Western Canada provinces looks to Alaska gas for economic lift

Posted: Thursday, November 16, 2000

ANCHORAGE (AP) -- With talk of a natural gas pipeline from Alaska's North Slope to Canada, both the Yukon and Northwest territories see a once-in-a-lifetime bonanza -- a construction boom, long-term jobs, government revenues and a pipe crossing the land like a spine in support of their fledgling oil and gas industries.

''It's critical for us,'' said Stephen Kakfwi, premier of Northwest Territories.

''A pipeline would be very important for Yukon,'' said its premier, Pat Duncan.

The problem is that despite their common plights -- unemployment, boom-bust economies and sparse opportunity -- only one territory would get the pipeline.

With gas prices high, Alaska's politicians and North Slope owners are considering a new development project, including a gas pipeline through Canada to the Lower 48. A conference on the project begins today in Anchorage. Gov. Tony Knowles is to announce his preferred route for a pipeline Friday.

There are two possible routes for a natural gas pipeline out of Alaska. One goes from Prudhoe Bay along the Arctic coast to Northwest Territories' Mackenzie River Delta and then south. The second follows the Alaska Highway south through the Yukon, a route favored by most Alaskans.

The pipeline route for the Yukon and Northwest territories is of great interest to both provinces.

Both territories have fragile economies, subject to global shifts in commodity prices. When the price of gold and other metals crashed in 1998, mines closed and the population of both territories slipped.

In the Yukon, unemployment among the 30,000 residents is about 8 percent, compared with the Canadian average of about 5 percent. Real estate prices have fallen. In Faro, a mining town northeast of Whitehorse, buildings stand empty since the zinc and lead mine closed in 1997.

In Northwest Territories, two of the three major gold mines have closed in the past five years, said Margaret Melhorn, deputy finance minister. However, a new diamond mine is providing many new jobs. About 42,000 people live there.

''We both have volatile, resource-based economies -- boom and bust,'' said Greg Komaroni, who works in the Yukon premier's office.

Developing Alaska's vast gas reserves has been a dream since the huge Prudhoe Bay oil field was discovered in 1969. With 35 trillion cubic feet of known gas reserves, the North Slope holds 21 percent of U.S. reserves. That's enough gas to supply 10 percent of the Lower 48's demand for 15 years, according to the state. In the 1980s, development plans foundered on huge costs and low gas prices.

But in the past year, gas prices have more than doubled and Lower 48 demand is projected to surge, reviving plans.

Developers are considering three plans, including a natural gas pipeline from the Slope to the Kenai Peninsula or Valdez, where it could be liquefied and shipped overseas. Another plan is to convert the gas to liquid for the trans-Alaska oil pipeline. The third option is a gas pipeline from Alaska to Canada and south to the Lower 48.

Of two potential routes for a new pipeline, the so-called Arctic route would run a pipeline from Prudhoe Bay 400 miles offshore to the Mackenzie Delta, then south 1,000 miles to existing pipelines in Alberta.

The route is shorter than the Alaska Highway route by about 300 miles. Proponents, including Northwest Territories officials and backers at the Houston, Texas-based Arctic Resources Co., say it would cost about $5 billion to $6 billion. That's about $1 billion less than the highway route, according to project backers. Lower construction costs may mean lower fees for moving gas and more revenue for the state of Alaska. Further, an Arctic pipeline could pick up the 9 trillion cubic feet of Mackenzie Valley gas.

''Ultimately this will be decided by which project delivers the lowest possible price. A billion dollar difference is going to decide it,'' Northwest Territories Premier Kakfwi said Wednesday in a telephone interview from Yellowknife.

Yukon Premier Duncan, who is attending the Anchorage conference, argues that the Alaska Highway route through Yukon would be no more expensive, noting that many permits are already approved, technology is less costly and that the Arctic route faces what may be a long, costly regulatory battle.

''The economics are here for a Yukon route,'' Duncan said.

The project mean billions of construction dollars and hundreds of jobs and could supply Fairbanks and possibly Anchorage with gas.

Although the stakes are high for Alaska, a gas pipeline would not be another oil bonanza like the 1970s. Construction costs and potential state revenue are about one-third of Prudhoe's bounty.

But for the Yukon and Northwest territories, the pipeline could usher in new prosperity. Duncan estimates the Yukon section of the pipeline would cost $2 billion, the largest construction project in the territory's history.

And both territorial leaders say the pipeline could support oil and gas development. Chevron made the Northwest Territories' first major gas discovery in 1998. The Yukon held its first lease sale last year and has eight largely unexplored oil and gas basins, Duncan said. p So far, Duncan is trying to avoid stoking the boom mentality inherent in a big project. When the pipeline was last discussed in the 1970s, some in Whitehorse bought welding trucks and equipment. The project never materialized.

''Some of those trucks are still sitting there,'' she said.

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