Gas line hinges on Canada pact

Posted: Tuesday, September 19, 2000

FAIRBANKS (AP) -- An agreement nearly a quarter of a century old could define the route and specifications for a pipeline to take natural gas from the North Slope to the Lower 48, unless the federal government and Canada alter that pact.

The 1977 ''Agreement Between The United States and Canada On Principles Applicable To A Northern Gas Pipeline'' describes the proposed line down to the number of compressor stations and which companies should build which sections.

''The legal framework for this entire project is unique, there's no doubt about that,'' James Hoecker, chairman of the Federal Energy Regulatory Commission, told a congressional committee last week.

Hoecker believes his agency has the authority to consider projects other than the Alaska Northwest Gas Transportation System approved in 1977 by Congress, former President Jimmy Carter and the government of Canada. But any changes also need Canada's approval.

''Much time has passed since this agreement, and consideration of a renewed ANGTS proposal could be affected by Canada's view of the status of the 1977 'agreement on principles,''' Hoecker said in written testimony.

In response to questioning from Sen. Frank Murkowski, R-Alaska, both Hoecker and T.J. Glauthier, deputy secretary of the Department of Energy, said they believed the agreement was binding.

''It's incumbent upon the administration to explore with Canada their views of the existing agreement,'' Hoecker said, as owner companies and regulators look at modifications or other routes.

Technology, market regulation and environmental rules have all changed in the past 23 years, so some modifications are inevitable.

A consortium called Arctic Resources Co. Ltd. has proposed abandoning the approved route roughly paralleling the Dalton and Alaska highways.

Forrest Hoglund, chairman of the Houston-based group, told the committee that the best and cheapest route goes east from Prudhoe Bay under the Beaufort Sea, then runs south along the MacKenzie River valley in Canada.

But the original ''sponsor group'' selected to build the pipeline under the 1977 agreement still exists, and appears ready to vigorously defend its project. That project calls for a line running from the North Slope to Fairbanks, then alongside the Alaska Highway, and then into Alberta to connect with existing gas distribution systems.

''The ANGTS is the only natural gas transportation project authorized under U.S. and Canadian statutes to transport North Slope Alaskan gas to the Lower 48 states,'' said Robert Pierce, chairman of Foothills Pipe Line Co. of Calgary, Alberta.

Canada, however, may no longer prefer the Alaska Highway route.

''I've heard Canada may oppose it because they would want to go through the top by the MacKenzie,'' said Rep. Don Young, R-Alaska, in a meeting with reporters Friday.

Arctic Resources has sweetened the deal for Canada's Native groups. Hoglund says his project proposes that 100 percent of the Arctic Resources line be owned by ''Native American and Canadian aboriginal groups residing along the route'' in Alaska and the Northwest Territories.

But Pierce of Foothills says there are good reasons to stick with the original plan.

''The comprehensive statutory and regulatory foundation for the ANGTS ... provide unique and streamlined procedures for expediting construction of ANGTS that continue in effect today,'' he told the committee.

The 1976 Alaska Natural Gas Transportation Act merged the roles of numerous federal departments into one ''Office of the Federal Inspector'' for all Alaska natural gas pipeline issues.

Former President George Bush dismantled that office in 1992, but gave its authority to the Energy Department, Pierce noted, so the legal basis for a single federal office still exists.

''We believe the appropriate role of the federal government is spelled out in ANGTA,'' Pierce said.

Could a modern pipeline for modern markets still fit within that decades-old framework?

Hoecker, the FERC chairman, told the committee his agency's decisions could be ''called into question'' if it used the ANGTA procedures to approve a project that didn't follow the specifications from 1977.

Hoecker said he has assembled a team to review the issue and submit a report to the Senate committee by the end of the year.

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