10/31: TODAY:  Governor's Alaska Highway Natural Gas Pipeline Policy Council, 10-31, Full Council Meeting, 9-4:30, Sheraton Anchorage Hotel.  (See full report on Policy Council and on 11-2001 pages)     *     Jann Atkinson, the National Energy Board's Applications Unit Environmental Specialist, provides this outstanding recent presentation of NEB organization, process and focus on northern projects at our 'Presentations' page.     *     Richard Peterson of ANGTL reports: "We have added several points about reducing US crude imports through a GTL program on our 'home' page and 'news' page".     *     Yellowknife, N.W.T., CBC - A vote of confidence in N.W.T. Premier Stephen Kakfwi's leadership will be held on TODAY. Members of the legislature have decided to vote on his leadership, but they're bickering over the procedure.     *     Whitehorse, Yukon, CBC - The head of the Kaska Nation is happy the Council of Yukon First Nations has approved a devolution deal.   ...  Tribal chief Hammond Dick says settling devolution frees up human resources for claims negotiations.  (Note: Consider implications for ANGTS; Kaska report under item b. here.  -dh)         *     Congressional Quarterly--DASCHLE UNDER INCREASING PRESSURE TO BRING UP ENERGY BILL:  Major veterans organizations have joined Senate Republicans in pressuring Majority Leader Tom Daschle (Left Photo), S.D., to bring a comprehensive energy bill to the floor. "Keeping in mind the horrific events of September 11 and mindful of the threats we are facing, we strongly believe that the development of America's domestic energy is a vital national security priority," members of the American Legion and Veterans of Foreign Wars said in a letter to Daschle. The pressure on Daschle also comes from organized labor and Secretary of Veterans Affairs Anthony J. Principi. Sen. Frank H. Murkowski (Right photo), R-Alaska, ranking member of the Energy and Natural Resources Committee, warned he will attach the energy bill to other legislation if Daschle does not act. "We'll have other opportunities with legislation that is moving," Murkowski said.       *     Alaska Terror Alert Response:  Responding to a national alert for heightened security against possible terrorist attack, Gov. Tony Knowles yesterday increased Alaska State Trooper presence along the Trans Alaska oil pipeline with the creation of a security checkpoint on the Dalton Highway just south of the Yukon River bridge. Seven members of the Alaska State Defense Force have been called to state active duty to work under the operational control of the Alaska State Troopers to help them accomplish this mission.  "Although we have not been informed of any specific threat to the pipeline, we know its importance to meeting the nation's energy needs makes it a potential target for terrorists," Knowles said.  "Accordingly, the Alaska State Troopers, with assistance from the State Defense Force, will establish a security checkpoint just south of the Yukon River beginning today. This checkpoint will not restrict access to the Dalton Highway for legitimate uses, just as we are tightening security at the nation's airports, we need to know who is accessing the pipeline corridor, where they are going, and why....  As part of this national alert, we know of no specific threat to Alaska or any other part of the country, but I urge Alaskans to be on guard," Knowles said. "Alaskans have a proud tradition of responding to challenges put before them and I am confident that  they will cooperate with these efforts to ensure the safety of their fellow Alaskans and the pipeline on which the nation depends."     *    Canadian Terror Alert Response: Iqaluit, Nunavut, CBC- The Canadian Forces in the north say they have stepped up security in the Arctic. The measures come as a result of the Sept. 11 terrorist attacks in the United States.     *     Yesterday's Alberta royalty information letter.  New sponsor: TOTE.

10/30: Enbridge, Inc. listed on the NYSE this morning (ENB) and CNBC featured President and CEO Patrick D.  Daniel (Photo) *        Anchorage Daily News, AP-"We have met with an assortment of companies who are interested in buying our gas to ship down the pipeline or use in-state," said Pat Pourchot, Department of Natural Resources commissioner. At least three gas marketing firms have asked state officials to consider selling the rights to state-owned gas reserves on the North Slope. (See our 10-25 and 10-29 stories.)     *      CBC, YELLOWKNIFE - Northwest Territories premier Stephen Kakfwi (Photo) fought off a rebellion in his legislature Monday and announced his decision to stay on the job.  "I want to serve," Kakfwi told a full assembly and a packed public gallery. "I want to finish my job."  Shortly after, MLAs voted 13-1 in favour of a motion expressing confidence in the government. Four abstained. ... Kakfwi will face another vote of confidence by secret ballot on Wednesday.      *     WHITEHORSE STAR, by CHUCK TOBIN -- Two groups of about 750 workers each would be going full-blast in the peak period if a natural gas pipeline snakes through the Yukon, says a pipeline construction supervisor.  Richard Fafara of Foothills Pipe Lines Ltd. said the proposed 864-kilometre route through the Yukon would be broken into six sections, over two summer seasons and two winter seasons.  In the first winter, he explained Wednesday in Whitehorse, one crew of 750 would be under way, laying between 2.5 and three kilometres of pipe per day, to complete the first section.  In the following summer season and the next winter season, both groups of 750 would be in the field working different locations, to complete sections two, three, four, and five, Fafara said.  Together, he pointed out, both groups would be achieving a combined daily pace of between five and six kilometres, signed, sealed and delivered.  In the second and final summer season, pipeline construction would be scaled back to one group for the completion of the sixth and final section.  ...  There were about 30 members of the public for Wednesday evening’s pitch in Whitehorse, and about 20 or so were on hand for the presentation in Haines Junction last night.  Foothills management remains confident a natural gas pipeline will be built along the company’s pre-approved Alaska Highway pipeline route. However, the major producers of Alaska’s North Slope natural gas have yet to make a decision.  They have said repeatedly they’ll make an announcement by the end of this year regarding whether a pipeline is feasible, though they’ve already hinted it may not be.  If it’s feasible, however, they’ve also committed to making a route selection by year’s end: either down the Alaska Highway or across the Beaufort Sea to the Mackenzie River and south from there.  Brian Love, the company’s local manager, said he doesn’t believe the announcement will come by year’s end, but he’s certain the producers will be waving the green flag sometime in the first or second quarter of 2002.  “It is not going to happen as soon as everybody would like it to, but there are factors out there that make for a favourable decision,” Love said.  As evidence of interest in the North’s energy reserves, Love noted the recent American buyouts of large and successful Canadian companies with assets in the North.  Among those buyouts of note was Duke Energy’s recent purchase of West Coast Energy, the second-largest pipeline company in Canada and a 50-per-cent owner of Foothills, he said.   As confident as he is that the producers will develop the reserves, Love is equally as confident they’ll choose the right-of-way secured by Foothills, as is Daniel Begley, the company’s Calgary-based director of northern affairs for the Alaska Highway pipeline project.  Begley was with Foothills in the 1970s, when the Alaska Highway route was first proposed ... “We really do believe we have the best route,” Begley told Wednesday’s audience. “We have examined the other routes. If the other routes were better, we would be going for it.”  ... Maximization, he quipped, is a buzz-word these days.  “We really mean it,” he said.  Foothills, it was pointed out, has begun a Yukon registry of territorial businesses that could assist the project in some way. ... To minimize the impact on local communities by southern workers moving north to capitalize on construction job opportunities, Foothills would insist any non-resident Yukoners it assigns to pipeline work be hired and deployed from the South, Begley explained.

