natural gas project advocates, an LNG voter initiative, one producer-led LNG study effort, one gas-to-liquids project advocate, one gas producer GTL pilot project (not currently concerned with Arctic reserves), various producer GTL research efforts.
* Canada. One overland pipeline advocate for moving Alaskan gas (i.e. southern route), one advocate with Aboriginal support for moving Alaskan and Canadian gas (i.e. northern route), one Mackenzie Delta producer group with Aboriginal support for moving only Canadian gas up the Mackenzie River Valley, and an alternative route connecting Delta gas to the southern route project.

Northern Gas Pipelines is a public service Web site that respects all participants: corporate, nonprofit, government and media. Its advocacy is not for a specific routing, but for logic, reason and good will. It is dedicated to objectively describing projects and producing news about them from sources everywhere. As a public service, the site archives material and satisfies requests from hundreds of readers; for example:

* Local, regional and national newspapers, radio/TV stations and magazines have received maps and background information.
* Contractors and oil companies have received help with briefings, proposals, reports and Alaska Native/Canadian Aboriginal interests.
* Universities have received modeling data, maps and reference.
* U.S. and Canadian federal, state, provincial and territorial government representatives have received maps, presentations and historical research material.

An unknown number of readers have copied material directly from the Web site.

Northern Gas Pipelines claims no particular expertise but, rather, offers readers a coordinating site. One becomes a part of the public interest effort by contributing to the fullness and accuracy of the historical record, growing daily. All project participants and readers are invited to correct and expand on the record. Hundreds of readers have sent news tips, presentations, maps, commentary, historical observations, editorial comment, additions and corrections.

Since the Arctic National Wildlife Refuge is adjacent to the Arctic gas development area, a special ANWR page is included. Since Alaska Native and Canadian Aboriginal interests are critical to the decision-making process, information about their corporate, non-profit and cultural constituencies is featured. Since many readers have or will travel to Arctic gas pipeline country, travel information is included. Northern Gas Pipelines also features the most extensive links page available anywhere for those interested in northern pipeline related companies, trade and professional organizations, Federal government agencies, news media, local governments, contractors, labor unions and environmental organizations. Its archive pages permit news and events of the past to reappear with the click of a mouse.

While Northern Gas Pipelines recognizes the right and responsibility of advocates to present their cases, it avoids advocating particular projects. It does occasionally editorialize on public policy matters. Its few editorials encourage diplomacy and due diligence as opposed to emotion and self-interest. Its editorial policy is to give the good intent of all, benefit of the doubt. It supports commercialization of northern gas and proper ANWR development benefiting all citizens.

Public service sponsors noted on the Web page, and a good deal of volunteer help, help the Web site thrive.

Lastly, Northern Gas Pipelines is about the projects and the people. The news is rich with names. Photos illustrate stories, whenever possible. Now, one can look back, see and appreciate both the news and the human beings who made it.

Dave Harbour is an author, public speaker and public affairs management consultant. He is former Director of Public Affairs for the Arctic Gas consortium and Director of Government Relations for Atlantic Richfield Company. Northern Gas Pipelines is Harbour's current public service effort.

8/30:  "Pipeline Decision: Complex Variables."

8/8: "The great indigenous leaders remembered by history will be those who courageously walk the path: protecting and savoring tradition while professionally manipulating corporate strategy."

8/6: "Continuing disagreement and intransigence will likely produce greatest success for constituencies advocating limited northern development."

