'Over-the-top' gas line inches forward

Torgerson vows more legislation to ban it

Posted: Thursday, January 17, 2002

To the consternation of Alaska legislators, a Houston- and Calgary, Alberta-based energy consortium is moving ahead with a project that would bring North Slope natural gas to market via a pipeline under the Beaufort Sea.

Although the so-called "over-the-top" route specifically was banned by a state law passed last year, ArctiGas Resources Limited Partnership announced Wednesday that it began the regulatory process with the National Energy Board of Canada.

The project, which would be the largest privately constructed piece of infrastructure in North American history, calls for a pipeline from the North Slope to the Mackenzie Valley in the Northwest Territories and down to Alberta, where it would connect with the existing North American grid. Cost estimates, depending on who's talking, range from $6 billion to $20 billion.

ArctiGas contends the over-the-top or northern pipeline would be cheaper to construct because it's a few hundred miles shorter and crosses flatter terrain than the proposed route paralleling the existing oil pipeline and the Alaska Highway through the Yukon Territory.

The consortium says that with up to 9 trillion cubic feet of Mackenzie Delta reserves added to the proven 35 trillion cubic feet of North Slope gas, the economics of the project work out better for everyone including the state of Alaska and the North Slope producers.

"This project offers substantial economies of scale and, as a result, higher wellhead prices for the producers," said Forrest Hoglund, chairman of project founder Arctic Resources Co., in a news release. "The higher wellhead prices would in turn generate more taxes and royalty income for both Alaska and Canada, and increase incentives to explore for and produce new revenues."

But Gov. Tony Knowles and many legislators favor the southern route because it would mean more construction jobs for Alaskans and access to gas for Alaska communities along the way. Alaska's congressman, Don Young, supported a ban on the over-the-top route in the national energy bill that passed the House last year.

U.S. Senate action is pending, but a draft from Democrats would allow the northern route. A 25-year-old U.S.-Canada treaty mandates the Alaska Highway route, but some say the North American Free Trade Agreement overrules it.

State Sen. John Torgerson, chairman of the Legislature's Joint Committee on Natural Gas Pipelines, said Wednesday he will introduce another bill to put "the nail in the coffin" of the Beaufort Sea option, as he said ArctiGas apparently isn't paying attention.

"We're not going to spend a lot of time on the over-the-top route because it isn't ever going to happen," Torgerson said at a hearing Wednesday.

But Bob Murphy, an official with Arctic Resources, said the company's not just tilting at windmills.

When the facts are all in, it will be apparent that there's only one economically viable project, he said. He then expects the Alaska Legislature to repeal the law banning the northern route.

And the three major North Slope producers ultimately will join the consortium, he said. So far, a working group formed by BP, Phillips and ExxonMobil has said that there isn't an economically viable project now along any route.

ArctiGas has signed an agreement with aboriginal land owners in Canada under which the consortium would manage the project and the Native company Northern Route Gas Pipeline Corp. would own the pipeline. The project would be financed completely through debt, reportedly an unprecedented strategy for a pipeline but a common method of building municipal infrastructure.

Bill McAllister can be reached at billm@juneauempire.com.

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