10/29: CBC-NWT Premier Stephen Kakfwi says a ruling by a legislative committee Wednesday has left him no choice but to think of leaving his position. Kakfwi said he would consult his supporters and give his decision TODAY.  NNS, by Richard Gleeson: ...Kakfwi's stance softened somewhat .... He said he may reassign staff.     *      REPORT:  The Governor's Alaska Highway Natural Gas Pipeline Policy Council, Access for In-State Gas Use Subcommittee, met in Anchorage on Friday.  Objective of the group was to prepare final conclusions and recommendations for consideration of the full Council at their Wednesday meeting this week.  The full council, in turn, will submit its final recommendations after nearly a year's work to the Governor by November 30.  We include a little of the committee interaction here to give a flavor of the areas covered.  Member Bill Corbus suggested the final draft include the beneficial impact of gas supply on stimulating mining and other projects in Interior Alaska.  Chairman Ken Thompson (Photo, left, 10-26-01) agreed, recalling testimony from an earlier Fairbanks meeting citing a number of proven mineral deposits along the route which could be commercial with the availability of reasonably priced energy.  On the subject of gas availability in the Cook Inlet area, Thompson said that the importance of North Slope gas should still be considered, "Don't be surprised to start seeing statements..." about new exploration adding 3-5 Tcf to local reserves.  He said that not just one, but three companies have recently said there should be enough Cook Inlet supplies to meet Southcentral Alaska's needs, though it would likely be a higher priced gas.  On the subject of state royalty gas, Thompson said the committee should make it clear that if royalty gas is sold, it should be sold to an energy trading company which, in turn, would nominate pipeline capacity and assume the market risks.  Referring to the news release quoted below, Member Jack Roderick (Photo-right) observed that this is already beginning to happen.  State Oil and Gas Division representative, Bonnie Robson (Photo-right) reviewed the process for sale of royalty gas with the committee.  "Preliminary findings have concluded that preserving the option of selling royalty gas in-kind is in the best interest of the state."  She also said that next month the state Royalty Board could consider this 'best interest' finding, simultaneously with issuance of an RFP, results of which could be received a month later.  Importantly, she said, this process could coincide with an open season that could come as early as the beginning of the year.  Member Brian Davies (Photo-left) explored with Robson's help the various scenarios which could develop: for example, the disposition of state royalty gas when new North Slope gas discoveries encountered a fully nominated, operating pipeline; and, similarly the importance of that new gas being able to gain pipeline access.  (Note: we include here the full recommendations of this and other committees, provided courtesy of Ken Freeman and Governor Tony Knowles' office this weekend.  Please be aware that these are recommendations only and may be modified, deleted or accepted by the full Council.)   *     October 26 Henry Hub Natural Gas: $3.06Mcf (Please see price references in 10/26 IAEE story.).     *       SALE OF STATE NORTH SLOPE ROYALTY GAS.  We reported this development on 10-25.  Here is the State's formal, 10-26 announcement of the "Competitive Sale of State's North Slope Royalty Gas" for your reference.   The Alaska Gas Producers Pipeline Team's External Affairs Manager, David F. MacDowell told Northern Gas Pipelines:  "It's good to see the state is dealing with this topic, as it will take some time to be fully addressed.  It is appropriate that the state take the steps necessary to plan for and understand its royalty gas options if an economic gas pipeline project can be developed."      *     WASHINGTON  -- Alaska Sen. Frank Murkowski Friday said momentum is growing for including a comprehensive energy bill in legislation that will be debated by the Senate before the close of this Congressional session.  He said the President yesterday during a meeting with him  at the White House expressed strong support for Senate passage of energy legislation this year. The President ... publicly urged Senate passage of energy legislation specifically opening the Arctic coastal plain to oil and gas development -- the President saying it is an important part of the nation's agenda to fight terrorism to expand our sources of domestic energy.     *        CBC, Whitehorse-The company that owns the rights to the Alaska Highway route, Foothills Pipelines, is selling the project to contractors and business people in a series of public meetings in the territory.  ... Mining's going down," said Len Andre, who owns Klondike Welding. "There doesn't seem to be much forestry happening any more. I guess what's left?"   It's a question he hopes will be answered by the pipeline and gas companies. But producers have to decide on a route first – and they've repeatedly said the project is too costly to do right now.  Foothills Pipe Lines' director of northern affairs, Dan Begley, was optimistic the gas producers will choose the Alaska route. "What we're saying is that if this project does go, we're anticipating it will go soon, and we are preparing the public for that," he said. ...  In the meantime, Foothills is compiling a list of businesses in the Yukon who could work on the project.

10/27-28 (weekend):  When questioned about gas pipeline costs and economics this week, economist David Reaume (Photo) told Northern Gas Pipelines, "The decision to spend $ 15 to $ 20 billion dollars on a gas pipeline from Prudhoe Bay depends first on whether or not a reasonable profit can be made on the line itself. Only the subset of alternatives that meet that test of feasibility should qualify for further consideration. The early history of Alaska’s Native Corporations shows just how badly things can turn out when the decision process is turned on its head."  (See our IAEE story and associated presentation on project economics, below. -dh)

10/26: Please acknowledge our newest public service sponsors, helping to bring this web page to you and thousands of other North American readers:  Sheraton Anchorage Hotel and Totem Ocean Trailer Express (TOTE)...more on sponsor page. 

TODAY: Governor's Alaska Highway Natural Gas Pipeline Policy Council, Atwood Building, Access for In-State Gas Use Subcommittee (Look for our report this weekend).       *       REPORT: Yesterday, the International Association of Energy Economics-Anchorage Chapter (IAEE) sponsored a luncheon presentation at BP's Anchorage office: an Alaska Gasline project update and outlook featuring Bill McMahon (Photo, 10-25-01) of the Alaska Gas Producers Pipeline Team, accompanied by Dave MacDowell.  If this were your daily newspaper, the headline would read: "US Senate to Consider Producer Expediting Legislation".  McMahon said that the language producers offered to the Senate Energy and Natural Resources Committee "has been included" in the mark-up version of the energy bill pending full Senate consideration (Obtain draft language in left margin under 'Quick Reference').  The significance of this development is that lack of expediting legislation in the wake of 9-11 was expected to substantially delay the long journey toward final approval and construction of a project.  McMahon provided an updated version of the PowerPoint presentation given to many audiences over the last few months.  But to this group of economists, he added detail.  Present feasibility work reveals both the northern and southern routes falling short of the pro forma 15% rate of return used in modeling.  MacDowell observed that the 15% is only a 'place-holder', as every company has a different standard for project investment and return on that investment.  McMahon said that the Northern route currently produced a 13% return while the southern route returned 11%.  He said the feasibility effort continued to seek ways in which project costs could be reduced, increasing project efficiency.  Eliminating Federal and state government uncertainty would contribute to risk and cost reduction.  Even so, he pointed out that while the price of gas this week had risen to $2.80/Mcf compared to last week's $1.80, that only emphasized the volatility of gas price projections.  "We don't fund projects based on price spikes, but on what you think prices will be long term."  He believes that long term, gas prices could achieve some predictability in the $3 range.  In addition to trying to contain external risks, the project itself has many inherent risks.  As an example, McMahon pointed out that, "There are no 52" pipelines operating at 2,500 psi that we know of."  He said "...if the Chicago price for gas fell to $1.80/Mcf and the transportation cost was $2.00, the 20 cents/Mcf loss over 20 years in a ship-or-pay contract could be painful."  Asked about Canadian positions, McMahon pointed out that both US and Canadian Federal and local governments would receive billions in revenue over life of the project, no matter which route were taken.  "Canadians have kept their powder dry on a Federal level; they say, 'let the market rule'," McMahon said, "while premiers of the Northwest Territories and Yukon have debated specific proposals."  MacDowell added that the Canadian Federal government looks to a northern gas pipeline to provide royalty revenue for government and other benefits to Aboriginal groups.  Northern Gas Pipelines readers may inspect the full text and photos in the presentation by clicking here and view other meeting photos here.    (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record.  -dh

10/25:  ANNOUNCEMENT....  At the 7 a.m. Alliance meeting this morning, Alaska's Natural Resources Commissioner Pat Pourchot said his department, "...has been approached by numerous companies to discuss potential use of the State's 12.5% royalty gas interest on the North Slope."  He said the state intends to pursue such royalty gas sales by putting gas up for bid, drafting contracts and submitting them for legislative approval.  He said the Legislature could see these arrangements in the 2002 session.  He said more details would be announced within the next few days.  

Alliance board member, Pita Benz introduced North Slope Borough Mayor George N. Ahmaogak, Sr. (Photo, 10-25-01) addressed Alliance members on the subject: "Are We Partners Or Not"?  (Obtain his complete presentation, here.)  In earlier statements, Borough officials have spoken in support of the Governor's highway routing preference but met resistance to certain legislative positions.  (See Molly Pederson's earlier testimony here.)  Ahmaogak spoke from the heart, but forcefully.  Setting the stage, he said that while the rest of Alaska enjoyed a certain economic diversification, the North Slope Borough (NSB) and villages depended on an oil industry tax base.  He then inventoried extensive support the NSB, Arctic Slope Regional Corporation (ASRC) and village governments have given to ANWR and gas pipeline efforts.  "We are constantly told we are an important part of the team," he said.  He encouraged members to ask Teamster Jerry Hood and Senator Frank Murkowski if North Slope citizens were not the most effective voice in Congress, countering Gwich'in claims.  Then he asked, "Why are you sending such mixed messages our way?"  He said that while North Slope citizens have been working in partnership with the state and industry, there has been a changing attitude in the Legislature during the past 2-3 years, primarily from Anchorage and Fairbanks leaders who have, "identified us as a target, as an enemy."  He then referred to SB 186 as a "legislative paint ball attack".   The bill is "An Act relating to municipal taxes on oil and gas production and pipeline property; establishing a limit on the general obligation debt that may be authorized and issued by home rule and general law municipalities; and providing for an effective date."   He candidly asked the audience "...if we lose our ability to bond, where is the incentive to support the energy development of Alaska?"   He then pointed out that in 2000 the NSB spend $139 million in Anchorage and $13 million in Fairbanks, much of it in the districts represented by SB 186 sponsors.  He concluded by reminding the Alliance that "We are all in this together.  We are partners."  While North Slope citizens have held up their end of the partnership, he suggested that to maintain unity Anchorage and Fairbanks leaders would have to weigh in on this issue.  He urged interested parties to coordinate with his special assistant, Dennis Roper. (See other meeting photos, here.)  -dh        *          Join a noon brown-bag speaking luncheon at BP's Anchorage office TODAY, for an Alaska Gasline project update and outlook featuring Bill McMahon of the Alaska Gas Producers Pipeline Team.  The event is sponsored by the International Association of Energy Economics-Anchorage Chapter (IAEE).  (Northern Gas Pipelines plans to provide a report here late Today or Friday.)      *      NEW YORK,  (Reuters) - Natural gas prices might have fallen 75 percent for the year, but energy firms are not ready to ditch their new-found enthusiasm for liquefied natural gas (LNG) imports into the United States just yet.       *     Alaska Department of Natural Resources, Call for New Information: 2002 Areawide North Slope Foothills Oil and Gas Lease Sale.     *     Rigzone.com: Gateway To The Oil & Gas Industry is added to the growing list of WebPages linking to Northern Gas Pipelines.  See the list here.