7/21:  Spirit of Compromise One observing Alaska events this week, is mindful that just as stakeholders here seriously grapple with their futures, so have citizens of the Yukon and Northwest Territories in recent months come together in Inuvik, Norman Wells, Hay River, Kakisa, Yellowknife, Whitehorse, Fort Simpson and countless informal settings to conscientiously seek their own paths leading to some pipeline project.  For any project to achieve ultimate approval, these country stakeholders must separately agree, then come together in a spirit of international compromise, if not cooperation.   By definition, "compromise" implies that neither party will completely achieve its goal.  While the action of Congressman Young (7-19-01 News) is well intentioned, as was passage of SB 164 in Alaska, it may have unintended cause-effect with respect to Canadian policy and does not signal a 'spirit of compromise'.   In short, while debate is healthy, if the debating period does not fairly quickly evolve into compromise and agreement, the current window of Arctic gas project opportunity could be threatened by alternative LNG, etc. projects.  A delayed Arctic gas transportation system will not significantly harm the producing companies who have other investment opportunities.  Delay, however, could put in abeyance the fairly high expectations of northern Canadian and Alaskan stakeholders for job, economic development and government budget projections.   Participants in the debate would now be wise to ask themselves if no project is preferred to compromise.  Some may already have concluded that this is so.  -dh)

7/6: Gas Price Projections Fail Reality Test.   All northern gas pipeline stakeholders should appreciate the gas pricing disparity between economic projections and historical reality, which Dr. Arlon Tussing illustrates (i.e. See 7-6-01 story here).  Investors are mindful of this disparity.  They will participate in a financing plan for a project or multiple projects based on their sense of gas price reality, and other cost and market factors.  While the desires of important governmental leaders and politically powerful constituencies will influence investors, political desires can only produce a successful Arctic gas pipeline project when the economic reality concurs.  Accordingly, the North Slope and Mackenzie Delta producers should be complimented for the intense financial and scientific studies now underway.  In the author’s opinion, especially given the complexity of competing routes and modes, political action is more likely to delay projects than to expedite them--absent great statesmanship.  One does expect stakeholders to express opinions; but accompanying such opinion with support--not criticism--for the producers’ due diligence and the free market is the surest route to a successful project. –dh)

6/29:  As Canadians and Alaskans Debate, Gas Producers Quietly Study.  Much as Alaskan stakeholders have debated the relative merits of alternate routes and modes for transporting Alaska North Slope (ANS) gas {i.e. see YPC story below}, so are Canadian political, business and aboriginal leaders intently negotiating terms and conditions and debating merits of three projects: a.  The Northern Route, combining ANS and Mackenzie Delta gas in a common transmission line (i.e. promoted by ARC and certain aboriginal groups, story above, and studied by the Alaskan Gas Producers Pipeline Team); b. the Southern Route (ANS gas only) roughly paralleling the Trans-Alaska Pipeline System to Fairbanks, then following the Alaska Highway southward (i.e. promoted by Foothills Pipe Lines, Ltd. and studied by the Alaskan Gas Producers Pipeline Team); and c., a Mackenzie Delta Pipeline tapping only Canadian gas (i.e. promoted by the Aboriginal Pipeline Group and Mackenzie Delta Producers).  One notes that whereas we hear quite a lot from various project advocates and politicians, we hear relatively less from those who own the gas and would be presumed to be major financial backers of projects: the gas producers.  Like any other business group, they are quietly devoting significant due diligence toward determining the most efficient, environmentally acceptable way of commercializing their gas reserves.  Thus, while words of proponents and political leaders may be noteworthy--even influential--the final decisions of producers will likely chart the future of any northern gas pipeline(s). -dh)

6/27: On Pipeline Expectations Northerners in Alaska and Canada foresee positive economic growth from one or more gas pipeline projects.  However, achieving 'prosperity' requires a combination of private sector success and effective government policies.  New gas pipeline(s) may not produce the volume of revenue and other economic returns required to meet all the needs, or 'greeds' of a state, territory or province.  The Northwest Territories, Yukon Territory and Alberta in recent months have all been grappling with budget and gas pipeline-related issues.  Alaskans share the human condition of wanting maximum financial and political returns.  All of these governments have constituencies that tend to want more benefits than a project can reasonably be expected to provide.  One suggests that the greatest single northern gas pipeline challenge will be for the myriad stakeholder groups to be sufficiently disciplined, coordinated and cooperative to agree on any project(s) this decade.  The next challenge will be for the governments involved to be courageous and farsighted enough to not change the tax and regulatory rules of engagement once a project has been approved, lest the future investment climate of northern children be mortgaged for their parents' short term benefit.-dh 

6/6: The Summer of Arctic Pipeline Decisions: Historical events are occurring this week in Canada, following Alaska Governor Knowles' well-publicized trip to Ottawa last week, and advocacy of two pipelines. 

