Energy expert warns Alaskans to adopt Canada-friendly attitude

Posted: Wednesday, July 18, 2001

ANCHORAGE (AP) -- Prices should remain high enough in the near future to bring Alaska natural gas to market, but the project could be derailed unless Alaskans do a better job of negotiating a pipeline route with Canada, an energy consultant said Tuesday.

Ed Small, Calgary representative of Cambridge Energy Research Associates, told the Alaska Legislature's Joint Committee on Natural Gas Pipelines that the chance of a pipeline being built to transport North Slope gas to the Lower 48 was somewhere between 60 percent and 70 percent.

''There is a window of opportunity for Alaskan natural gas,'' Small said. ''It is not a done deal by any stretch of the imagination.''

He reminded the committee headed by Sen. John Torgerson, R-Kasilof, that regardless of what route is chosen, two-thirds of the line will be in Canada.

Alaska's major oil companies are studying two routes: a northern route from Prudhoe Bay to the Canadian Arctic by sea, then south along the Mackenzie River, and a southern route along the trans-Alaska Oil pipeline, then down the Alaska Highway.

Gov. Tony Knowles and Alaska legislators favor the highway route. They sayd it would will mean more jobs, increased property values and a ready source of natural gas for Alaska communities.

The Legislature in May overwhelmingly approved a bill prohibiting the state from issuing any licenses for a pipeline along the northern route. About the same time, Premier Ralph Klein said Alberta would strip petrochemicals from any pipelines built through the province to ship natural gas to the United States.

During negotiations, Alaskans should adopt a more conciliatory attitude toward the Canadians, Small said, or run the risk that the pipeline will never be built. Discord ''could be enough to close the window'' of opportunity, he said.

If the pipeline is not built by 2010, competition from other sources likely will scuttle the project, Small said.

''The governor has done his best to have strong relations with our Canadian counterparts, recognizing that their support will be crucial to a gasline project,'' said Bob King, spokesman for Gov. Tony Knowles.

Knowles met with Canadian Prime Minister Jean Chretien in May to talk about the pipeline project, King said.

Small said the project faces numerous obstacles, including a drop in natural gas prices, easing of demand, and competition from natural gas from the Lower 48 and from the Mackenzie River delta in far northern Canada.

Natural gas prices reached $10 per thousand cubic feet last December, but they're hovering just above $3 now.

Small predicts that natural gas prices will average between $3 and $3.25 over the next five years.

Prices need to be sustained at $3 for the North Slope project to remain viable, he said.

If Mackenzie Delta natural gas came onstream before North Slope gas, Alaska's production goal of 4 billion cubic feet a day likely would be delayed, Small said.

The Mackenzie Delta could produce 1 billion to 1.5 billion cubic feet a day.

The North Slope holds proven reserves of 35 trillion cubic feet of natural gas. The United States currently consumes more than 21 trillion cubic feet of gas per year.

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