10/24: During last night's Alliance annual meeting at the Sheraton Anchorage Hotel, Governor Tony Knowles and National Energy Policy Development Group (NEPDG) Executive Director, Andrew Lundquist, shared similar views.  Several hundred contractors, legislators and government officials from around Alaska were pleased with the messages (Please see photo file).   Knowles praised Congressman Don Young for House passage of the Energy Package, with its ANWR provision, acknowledging the important contributions of organized labor, other Congressional offices, Lundquist and Vice President Dick Cheney.  "We need to take that same sense of unity to the gas pipeline issue," he said.  Lundquist, an Alaskan, has worked for years in Washington.  Serving with Senator Ted Stevens' staff, he went on to become Senator Frank Murkowski's Chief of Staff, a member of the Bush transition team and then, head of NEPDG.  He said that working on the President's National Energy Policy during the first months of the new Administration was, "...the first time all cabinet members dealing with energy issues worked together on a national energy policy."  While it has been "difficult" since September 11 to refocus on the President's energy agenda, the Administration's "call for a national energy policy has not changed.  Future energy demand," he said, "will vastly out step supply if no action is taken.  America cannot meet tomorrow's demands with yesterday's technology."  He outlined goals of the policy, including a supply diversification, environmental protection and stronger energy sufficiency.  He said the plan contained 105 recommendations, "85 of which can be implemented by agency action and executive order."  The other 20 measures were up to Congress.  He said the Senate leadership had stopped the energy package vote in committee since Senator Murkowski had a majority of bipartisan support.  "We still hold out hope he Senate will act this year," he said, "but time is short."  He added that Alaskans have never been closer to achieving ANWR approval.  He attributed much of the progress to "...Arctic Power, which has kept the flame burning for years."  He complimented the same team earlier identified by Knowles, drawing special attention to Teamster leader Jerry Hood.  "It is shocking to think we import about 600,000 barrels a day of oil from Iraq," he said.  (See Paula Easley's ANWR commentary, also arriving last night).  After his speech he was asked which route the gas pipeline should take.   The audience chuckled thinking Lundquist to be in a difficult situation.  But taking the challenge in stride, he said the Administration hadn't taken a position on which route the gas pipeline should follow, "...but the Administration will look to guidance from the Delegation and the good Governor."  To another question, he answered that Gas-to-Liquid technology held much promise for the state.     Alliance General Manager, Larry Houle, recounted the proud history of the Alliance, beginning with its founding in 1979.  In that year, a more informal organizing group of members testified and lobbied successfully in support of the Joint Federal/State Beaufort Sea Lease Sale.  "The Alliance is committed to the safe, environmentally sound development of Alaska," he said.  Outgoing President, Bill Stamps of Peak Oilfield Service Company and incoming President, Bob Stinson of Conam Construction Company, closed the meeting with the Alliance's recipe for prosperity.  Stamps encouraged the membership to be vigilant in maintaining a stable tax policy, avoiding attempts at new reserves taxes, maintaining a predictable regulatory regime and a sound fiscal policy.  Stinson emphasized the importance of fiscal responsibility (for a state spending more than it takes in), of obtaining ANWR, gas pipeline and exploration successes.  (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record.  -dh   ...Draft Revision: 10-23-01)

10/23: GAS MEETINGS ABOUND!    Join a noon brown-bag speaking luncheon at BP's Anchorage office Thursday, 10-25 for an Alaska Gasline project update and outlook featuring Bill McMahon of the Alaska Gas Producers Pipeline Team.  The event is sponsored by the International Association of Energy Economics-Anchorage Chapter (IAEE).  (Northern Gas Pipelines plans to provide a report here late Thursday or Friday.)     *         Governor's Alaska Highway Natural Gas Policy Council meetings (For teleconference access, send a message here): 1. 10-26, Access for In-State Gas Use & Future Opportunities Subcommittee, Atwood Building, Anchorage, 8:30 a.m. to 4 p.m., Ken Thompson-Chairman; and 2. 10-31, Full Council meeting, Sheraton Anchorage Hotel, 9 a.m.-5 p.m., Jim Sampson and Frank Brown-CoChairmen.

10/22:  U.S. SENATOR FRANK MURKOWSKI TODAY ANNOUNCED HE WILL BE A CANDIDATE FOR GOVERNOR OF ALASKA.     *      CBC, Edmonton, AB - An American Senator was in Edmonton on the weekend pushing a bill that would ban the so-called "over-the-top" route for the Alaska Pipeline.  John Torgerson is a state senator for Alaska....  Torgerson says that takes the gas away from Anchorage, Alaska and eliminates other value-added and export options.  He says he expects Canada's Mackenzie Delta project to be built before Alaska's.  He says that's mainly because Alberta's current distribution system could handle the expected volume from the McKenzie pipeline.   Torgerson says the U.S. Senate may make a decision on the Alaska pipeline and other related energy issues in early spring.       *      ANCHORAGE DAILY NEWS by David Reaume-According to the BP-Exxon-Phillips team studying the proposals for transportation and marketing of Prudhoe Bay natural gas, neither the northern route through the Beaufort Sea nor the southern route via Fairbanks are economically feasible at this time. That finding raises an interesting question. What does it mean for a project to be economically feasible? The first possible meaning (Boldface added) is that given a forecast of natural gas prices, estimates of construction costs and associated judgmental probabilities, the expected rate of return is negative. ...  The second possibility is that given the same forecast of prices and costs, the expected rate of return is positive but not as large as the expected rate of return on alternative projects that compete for the same limited investable funds. ...  The third possible meaning is that (again, given the same forecast of prices and costs) the expected rate of return on the project is positive, larger than on all (or at least most) alternative projects but still not large enough to offset the very high political and economic risk and uncertainty associated with it....     ...given the marginal economics that accompany either project, continued insistence by the public on the Alaska Highway route is decidedly counter-productive.       *      CBC, Yellowknife, N.W.T. - The Premier of the Northwest Territories says some of the Deh Cho's terms for supporting a pipeline are unreasonable. The Deh Cho First Nations have chosen not to sign onto an agreement for part ownership in the proposed Mackenzie Valley Pipeline....  Premier Stephen Kakfwi says the Deh Cho could negotiate for royalties and benefits, but he says the region will not get a role equal to the federal government in the environmental review process.   Kakfwi also takes issue with the Deh Cho condition that trappers on the route support the pipeline.  "Nobody is going to ever agree that a handful of trappers along the right of way will have the ultimate say...."  25 years ago aboriginal people across the Northwest Territories opposed a Mackenzie Valley pipeline. Justice Thomas Berger recommended a moratorium on construction of a pipeline until land claims were settled.  Three out of four first nations along the pipeline route have now settled claims.  The Deh Cho has just entered the second phase of its negotiations. It's expected to take seven years to come to a final agreement.     *     Northern News Services, by Derek Neary, Wrigley (Oct 22/01) - Percy Hardisty is once again chief of the Pehdzeh Ki First Nation.  "My interest is to ensure that economic developments are properly handed," said Hardisty, who last served as chief in 1985.  He said some community members, during a special workshop at Willowlake River in late September, decided that the community's position on oil and gas development should be discussed at a special meeting. They also generated some other recommendations.   "At the chief and council level, we're going to be working with these recommendations ... we're going to use it as a guideline," Hardisty explained. "It means there will be (more) community workshops with outside consultants." 