    Alaska has registered its support for the popular Highway Route though, according to polls, an economically viable LNG project would be preferred and companies continue vigorous study of GTL technology.  
    Canada is carefully pursuing its own agenda.  The Highway route is supported by the Yukon government and others, but Mackenzie Delta producers have constructed a draft agreement with the Aboriginal Pipeline Group (APG), providing them with up to 1/3 ownership in a Mackenzie Delta-only pipeline.  This project has the attraction of freeing stranded Canadian reserves...and royalties...for Canada.  Some APG constituencies favor the economies of scale and financial arrangement of a 100% aboriginal owned line which also transports Prudhoe Bay gas (Northern Route).  Aboriginals and Producers are meeting in Hay River today to seek consensus on the Delta-only proposal.  On June 20-21 Sahtu constituencies of APG will host a meeting in Norman Wells to consider the Northern Route, at the same time the Inuvik Petroleum Show is convening.  
    Where is the historical significance?  If the Delta-only route achieves Canadian approval, prospects for a delayed Alaska routing may appear for various market, supply and manpower reasons.  If the Northern Route gains ground, Alaskan and industry decision makers will have their own consensus challenges to a very restricted time frame.
In short, all of North America may remember the summer of 2001 as the time in which--after two decades of delay--Arctic pipeline decisions were finally made.  -dh

5/31: On Projects LostSelf interest is the basis for survival but can lead parties to disagreement.  If disagreement is not resolved it produces delay.  Delay permits windows of opportunity to escape, unopened, into history.  Looking back, the parties wish they had been more sensitive to market realities and more willing to compromise. 

Today...and this month, the pipeline puzzle's pieces are coming into focus revealing more and more stakeholders, each with valid self interest:

-Alaska's Governor advocates two gas pipelines in Ottawa today; one being the Highway.

-Alberta's Premier advocates more provincial control, will meet with Cheney.

-Yukon concerned about pipeline social problems; NWT village seeks help with impact.

-Conoco enters the Delta arena with purchase of Gulf Canada (6-1, Royal Dutch Shell, with Delta holdings, competes for Gulf ownership); more Lower 48 and Canadian Companies successfully bid on gas rich, North Slope Foothills leases.

-Alaska's legislature opposes northern/Mackenzie route while Canada opposes ANWR; meanwhile, oil and gas operations protect caribou as high river water kills thousands.

-Alaska producers study all alternatives; Canadian producers explore Mackenzie route; ARC seeks to combine projects; Foothills, Williams, Governor Knowles and many Alaskans look South; Northern Aboriginals seek a seat at the table for an 'over the top' or 'Mackenzie only' route, undecided; and service providers like Enbridge, Fluor, Halliburton, Natchiq, and VECO await consensus.

Meanwhile, the market appetite for new gas supply is unsatisfied.  Offshore LNG, East Coast and other projects continue preparing competitive strategy to fill the void and capture their own opportunity windows...and gas prices continue to drop.  -dh (Rev. 6-3-01)

5/29: Window of Opportunity, Penalty of Delay:  This week and through the weekend, Canadian news has been boiling and Alaska players active.

Certain NWT aboriginal interests, organized as the Aboriginal Pipeline Group (APG) are first reported as opposing a Mackenzie pipeline, but an announcement is made of their support and 1/3 interest in a $3 billion line.  Then, more opposition rises this weekend from the important Sahtu region, and their Western Arctic Energy Corporation, seeking 100% line ownership, but indicating negotiable flexibility and preference for the 'over the top' route.  In Alaska, the Governor's Pipeline Council explores the desire to found a petrochemical industry in Alaska with some of the gas liquids, perhaps marketing a large share in Alberta.  Premier Klein of Alberta wants Alberta to be a major player and schedules an unprecedented, historical visit with Vice President Cheney.  There is Alaskan desire and a budget requirement to market its gas...then SB 164 blocks one alternative (See editorial below).

