Alaska left out of Canada gas agreement

Posted: Monday, June 23, 2003

FAIRBANKS (AP) Alaska has been left out of an agreement between Canada's natural gas producers, Native groups and a major pipeline company to tap gas reserves in Arctic Canada just east of the Alaska border.

The line they hope to build is too small to take Alaska gas.

''This is being developed as a Mackenzie Delta stand-alone project,'' said Hart Searle, spokesman for the Mackenzie Delta gas producers group in Calgary, Alberta. ''Our project is not designed to incorporate or include gas from Alaska.''

The agreement has not been approved by regulators. The producer's group said it would soon file preliminary information with about 14 different regulatory agencies in Canada.

Some say the agreement allies the major players on Arctic Canada's natural gas pipeline scene, and therefore is a setback for a proposal to combine Alaska and Mackenzie gas in a pipeline following a similar route.

That line, promoted by Arctic Resources Co., would start at the much larger Alaska gas fields near Prudhoe Bay, cross the Beaufort Sea offshore and pick up the Mackenzie gas on the way south to Alberta.

However, the gas producers announced last week that they have now secured backing from the influential Native tribes in the region for the smaller, Mackenzie gas-only line.

The tribes, called First Nations in Canada, formed the Aboriginal Pipeline Group in 2000 to obtain a stake in any pipeline that passes through the four Native land claim settlement areas affected.

The gas producers, made up of oil companies that have development rights in the Mackenzie delta area, said that they could eventually sell the aboriginal group a one-third share of the line.

Fred Carmichael, the aboriginal group's chairman in Inuvik, said in a news release that the project will be done to result in ''lasting benefits for the people of the North.''

Under the deal, TransCanada will lend the aboriginal group about $60 million so APG can participate in preliminary design work with the gas owners. Those owners include Imperial Oil Resources, ConocoPhillips Canada, Shell Canada Ltd. and ExxonMobil Canada.

APG would pay the money back with revenue generated by shipping charges on the pipeline, if it obtains an ownership share. It still must raise the actual construction money to do that, though.

Last year, the aboriginal group tried to obtain the money from the federal government. That ran into a dead end, Searle said. Now, the APG must seek private financing, he said.

The line, production facilities and gathering lines will cost $3 billion, Searle said. The producers are quite interested in helping the aboriginal group find enough money to cover a third of that cost. The agreement announced Wednesday commits them to doing so.

''History would tell you that unless you have aboriginal support for an initiative like this, you likely aren't going to be successful,'' Searle said.

The Aboriginal Pipeline Group itself decided to back a Mackenzie gas-only project in part because of the uncertainty of the Alaska line, Carmichael said. He noted that Alaska's Legislature opposes an ''over the top'' gas line across the Beaufort Sea to Canada.

The aboriginal group's decision shouldn't hamper an Alaska gas line along a southern route, though, he said. ''There's a general feeling that not long after this line (from the Mackenzie delta) is completed, the Alaska Highway line will be going ahead,'' he said.

John Katz, Alaska Gov. Frank Murkowski's deputy in Washington, D.C., said he hoped that would be the case.

''We've always said that the Mackenzie valley pipeline and the Alaska pipeline are not in competition,'' Katz said Friday. ''It is our understanding that the Mackenzie valley gas would primarily be used for domestic purposes in Canada.''

The Mackenzie-only pipeline would carry about 1 billion cubic feet of gas per day and could be finished by 2008 to 2010, Searle said. An Alaska line would be four to five times that size and isn't expected to be done before 2010, at the earliest.

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