10/20-21 (Weekend):  For Canadian Integrated Studies of the Mackenzie Delta, Click Here!     *     CBC, Yellowknife, N.W.T. - Federal buildings across the north are beginning to increase security since the September 11 attacks on the United States. In Yellowknife, employees and visitors entering the Bellanca Building were met by a security guard at the door on Monday morning.  The building houses the Department of Indian and Northern Affairs.  Employees in the building now have to show their identification cards to security each time they enter. Visitors are being asked to state their purpose in the building, sign in and then sign out when leaving.  

10/19: See FirstEnergy's outstanding analysis of the Mackenzie Valley Pipeline status, maps, gas ownership of participants, aboriginal interests and responsibilities and potential use of much of the production to support bitumen production (Please download the 10-19-01 analysis here; also you may refer to our 6-01 draft of the project MOU, left column under 'Quick Reference', and this Imperial Oil Limited summary, and this Gulf Canada, Ltd. report).        *     Northern News Services, by Derek Neary, Fort Simpson (Oct 19/01) - Chief Rita Cli said Friday that band members in Fort Simpson want her to sign the Aboriginal Pipeline Group's memorandum of understanding.  Close to 270 members of the Liidlii Kue First Nation signed in favour of the MOU in a poll taken last week. That's a significant majority, as there are fewer than 400 names on the LKFN's voters list, according to Cli. ...  "You have to look at the global picture," Cli said. "We missed the boat once (with the Norman Wells pipeline), do we want to miss it a second time? One-third ownership is better than nothing ... to me it's an investment for the future generation."  Band member Dennis Nelner, who conducted the poll along with Keyna Norwegian, Ron Hardisty and Betty Hardisty, agreed that waiting too long is risky.  "History has an ugly way of repeating itself," he said referring to the Norman Wells pipeline. "What people want is employment, training, the opportunities, and benefits ... people want those things and you can't get that without development.  "It's not me talking. It's not Chris Reid or the grand chief talking, it's the community .... If (the LKFN) wants a mandate for signing the MOU, there's your biggest mandate right there."  ...  Fort Liard endorsed the Aboriginal Pipeline Group's memorandum of understanding (MOU) two weeks ago. Now Fort Simpson is about to do the same. However, Deh Cho First Nations Grand Chief Michael Nadli said he is confident Deh Cho communities won't sign the pipeline agreement one by one.  ... He said he has not wavered from the resolution passed at the Wrigley special assembly last month. That resolution states that the Deh Cho will negotiate the terms of a pipeline directly with the federal government. On the other hand, if a majority of 10 Deh Cho communities do sign the MOU, then, Nadli said, he would be forced to reconsider his position. However, support for a Mackenzie Valley pipeline isn't limited to the APG's proposal, he said. "There's a lot of companies coming up the ranks," he said. "So there's going to be many choices ... it would be very premature (to sign the MOU)."      *     TAPS renewal process: The final scoping meeting was held in Barrow Friday, October 12.  A public report summarizing the results of scoping will be available for the public in mid-November.  DATES: The BLM will accept written comments on the EIS scope postmarked by October 19, 2001; and electronic, faxed, and voice comments received by October 19, 2001. Written comments may also be hand-delivered to the Joint Pipeline Office in Anchorage, Alaska, by 4 p.m. on October 19, 2001.  Comments may also be provided by E-Mail: tapseis@anl.gov.      

10-18: Financial Times-El Paso, the third-largest natural gas producer in the US, announced on Thursday a deal worth more than $1bn that will allow it to transport liquefied natural gas (LNG) from the Snoehvit natural gas field in the Barents Sea to the US market....     *     MACKENZIE VALLEY PIPELINE PROGRESS....  CBC, Yellowknife, N.W.T. - People in the Deh Cho are being told it's not too late to join a proposal making the N.W.T.'s aboriginal people one-third partners in an northern pipeline. That was the message to the Deh Cho from the aboriginal pipeline group and the Mackenzie Delta gas producers on Monday....  The pipeline-ownership deal has been endorsed by leaders who represent about 75 per cent of the territories' aboriginal population, according to K.C. Williams. Williams is the head of Imperial Oil Resources, the largest of the four gas producers with reserves in the Mackenzie Delta.  "We are committed to working with all people of the north whether or not they've committed to the business partnership outlined in the M.O.U.," he says.   Nellie Cournoyea, the head of the Aboriginal Pipeline Group, says she has explained the benefits to the region, and the rest is up to the Deh Cho.  "I have confidence that once they've worked out the relationship they can live with they'll be there and we'll be waiting for them," she says.   Deh Cho leaders have tried to put off the pipeline issue. In the summer they decided self-government and land control talks had to be settled first.  However, the issue keeps coming back, as Fort Liard signed the agreement, and Fort Simpson has announced it plans to.     *     Northern News Services, by Jorge Barrera, Yellowknife - Celebrations were dampened Tuesday as three people died in a plane crash while flying to Fort Liard from a pipeline agreement signing ceremony in Yellowknife.   Despite the tragedy, the message that Inuvialuit, Dene and Metis must embrace the pipeline if they want to prosper still rings strong after the elaborate ceremony Monday.  The ceremony cemented a relationship they hope will spawn a pipeline through the Mackenzie Valley.  "We can no longer make a living off the land," said Fred Carmichael, president of the Gwich'in Tribal Council, in a short speech during the ceremony held in the small Ndilo community gymnasium. "We have to ensure there is a future for our children," said Carmichael.  With Ndilo drummers opening the ceremony and elementary school children from Done Necha-Lia Gha Enitl'e Ko sitting in the front row, the Aboriginal Pipeline Group (APG) and four of North America's largest oil and gas companies signed an agreement to work together on the pipeline.   A good chunk of the territory's cabinet showed up for the ceremony, along with Premier Stephen Kakfwi from Ottawa via telephone.   The Mackenzie Valley pipeline would run gas from the Beaufort Delta, down the Mackenzie Valley to Alberta and southern markets.  Despite the pomp and circumstance, K.C. Williams, senior vice-president for Imperial Oil and spokesperson for the producer's group, played down the importance of the agreement.  "It is very important that this not be seen as a decision to build a pipeline," said Williams. "This agreement only outlines there are things we're willing to work together (on)."   But that wasn't the message repeatedly delivered during the ceremony from the various players and dignitaries.   "We believe a pipeline needs to be up and running as soon as possible," said Nellie Cournoyea, chair of the APG.   "(This) signals our capacity to work in the economy of the 21st century. Today our involvement is one step closer to ensuring the future of our children," said Carmichael.   "This is a historical occasion," said Joe Handley, finance minister for the territory. "This is the largest single project partly owned by aboriginals."  "The NWT has an incredible future and we are certain to make life better for ourselves," said Kakfwi.  Through the glowing words the Deh Cho region's continuing hold-out was not forgotten.  ... The Deh Cho's support base is slowly eroding with the recent defection of Fort Liard and a wavering Fort Simpson.   Both the APG and the oil and gas producers said they would leave room for the Deh Cho but wouldn't stop for them. ... Chris Reid, chief negotiator for the Deh Cho First Nations, said the recent agreement does not change anything for them. Reid said the leadership wants the pipeline to be included in their process and alternative partnerships are being explored. Arctic Resources Company is one option, said Reid.   The APG will now work with Imperial Oil, Conoco Canada Ltd., Shell Canada Ltd., and Exxon Mobile Canada to legalize the agreement.   Williams said the next step will cost around $200 million.  The APG will hold a one-third stake in the $3-billion project, Imperial and the three other producers the rest.  The APG is looking to Ottawa for help in funding their $1 billion share.  Recent reports quoted Department Indian Affairs and Northern Development Minister Robert Nault as saying money would not come from his department.     *     Northern News Services, by Jorge Barrera, Yellowknife (Oct 17/01) - The recent agreement signed Monday between an aboriginal pipeline group and four of the biggest oil and gas players on the continent triggered dissent from a corporation in the Sahtu.  On the day of the signing, Norman Wells-based Ernie McDonald Land Corporation fired off a blistering fax saying they did not support the agreement.  "(The corporation) does not support the agreement being signed," said the release.  The Aboriginal Pipeline Group signed an agreement to work with Exxon, Imperial Oil, Conoco and Shell in developing a pipeline.  "I don't think there's been much offered, it's just one-third ownership and they have to come up with a billion dollars and that has to paid back," said Larry Tourangeau, president of the corporation. ... "We want to raise the flag to say not everyone in the Sahtu is on board," said Tourangeau.  Tourangeau is peddling an alternative to the APG. He's promoting a 100 per cent aboriginal ownership deal with Arctic Resources Company (ARC).   Owned by Calgarian Harvie Andre and Texan Forrest Hoglund, they were the first at the 1990s Northern pipeline table with a proposal to take Canadian arctic gas to southern markets.   They propose to fund a pipeline through a method that would be completely debt financed.  The McDonald corporation pulled their name from the APG June 26.   The Fort Good Hope Metis Land Corporation has signed on to ARC.