When you check the news (this week), you can try to draw your own roadmap from these statements:    "The federal government is quietly negotiating with northern aboriginal groups to ensure they have the financing to secure an ownership stake...."   "It's a god-damned sell-out..."    “Arctic gas is necessary to meet North American demand...."  "We believe it is the best option, not only for the producers, but also for Yukon."   "Alberta will get its 'pound of flesh' on any pipeline connecting natural gas from the Canadian Arctic or Alaska."    “...the market should decide the proper routing.  Pipelines need to be determined on an economic basis.”  " Politics can't make a deal happen, but it sure can kill one."   “…the more conflict that is encountered the longer the process will take”.

Astute observers will try to shift through the positioning to find the wisdom.  "Is not most of the dialogue necessary in order to reach consensus?"   Then, some will wonder, "Are any deal breakers here?"

Yesterday, as Canada worked, America celebrated Memorial Day.  Maybe some Canadian-American veterans of the 1970s' pipeline wars stopped to reflect on fallen projects: El Paso, Maple Leaf, Alcan, Arctic Gas.  Each had proponents who saw a 'window of opportunity'.  For each, the window was on a train moving through the station...gone in a flash as the invisible hand of supply and demand satisfied the market without them.  All of the veteran projects now have a new generation of advocates.  We always hope for a new generation that it has learned from earlier mistakes and is a generation wiser.

As political dialogue of real and exaggerated issues continues now, so does the clock tick and so does the invisible hand work.  On the horizon, new LNG and Eastern Off-shore projects position for success.  If any Arctic project is supported and grasps its passing window of opportunity it will become a part of the new market supply/demand picture.  But every extended debate, attack, accusation and demand lengthens the process for a given project.

North America could use Arctic this point in time.  The project supplying first volumes will be the one reflecting greatest, earliest support and economic strength.   History shows that "holding out" often carries a terrible penalty, like the amateur market-timer waiting for the peak price to sell a stock.  -dh

5/9:  Author's Lease Sale Commentary The North Slope Foothills Areawide Oil and Gas Lease Sale in Anchorage yesterday has significant implications for those interested in gas pipeline projects (not to minimize positive results from the smaller Cook Inlet Area Wide Lease Sale also conducted yesterday, good news for Southcentral Alaska consumers).  Alaska oil patch pros will confirm that most wells drilled in the foothills region have encountered gas and the geology is compelling.  In addition to the optimism expressed yesterday (below) by Anadarko's Mark Hanley and state Oil and Gas Director, Mark Myers, Unocal's longtime Land and Government Affairs Manager, Kevin A. Tabler later said his company is "...excited about its success and impressed with results of the sale.  We accomplished what we set out to do and obtained a position in the foothills area."  Unocal won bids on all 18 of the tracts it targeted.  "I don't think anyone knows for sure how the pipeline projects will turn out," he said, "but the tracts we bid on are very close to a major route...."  As to overall strategy, Tabler stated, "Unocal is in a growth mode in Alaska.  We have been mostly involved in the Cook Inlet area to date but selectively diversifying our holdings on the North Slope is compatible with corporate growth objectives."  He added that, "...other companies also seem enthusiastic about gas potential in Alaska."   Contributing to positive sentiment in the Anchorage Loussack Library auditorium yesterday among lease sale attendees, was the emergence of two "new Alaska corporate entities": successful participants, "5051 Alaska Inc." and "Petro-Canada (Alaska) Inc."  As the newcomers won tract after tract the announcements were greeted by a rising tide of whispers.  In wake of yesterday's sale, commercializing Alaska's vast, stranded gas reserves seems a step closer to reality.  -dh      