10-17: REPORT:  The Access for In-State Gas Committee of the Alaska Highway Natural Gas Pipeline Policy Council met yesterday in Anchorage.   Committee Chairman Ken Thompson (Photo) opened the meeting saying that the "...objective is to review key goals of the committee and draft recommendations.  Our challenge on this committee," he said, "is to look at issues from an Alaskan viewpoint."  Speaking about the 'in-state' focus of the committee, he said it would be foolish "...for  any state or country to not use its own resources."  Member Carl Marrs reminded the committee of the importance of focusing on the development of a gas pipeline.  Chairman Thompson cautioned that a northern route would only benefit the North Slope.  The committee reviewed 16 pages of recommendations and conclusions proposed by the Chairman, made changes and agreed to meet again on 10-26 to finalize a package for review of the full council.   *     CBC, Yellowknife, N.W.T. - The Aboriginal Pipeline Group is now a partner in the proposed Mackenzie Valley pipeline. The Group signed a memorandum of understanding with Imperial Oil and the other gas producers in N'dilo Monday, giving the group a one-third interest in a pipeline when it's built.  The producers haven't decided to build, but they're going ahead with the next step in the project - getting an application ready for the regulatory process.  It's a step that's going to cost up to $200 million dollars over the next three to four years. Under the agreement, the Group is committed to finding up to $65 million to guide the project through the required engineering, legal and environmental work.  "We feel the government of Canada can give us some support in that area," says the Group's chair, Nellie Cournoyea (Photo).  "How it comes I don't know, maybe in the form of guarantees."  However, the Minister of Indian and Affairs says Ottawa has no plans to provide aboriginal people with loan guarantees so they can own part of the pipeline.  Cournoyea can't look to the producers either. The industry has said the pipeline group must come up with the money for the project on its own.   Cournoyea says she's confident she'll have the huge construction dollars in hand by the time a decision is made to build, three or four years from now.  (See 6-01 version, Mackenzie Valley Pipeline MOU Draft)       *       Kenai, Ak.--The legislature's Joint Committee on Gas Pipelines will meet November 7 & 8 at the Kenai Visitors and Cultural Center.     *     Financial Post, EDMONTON - A second group has emerged to try to build a northern gas pipeline with 100% aboriginal ownership.   North American Aboriginal Pipeline Corp., based in Fort Simpson, N.W.T., will try to assemble financing for a pipeline from Alaska's Prudhoe Bay to the Mackenzie Delta, then down the Mackenzie River into Alberta.     *     Financial Post, by Alan Toulin, OTTAWA - Ralph Goodale, Natural Resource Minister, yesterday criticized Alaska's governor for tying the building of the Alaska Gas Highway pipeline to the national security needs of the United States.  Alaska also wants financial and tax breaks to spur building the gas pipeline, but Mr. Goodale said the administration of President George Bush agrees with Canada that the pipeline project needs to stand on its own as a viable project.

10-16:  (Editorial Note:  In the complex world of Northern Gas Pipelines, rumors add both complexity and confusion.  We do our best here to clarify and maintain an accurate public record.  Every time we have asked a project proponent for clarification, we have received an immediate, clear response.  Last night, a well-intended reader Emailed us a rumor that, "...the Oil Companies cancelled all studies, engineering, etc. for the Overland routes...."  One might expect such conjecture when, in wake of Senate Energy and Natural Resources Committee hearings on 10/2, the leadership made no move toward providing expediting or incentive legislation for pipeline proponents.  However this morning, Alaska Gas Producers Pipeline Team spokesman, Curtis Thayer responds that the joint study is on track for year-end completion.  Another Team representative, Michael Hurley was attending an Alaska Highway Natural Gas Pipeline Policy Council meeting this morning and added, "We will continue feasibility work on the two routes with an unchanged goal: finishing our analysis by year-end."  -dh)     *       TODAY:  Mackenzie Delta Oil and Gas Development Strategies, Calgary: Invited presenters: Shawn Denstedt, Partner Bennett Jones; Bob Dawson, P.Geol. Exploration Analyst, Canadian Discovery Ltd.; Patrick Schmidt, Vice-President Business Development, Inuvialuit Development Corporation, (Inuvik, NWT); Barry Hochstein, Manager Training Division, Inuvialuit Environmental & Geotechnical Inc. (Calgary/Inuvik, NWT); Russell Newmark, Vice-President and Chief Operating Officer, E. Grueben’s Transport Ltd. (Tuktoyaktuk, NWT); The Honourable Stephen Kakfwi, Premier of the Northwest Territories; Cindy Kenny-Gilday, Member NRTEE and Co-Chair Aboriginal Communities and Non-Renewable Resource Development Task Force (Yellowknife, NWT); Joe O’Neill, Member NRTEE and Co-Chair Aboriginal Communities and Non-Renewable Resource Development Task Force (Ottawa); Daryl Johannesen, Manager - Oil and Gas, Golder Associates Ltd; Petr Komers, Ph.D., P.Biol., Manager Biophysical Services, Inuvialuit Environmental & Geotechnical Inc. (Calgary/Inuvik, NWT); Billy Archie, Traditional Knowledge Advisor, Billy Archie Contracting & Consulting (Aklavik, NWT); Cynthia Pyc, P.Biol., Environmental Specialist Mackenzie Delta Project Team, BP Canada Energy Company; Delona Butcher, Community Relations, Mackenzie Delta Project Team, Chevron Canada Resources; Gordon Wray, Chairman Northwest Territories Water Board (Yellowknife, NWT); Annette McRobert, Manager of Land Administration, Department of Indian Affairs and Northern Development (Yellowknife, NWT); Bonnie Gray, Professional Leader, Environment Professional Leadership Team, National Energy Board; Kristine Mason, Aquatic Biologist, Golder Associates Ltd.; Senator John Torgerson, Chair of the Resources Committee, Alaska State Senate (Soldotna/Juneau, AK); Robert Hunt, Senior Vice President, Akita Drilling Ltd.; Aboriginal Pipeline Group Representative; K. Joseph Spears, Partner, Spears and Company (Vancouver); Stewart Scalf, CA, CBV, Senior Vice President, KPMG Corporate Finance Inc.; Rhys Renouf, Vice President, KPMG Corporate Finance Inc.; George Hegmann, M.E.Des., P.Eng., Impact Assessment Specialist, AXYS Environmental Consulting Ltd.; Brad Gilmour, Partner, Bennett Jones     *       PLATTS-... Senate Majority Leader Tom Daschle Monday said Republicans would have to overcome a likely filibuster to open Alaska's Arctic National Wildlife Refuge to oil and gas drilling. An aide to Senator Frank Murkowski (Republicans-Alaska) said Monday that Republicans would like a consent agreement for a straight up or down vote on an ANWR amendment to an energy bill.  On Friday, Daschle told reporters that he is willing to give Republicans a vote on "the whole question of drilling" in ANWR...he also noted that last week, when he failed to get the necessary 60 votes to halt a filibuster on an amendment to airport security legislation, "we pulled the amendment."      *      Bloomberg Business News, NEW YORK -- The American Gas Association said Monday it will stop publishing a weekly report on natural gas inventories at year's end because of increased costs, depriving traders of a gauge of demand they have depended upon since 1993.      *            Northern News Services, by Richard Gleeson, Yellowknife - ... At a press conferences in Ottawa, Yellowknife and Whitehorse Thursday, representatives of six environmental groups outlined what they say needs to be done before a pipeline is built, including: concluding regional land use plans; identifying of a system of ecologically and culturally sensitive areas to be protected from development; increasing land, oil, water and gas fees and royalties and the north's share of them; using fees and royalties to explore alternative and renewable energy sources; making approval of projects aimed at exporting Northern oil and gas to the U.S. conditional on protection of the Arctic Wildlife refuge and the U.S. re-joining international negotiations on reducing greenhouse gas emissions; establishing a rigorous environmental assessment regime that looks at the development a pipeline would spawn and includes sufficient funding for participation of non-government agencies....Environmentalists attending the Yellowknife press conference emphasized they are not opposed to oil and gas development....   *     Northern News Services, by Derek Neary, Fort Simpson - Michael Nadli is confident Deh Cho communities won't sign the pipeline agreement one-by-one.  Fort Liard endorsed the Aboriginal Pipeline Group's memorandum of understanding (MOU) two weeks ago. Now Fort Simpson is on the verge of adding its support. However, the grand chief of the Deh Cho First Nations said the APG's momentum will likely stop there, with the possible exception of the Hay River Reserve.  "There's still some leaders out there who have strong principles, so that's the encouraging thing at this point," Nadli said Friday.  He noted that he has not wavered from the resolution passed at the Wrigley special assembly last month. That resolution states that the Deh Cho will negotiate the terms of a pipeline directly with the federal government.  On the other hand, if a majority of 10 Deh Cho communities do sign the MOU, then, Nadli acknowledged, he would be forced to re-think his position. ... APG secretary Wilf Blonde said the APG has ... supplied information to Deh Cho communities regarding the MOU, he said.  "It's our job to explain what the MOU is all about," he said. ...  Blonde argued that the DCFN's mandate is to negotiate a land claims agreement and whether a pipeline is included within the parameters that land claim agreement is questionable "We'd really like to have the backing of the Deh Cho First Nations, but it's up to the individual chiefs whether they feel this is part of DCFN's mandate or not," he said. "We have six other regions who would like to have a pipeline. I feel the (Deh Cho) communities are going to recognize that they want to." 

10-15: 11-1, Resource Development Council for Alaska, "Trans-Alaska Pipeline Re-Certification", David Wight, President, Alyeska Pipeline Service Company (Photo)    *     Northern News Services, by Derek Neary, Fort Simpson - A Deh Cho Economic Corporation could be a reality as soon as next week. After three days of discussions, the concept was endorsed by delegates at an economic development workshop in Fort Simpson last week.  The recommendation will go before Deh Cho First Nations leaders at an assembly in Fort Providence beginning Tuesday.  As proposed, the economic corporation, which would have representation from each community in the region, will negotiate potential business deals and identify partnerships and investments for the consideration of Deh Cho aboriginal leaders....     *     The State Ownership/Tax Policy Committee of the Governor's Alaska Highway Natural Gas Pipeline Policy Council ended its October 3 meeting with draft recommendations.  Please see our report here.  That report is extended with the following draft policy points the committee is considering for recommendation to the full Council.  (Photo: Ken Freeman-left, Governor Tony Knowles' aide supporting the Council and Ownership/Tax Committee Chairman, Bill Corbus.)  Please note the draft nature of these 'recommendations' and 'conclusions':

The Committee believes the pipeline is economically feasible for certain investors and should be undertaken with private financing. We recommend against direct state investment unless there is clear evidence of economic benefits to Alaska that cannot be achieved through other regulatory or political mechanisms.

Recommendation: The Committee encourages exploration of creative financial structures to facilitate all or part of a gas pipeline and/or in-state gas infrastructure, provided such entities finance their activities through private markets.

Recommendation: The Committee recognizes that state tax policy is one of several tools that could play a role in influencing pipeline development, but reserves a decision. It is premature to decide how to use this tool until there is more definition of a project and the nature of its ownership.

Conclusions: * When the Committee began its work early in 2001, there appeared to be certain problems that could be resolved by partial state ownership in a gas pipeline, and that it could be an important advantage for Alaska. However, through the process of gathering information and holding meetings, the Committee has determined that most if not all of these could be resolved through other means, other tools the state has at its disposal.  For example, access to and from a pipeline can be facilitated through the state Regulatory Commission of Alaska working with the Federal Energy
Regulatory Commission, and through stipulations in a state right-of-way lease across state lands. * The Committee believes a natural gas pipeline from Alaska would be  good investment, but there are other, equally good investment opportunities for public funds that entail less risk. The state has a policy of diversifying investment of its assets (the Permanent Fund is an example) to reduce risk.  * From information gathered during hearings, the Committee has concluded that, absent majority or total ownership of a natural gas pipeline, an ownership interest gives the state no right to capacity in the pipeline.  Capacity in a contract carrier pipeline is obtained through the nomination process during an "open season."  * The Committee is not persuaded that partial ownership of the pipeline raises any conflict of interests for the state (i.e. a state "ownership" interest vs. a state responsibility to regulate the pipeline) that cannot be resolved.  * Absent a compelling public interest for partial state ownership,
ownership of the pipeline is best left to private industry, and to firms which are experienced in oil and gas and the pipeline business.  * The Committee suggests that Alaskan-owned businesses, such as Alaska Native corporations, have the opportunity to invest in a natural gas pipeline project.  * Regarding alternative financing mechanisms, the Committee has been told by the producers' group that an investment in a gas pipeline might not meet the rate-of-return criteria for the producing companies. If so, alternative financing mechanisms, such as through a public authority, might facilitate others, such as pipeline transmission companies, becoming involved. A public authority may have advantages in terms of exemption from federal income tax, or jurisdiction by the Federal Energy Regulatory Commission. 
* Regarding tax policy, the producers are seeking simplification and clarity in natural gas tax and royalty administration.  * The Gas Policy Council itself has endorsed the Governor's proposals for
federal tax incentives, such as accelerated depreciation, an investment tax credit and a gas price volatility protection mechanism, a tax credit that becomes effective if prices fall below a certain point. The Committee reaffirms this endorsement.  * The Committee feels that if a viable proposal for a pipeline is put forward and the producers do not respond in a reasonable period of time, the state should use tools that it has available to facilitate the project moving forward.  * House Bill 383, enacted by the Legislature to facilitate construction of a liquefied natural gas project (and since lapsed) contained a mechanism for a "contract" between the state and a sponsor of a gas pipeline project
that would encourage stability in taxes on a gas project. While there are legal limits to the Legislature's ability to guarantee future tax policy, such a contract would carry an important moral commitment, and would be worthy of consideration for an Alaska Highway gas pipeline.

10-13/14 (Weekend): (KASILOF) - As part of the Legislature's continuing effort to build international support for a pipeline to bring Alaska's North Slope gas to markets, the chairman of the Joint Committee on Natural Gas Pipelines plans to travel to Canada next week to meet with government and business leaders on the issue.   "We are engaged in a long-term effort to overcome any obstacles to getting Alaska's gas resources to market," Sen. John Torgerson said today.  "As that effort continues, it is important to maintain and expand our working relationship with the Canadians who are our neighbors and potential partners in that effort."     *     CONGRESSIONAL QUARTERLY: DASCHLE OFFERS GOP DEAL ON ENERGY BILL CONSIDERATION: Senate Majority Leader Tom Daschle, S.D., today offered Republicans a deal on taking up an energy policy bill after work on appropriations and Sept. 11 response legislation is completed. He said he would allow an amendment to open Alaska's Arctic National Wildlife Refuge to drilling, provided Republicans agreed to pull the proposal if they do not get 60 votes to limit debate on it. Daschle did that for Republicans yesterday when the Senate voted 56-44, four votes short of the necessary number, against invoking cloture on a Democratic amendment to aid displaced airline workers. As a sweetener, Daschle suggested adding a provision to the energy bill that would expedite construction of a natural gas pipeline from Alaska, a key objective of Alaska's powerful all-GOP congressional delegation. But Republicans, lacking the 60 votes to overcome an ANWR filibuster, reacted coolly to the proposal. They said they needed more time to review it before they made any final determinations.     *     WASHINGTON -- Alaska Sen. Frank Murkowski, ranking member of the Senate Energy and Natural Resources Committee, released the following statement after comments made by Sen. Tom Daschle regarding a debate on energy.      "I see some progress in Senator Daschle's comments.  At least he is willing to take up this issue on the floor.  But why is the Democrat leadership so afraid to give ANWR a straight up or down vote?  Why do we we need 60 votes to pass this?  Senator Daschle is just using the rules to subvert the will of the majority of the Senate.      "The Senate is working only three days a week.  When Senator Daschle talks about dealing with energy when we get done with essential business, we could be dealing with this next week, if he wanted.      "ANWR is far from the most sensitive part of Alaska, as Senator Daschle claims.  It is not pristine -- there is a village there with an airport, with homes and businesses.  Advanced technology will ensure exploration won't disturb the environment.  The development footprint will only be 2,000 acres out of 19 million acres in the entire ANWR -- the size of South Carolina.  It won't take 10 years to get the oil flowing -- we built the Pentagon in 18 months in an emergency.  We can accomplish great engineering feats when our world is challenged.      "The Carnahan amendment that Senator Daschle referred to had nothing to do with the airline security bill.  An energy bill that contains the most important new source of oil, ANWR, is certainly something that should not be filibustered or treated in the same fashion as the Carnahan amendment, which was a health care amendment on the air security bill.      "An Alaskan natural gas pipeline isn't going to do anything to help reduce our dangerous dependence on foreign oil.  The owners of the Alaska gas have indicated it's not economic at this time.  There isn't even an application submitted to build this line.  Is Senator Daschle suggesting the federal government spend the $20 billion to build the pipeline?  Ultimately, these very separate issues must stand alone.  Senator Daschle needs to understand the difference between oil and gas.      "The President said yesterday that our energy security is a part of our national security.  He called on Congress to give him a comprehensive energy bill.  The House has done its job.  Senator Daschle should give us a date certain so that the Senate can do theirs.  If he wants to put a 60-vote requirement on an issue as important to national security as energy, each Senator is going to have to recognize his obligations to our national security as opposed to environmental extremists." said Murkowski.         *     The State of Alaska will not tolerate any threats to Alaska's energy facilities and will prosecute any such cases to the full extent of the law, Gov. Tony Knowles said yesterday. Knowles' comment came as a Fairbanks grand jury indicted Daniel Carson Lewis on three felony charges in connection with the October 4 shooting of the Trans-Alaska Pipeline that shut down the pipeline for 64 hours and spilled more than 285,600 gallons of oil.  "Anyone who threatens Alaska's pipelines and our energy resources will be aggressively prosecuted," Knowles said. "We will use every means to find and punish those who jeopardize the safety and well-being of Alaskans, our environment, and the oil facilities on which our jobs and economy depend.  We will protect our oil resources for the nation as well, and we will not let down our guard."  A Fairbanks grand jury yesterday handed down an indictment against Lewis on three felony charges that carry maximum penalties of 20 years in prison and fines of $150,000. The felony charges are for criminal mischief in the first degree; operating a motor vehicle while intoxicated, a felony due to prior convictions; and assault in the third degree. Lewis could also be made to pay restitution to the oil companies and to the state.  Additional state charges not needing grand jury approval will be made against Lewis for oil pollution, and weapons misconduct of the fourth degree, according to Assistant Attorney General Kevin Burke.  Convictions for both charges could add extra jail time of two years and an extra $10,000 in fines.   A joint criminal investigation of the incident is being conducted by the Alaska State Troopers, the  Alaska Department of Environmental Conservation Environmental Crimes Unit, and the Federal Bureau of Investigation. Additional federal charges maybe brought against Lewis.