On 3/16, Representatives Whitaker and Croft (later joined by Kerttula) introduced HOUSE BILL NO. 190, "An Act levying and collecting an ad valorem tax on North Slope natural gas in place; and providing for an effective date."  It was referred to Oil & Gas, Resources and Finance Committees.  The Oil & Gas Committee will hear the bill Friday, 4/24 in Room 124 of the Capital."HB 190 is an onerous effort to punish companies for not producing natural gas in the time frame desired by the bill's sponsors.  The bill would tax producers 'the greater of' $1 BILLION/YEAR, or $.02/MCF PER YEAR, effective 1/8/08.  While the author is confident the bill will be summarily defeated, the fact that it was even introduced threatens the positive investment signal Alaska has transmitted to business and industry for 20 years, is inconsistent with the positive leadership provided by the Governor and Legislature to date on most natural resource issues.  It also reveals a disturbing willingness of its sponsors to 'change the rules of the game' after lease sales and implied commitments have been finalized." 4/24/2001 -dh)

Alaska Senate Bill 164recently passed the Senate and could face House approval and the Governor's signature any day (5/16/01, signed into law by Governor).  


Bill outlawing northern gas pipeline route was fueled by good intentions, but its poor timing could have adverse affects

By Dave Harbour

Special to PNA

Alaska Senate Bill 164 recently passed the Senate and could face House approval and the Governor’s signature any day. It is an act that could make construction of a northern gas pipeline route illegal.

In late March and early April it moved rapidly through Senate committees and passed with little controversy. The house has given it a VIP reception, as well.

While most of us favor maximum Alaska content, along the lines Gov. Knowles has suggested, this legislative action, its momentum fueled by passions of well-intended constituents, could have unintended results. It is an example of how the good intent of government, poorly timed and executed, could result in an negative outcome should the House pass SB 164 and the governor sign it.

For example, if the Alaska Highway route proves uneconomic in this time frame, the state would be stuck; Alaska’s fiscal ‘soft landing’ might turn into a ‘hard’ one (See Murkowski story. dh). It would then regret having stopped engineering, environmental and economic studies for an alternative pipeline.

Second, potentially making offshore ANWR an illegal route plays into the hands of anti-ANWR political strategists.

Third, making study of the northern path impractical reduces industry’s leverage in pre-negotiating terms with Canadian provincial governments, aboriginal groups, and contractors. Reduced negotiating leverage could mean higher project costs and a lower return to the gas owners, including the state.

Fourth, one could conclude that if SB 164 is passed into law, some Alaska contractors now assisting industry with feasibility studies could have their work diminished, though producers say this may not be likely.

Fifth, when Alaska law acts to preclude free market decisions, will Canadians be tempted to respond in kind?

The only positive thing this legislation does is license well intended political leaders to tell constituents: “We intended well.”

Even proponents of the highway route, presumed beneficiaries of this action, have said it’s unnecessary.

Legislators and the administration would be better advised to confer with gas line planners cooperatively. The attitude should be “what can we do to help?”, not “here’s what we will do to help.”

Perhaps cooperation and unbiased objectivity should be offered to industry researchers and Canada, rather than roadblocks. A negative attitude can cost an employee her job, a contractor his client or a state a critical project at a critical time.  (3/20/2001 update: HCS SB 164(O&G) passed the House yesterday and was returned to the Senate for concurrence on minor changes.  It will then move to the Governor's desk....  5/16/2001 Signed into law by the Governor.  See some of the first predicted impacts developing here (i.e. Klein)...and here (i.e. from the State's very objective Canadian consultant...'cause and effect'. )

b.   Gas Pipeline 101: An Editorial Especially for Young People

In April 1967 ARCO employees began drilling Prudhoe Bay State No. 1 and announced a discovery on February 16, 1968.  Those pioneers didn’t then appreciate the degree of prosperity their work would bring to Alaska and America for the next thirty years.   They had discovered North America’s largest oil field 200 miles East of Barrow, 650 miles North of Anchorage.  The nearly 10 billion barrels of recoverable oil had awaited them since prehistoric times in a 600 foot thick sandstone reservoir some 9,000 feet beneath the tundra’s surface.