10-12:  WHITEHORSE STAR-A talk in Whitehorse by Thomas Berger, postponed from last month after the Sept. 11 terrorist attacks on the U.S., has been rescheduled for Oct. 17.  The Maddison Chair in Northern Justice and Yukon College made the announcement today. Berger will discuss a northern pipeline.  Berger is a prominent lawyer, and former Justice of the Supreme Court of B.C. He has been involved in several landmark decisions in Canada, and conducted several inquires, including the Mackenzie Valley Pipeline inquiry of the mid/late 1970s. As a result of that inquiry, a moratorium was imposed on development until land claims were settled.     *      ANCHORAGE DAILY NEWS, by Tony Hopfinger-After 19 years of trying to build an 800-mile pipeline to move liquefied natural gas from the North Slope to Valdez, Yukon Pacific Corp. is downsizing its staff and cutting its charismatic chief executive.  Jeff Lowenfels (Photo right, left-right: Frank Peake, Vice President & General Manager, CSX Lines-Alaska, CSX Chairman/President/CEO John Snow, Former Governor Walter J. Hickel, and Jeff Lowenfels), Yukon Pacific Corporation President said he will leave his post today and become a part-time consultant for the Anchorage company as Yukon Pacific's work force shrinks from about a dozen positions to just a couple. ... Yukon Pacific, owned by Virginia-based transportation giant CSX Corp., has done nearly everything it can to make the multibillion-dollar project happen, he said. It secured most of the permits needed to build the pipeline, and it has received preliminary orders from some Asian gas buyers. ... Now the little company that got its start in 1982 under former Govs. Wally Hickel and Bill Egan faces a fuzzy future. It plans to relocate its downtown offices to Midtown and keep on only a few part-time engineers. Other employees are being retained as consultants.  ... "If the company is for sale, somebody could buy the permits and put the project together," said Scott Heyworth (Photo, 7-30-01), an advocate for the LNG project.  But some analysts said the idea is too risky, even if a gas company were in charge. Low gas prices and limited markets in Asia don't support the huge upfront costs -- estimated at $8 billion to $10 billion -- that would come with an 800-mile pipeline and chilling plant to convert the gas to liquid.  "It has become incredibly obvious that there are lots of places that could get lots of gas to market at lower prices," said Roger Marks, a state petroleum economist. ... As for what's next, friends have suggested Lowenfels run for public office. He said he's keeping all options open.     *       CBC, commenting on the TAPS shooting-A man who police say was drunk is charged with felony assault and criminal mischief. Now crews have to focus on cleaning up a little more than a hectare of ground contaminated by the spill.   (Note: Please see our earlier editorial.)    *      WASHINGTON -- Alaska Sen. Frank Murkowski today expressed optimism that the Senate will pass a strong energy bill allowing for exploration in ANWR after President Bush urged the Senate to act on such legislation.      President Bush, following an afternoon Cabinet meeting yesterday, said energy legislation is vital to homeland security and he urged the Senate's leadership "to get an energy bill moving."      "We discussed our legislative priorities before the Congress goes home. One of those, of course, is an economic stimulus package that must include tax relief that has got a positive effect on the economy in the short run.      But there are two other aspects to a good, strong economic stimulus package, one of which is trade promotion authority. And the other is an energy bill. Now, there was a good energy bill passed out of the House of Representatives. And the reason it passed is because members of both parties understand an energy bill is not only good for jobs, it's important for our national security to have a good energy policy.      And I urge the Senate to listen to the will of the senators and move a bill -- move a bill that will help Americans find work and also make it easier for all of us...  to protect the security of the country. The less dependent we are on foreign sources of crude oil, the more secure we are at home.      We've spent a lot of time talking about homeland security. An integral piece of homeland security is energy independence. And I ask the Senate to respond to the call to get an energy bill moving," said President Bush.      "The President's comments will have a very strong impact in the U.S. Senate in light of the events of Sept. 11. I'm optimistic that we are gaining strong ground in this battle," said Murkowski.     *       WASHINGTON -- Late yesterday, Alaska Sen. Frank Murkowski urged Governor Tony Knowles to work with Democrats in the Senate to convince them the nation needs comprehensive energy legislation now.       "I certainly welcome the Governor's expressions of concern over the Democratic Senate Leadership's action suspending Energy Committee work on an energy bill," Murkowski said (Note: see our story and notes yesterday, below).  "The Committee Chairman suspended the Committee process because I had the votes from both Republicans and Democrats in the Committee to open ANWR.  And the reason I had those votes is because of the superb work that Alaska labor leaders, especially Jerry Hood and Mano Frey, and Alaska Native leaders have done to personally convince Members of Congress of the vital importance of opening ANWR.     One of the effects of Majority Leader Tom Daschle's decision to suspend the rules and bypass the committee process is to make what is a matter of national security a partisan issue.  In these circumstances, especially since the legislature is not in session, it would be very helpful if Governor Knowles would join Alaska labor and Native leaders here in Washington to personally press our case for opening ANWR with his party leadership," Murkowski suggested.     "I certainly welcome this or any effort by the Governor to become more fully involved in this effort which is so important to Alaska and the nation.  I hope the Governor can help convince his party's leadership in the Senate to put aside partisanship and bring this issue to the Senate floor this year," Murkowski said.                                          

10-11:  In this WHITEHORSE STAR article by Jason Small, Yukon's Premier and elected leaders begin to question timing of gas pipeline.