About 26 trillion cubic feet (TCF) of natural gas accompanied the oil, about 1/3 mixed with the oil and another 2/3 overlaying the reservoir as a ‘gas cap’.  While oil companies studied how to move this energy, only the oil found an economic way to market, as natural gas prices were too low to support the cost of a huge gas pipeline project.  About 6 TCF of gas had been discovered in the nearby Mackenzie Delta area of Canada.  Over 25 oil and gas companies in the U.S. and Canada studied alternative gas transportation schemes between the late 60s and early 80s.  None proved feasible.  The gas would have to wait.

Today, Alaska North Slope (ANS) oil flows at about half the rate it did when the 48” diameter Trans-Alaska Pipeline System (TAPS) was completed in 1977.  Proven reserves of ANS gas have grown to about 35 TCF, about 1.5 times the total natural gas consumed by the entire U.S. annually.  Geologists predict that over 100 TCF of ANS gas will be found.  Put into this mix that a little oil and about 9 TCF of gas have now been discovered in the nearby Mackenzie Delta of Canada, remote energy reserves also without a transportation project.

As Alaska's elected leaders consider revenue options with Prudhoe Bay oil production down, suddenly, the Lower 48 demand and price for natural gas tripled by winter, 2000 then began to drop by spring 2001 to levels only slightly higher than a year ago.  However, demand and prices are expected to continue an upward trend.   Northern Canadian people seek to commercialize their own gas for jobs, royalties and other economic benefits.  And our friends in the Lower 48 and Southern Canada need the gas to supply home heat and electrical power generation.  You’ve read about California.  With this new price improvement, comes hope that marketing (“commercializing”) northern gas reserves will now justify one or more multi-billion dollar gas transportation projects, perhaps giving Alaska’s budget a “Safe Landing” as oil production continues declining and providing a brighter future for northern Canadian citizens.  Bringing northern gas to market would also create thousands of jobs and displace foreign energy imports, which will keep more North American hard-earned money at home. 

Our big, Olympic gas arena is filled with these principal competing projects. 

-The “Northern Route” project (ARC, Ltd.), would take ANS gas about 400 miles east, buried in the sea bottom, combine it with Mackenzie Delta gas, and take the whole lot to southern markets in the U.S. and Canada.

-Northern Canadian producers and aboriginal groups are considering a Mackenzie Delta-only project. 

-The “Southern Route” project (Alaska Natural Gas Transportation System, “ANGTS”) would move ANS gas down the TAPS right of way to Fairbanks, then on a buried pipeline route south, roughly paralleling the Alaska Highway.  Two groups are studying this route.

-Four LNG projects (i.e. two municipal groups and two industry groups) support piping ANS gas to Valdez or Kenai-area tidewater locations, converting it to Liquefied Natural Gas (LNG, minus 260 degrees F.), loading it onto tankers bound for Asia or southern markets, re-gassifying it on the other end for customer distribution.

-Several companies are considering various “Gas to Liquids” (GTL) alternatives, which, unlike LNG, could be moved in “batches” through the existing trans-Alaska oil pipeline.

The North Slope producers have not yet (i.e. as of early April 2000) ruled out any option for maximizing revenue and economic impact both to the companies and to the state.  Alaska, Yukon and Northwest Territories politicians, however, do have preferred projects.  While experts say there is sufficient gas to support multiple projects the question now before us is which one will be first.  Within the year 2001, we can expect the players to answer two critical questions:

-Will the long-term price of natural gas justify financing a project; and, if so, which one?

-Will discussion over competing projects be in Alaska’s and Canada's long-term interest, and will competing proponents of the high stake projects diplomatically bolster industry and international relations or scar them for years to come through word and act?

Regardless of the transportation method chosen, the future of all North American citizens rests in the balance, especially the younger ones among us studying “Gas Pipeline 101”. -dh (Rev. 6-01)


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