MORE SPOTLIGHTS ON WASHINGTON THIS WEEK:  JUNEAU-  Late yesterday Governor Tony Knowles (Photo-right, 9-10, Anchorage) said America's energy and job needs can't be ignored and expressed concern over the decision by the chairman of the Senate Energy Committee to suspend mark up of national energy legislation. The action bypasses the normal committee process where a vote was pending on responsible development of oil within the coastal plain of the Arctic National Wildlife Refuge (ANWR) and national interest legislation to tap Alaska's vast resources of natural gas.  "The time to address America's needs for energy, resources, and economic development is now and I urge the chairman and majority leader to reconsider this decision and allow a vote on this critical matter," Knowles said.  "I have and will continue to strongly support responsible development of ANWR's coastal plain and the development of the Alaska Highway natural gas pipeline project as ways to meet our nation's energy needs, create jobs, and strengthen our economy.  "Suspending the rules and bypassing the committee process denies full and fair debate on these essential needs for our nation and Alaska," Knowles said.  "I will continue to work with our delegation and other congressional leaders to push for final action on these important energy issues.  Just as Congressman Don Young was able to muster bipartisan support for energy legislation in the House, I hope Sen. Frank Murkowski is successful in using his influence as ranking member to address legislation that opens ANWR and mandates a southern route for the natural gas pipeline."  (Note: While Murkowski's influence is somewhat affected by reorganization of the Senate, one does not want to underestimate the importance of the Governor's influence with Senate democrat leaders.  -dh)

(Note:  The Producers have said that Federal enabling legislation to facilitate regulatory efficiency is a "must have" for a project to move forward.  Producer representative, David F. MacDowell told Northern Gas Pipelines late yesterday that, "We are very interested in continuing our discussions toward this end, and are certainly willing to be part of any process to get there.  Modern day enabling legislation that creates regulatory efficiency and that is available to all parties will help reduce project risk, and will provide the best possible opportunity for success.  A successful project is one that actually gets built.  And a project that gets built would be good for Alaska, Canada, American consumers, and the North Slope gas producers!"   ...   The Senate's leadership suspended Energy Committee action to 'avoid quarrelsome, divisive votes in committee {i.e. Jeff Bingaman}'.  But the gas pipeline dialogue during the recent hearing {see testimony in left column and our 10-2-01 story} did not reveal strong desires to move that legislation expeditiously.  -dh)
 

WASHINGTON -- Alaska Sen. Frank Murkowski yesterday called on Senate Majority Leader Tom Daschle (Photo) to reconsider his decision to suspend committee action on energy legislation.  Murkowski told reporters on Capitol Hill today he is disappointed and troubled by the Majority Leader's action.      ...   "Chairman Bingaman has announced that Sen. Daschle and a select group of Senate Democrats will write an energy bill and bring it directly to the Senate floor.  This is an affront to the committee process.  There will be no mark-up in the Energy Committee and there will be no open, public debate on a national energy policy," Murkowski said.  "How can there be balance in the bill without any input from rank-and-file Democrats, let alone from the Minority?      "Our nation's strength lies in our ability to openly debate issues.  ... "The House, recognizing that energy security is integral to national security, has done its job by passing comprehensive energy legislation," Murkowski said.  "I urge the Democratic Leader to reconsider this decision and give us a time certain for a floor debate.  The people's business should be conducted in an open, honest, and forthright manner."   (See this morning's Anchorage Daily News story by Liz Ruskin.)

 According to Senator Jeff Bingaman, "It has became increasingly clear to the Majority Leader and to me that much of what we are doing in our committee is starting to encroach on the jurisdictions of many other  committees.  Additionally, with the few weeks remaining in this session, it is now obvious to all how difficult it is going to be for these various committees to finish their work on energy-related provisions.  "Finally, and perhaps most importantly," Bingaman said, "the Senate's leadership sincerely wants to avoid quarrelsome, divisive votes in committee.  At a time when Americans all over  the world are pulling together with a sense of oneness and purpose, Congress has an obligation  at the moment to avoid those contentious issues that divide, rather than unite, us."  Bingaman's office says he will "...continue to consult and build consensus with members of his committee, with other committee chairs and with other Senators as he finalizes a proposal to present to the Majority Leader."
 

10-9:  Northern News Services, by Thorunn Howatt, Fort Liard- Elder Stanley Bertrand was flown out of Fisherman's Lake when Acho Dene Koe band council members in Fort Liard decided it was time to sign an agreement dealing with pipeline ownership and land access. ... The memorandum of understanding, drafted last June, is an agreement between the regions involved with the Aboriginal Pipeline Group and the Mackenzie Delta Producers Group. The band council wanted Bertrand's signature on a resolution supporting the memorandum.  ... Chief Judy Kotchea said if the band is going to have a stake in the pipeline then it must move forward. "We want our people, especially our young people to have long-term benefits...."      *       CBC, Yellowknife, N.W.T. - The Grand Chief of the Deh Cho First Nations says he's not surprised the Acho Dene Koe have signed on to the Aboriginal Pipeline Group's Memorandum of Understanding.  ...  But Mike Nadli says he wishes the band had kept him informed of its plans.  ... Chief Negotiator for the Deh Cho, Chris Reid, says the move will not have any impact on their plans to negotiate the terms and conditions for a pipeline through their self-government and land management negotiations. He says he's also not surprised at the Fort Liard decision. Reid says the community's honorary chief, Harry Deneron, still has a lot of influence in Fort Liard.    *     Houston, Texas and Calgary, Alberta, Oct. 9, 2001 - Burlington Resources Inc. (NYSE: BR) and Canadian Hunter Exploration Ltd. (TSE: HTR) today announced that they have entered into an agreement pursuant to which Burlington will make an offer to holders of the outstanding shares of Canadian Hunter to acquire all such shares for cash....

10-8:  EDMONTON, CBC  -  Premier Ralph Klein will bring assurances to New York that Alberta can continue to supply that city with natural gas this winter.      *     Henry Hub natural gas: 10-7, $2.09; year ago, $5.19.     *     The Bureau of Land Management Joint Pipeline Office confirms that the trans-Alaska Pipeline system Renewal Environmental Impact Statement public scoping comment period is extended to October 19, 2001.  (Please see right column for schedule)      *     Rep. John Harris commentary: ...the Trans-Alaska Gas System (TAGS) project to Valdez still lives.

10-6/7: (Weekend): Seattle Times, by Hal Bernton, TACOMA — In an era of corporate downsizing and dot-com busts, Alaska Seattle Times-Gov. Tony Knowles came to Washington yesterday to talk about an economic boom — the kind fueled by a proposed 3,500-mile pipeline bringing North Slope natural gas to the Lower 48.  (See our story below, 10-4)     *     Anchorage Daily News, AP, Fairbanks -- Several companies may drop their multibillion-dollar claim to earnings from a proposed natural gas pipeline to the Lower 48, an action that could remove a question mark hanging over the cost of the line's southern route, a pipeline executive said this week. (See our Senate Energy Committee report, 10-3, below)

10-5:  Governor’s Alaska Highway Natural Gas Pipeline Policy Council.   The conclusion of this Council’s mission approaches with a final report due to Governor Tony Knowles on November 30.  In preparation for that deadline, several meetings are occurring:  The State Ownership/Tax Committee met Wednesday (10-3-01) in Anchorage (Report below); The Access for In-State Gas Use and Future Opportunities committee meets at 9:30 a.m., Suite 1730, Atwood Building in Anchorage on October 16.  The next full Council meeting will meet October 31, time and location to be announced.     *        ANCHORAGE DAILY NEWS-Bullet hits Trans-Alaska Oil Pipeline...criminal mischief, not terrorism...man arrested.     *     Northern News Services, by Thorunn Howatt, Yellowknife - Members of the Aboriginal Pipeline Group (APG) postponed a trip to Ottawa this week. ... Group chair Nellie Cournoyea said preparations for the meeting have not been completed. ... The Aboriginal Pipeline Group, along with commercial oil companies ..., hope to build a pipeline to carry natural gas from the Mackenzie Delta southward.  The commercial producers have already committed their portion of the financing for the project but the aboriginal group is hoping to find financial backing from the federal government.

Northern Gas Pipelines Report: The State Ownership/Tax Committee Meeting, 10-03-01 

At 9:20 a.m. Chairman Bill Corbus (Photo, left) called the meeting to order, introducing Rigdon Boykin of O’Melveny & Myers by teleconference from New York and Department of Revenue representatives Larry Persily (Right photo, left) and Roger Marks (Right photo, right, with journalist Tim Bradner, center).  Their appearance was followed by those of Bonnie Robson from the Division of Oil and Gas, Representative Eric Croft, with public testimony provided by Harold Heinze and Jerry McCutcheon.  Chairman Corbus asked Boykin why his client, the Alaska Gasline Port Authority, required no equity when AIDEA representatives have told the committee that state revenue bonds would require equity in the form of cash or a pledge of royalty income or severance taxes.  Boykin said that if the state issued the bonds investors would require equity but that almost all independent ‘authorities’ finance 100% of the debt with security for the bonds being the revenues pledged.  He gave the example of $9 billion in bonds issued by the Long Island Power Authority.   He said bondholders’ principal concern is whether the debt service coverage ratio is sufficient.  In the Alaska authority’s case, he said, “…we have an average of a 3.0 debt service coverage.  That is far in excess of what would normally be required.”  His advisors have said the project needs only a 1.7 coverage ratio to be successful in the market.  Member Ron Duncan (Photo below, right, with Roderick) was interested in assumptions (terms and conditions) made for obtaining the project's gas supply.  Boykin said the project assumed payment to producers of $.75/MCF and that they would have to deliver at that price or pay the cost of damage for failure to deliver.  Duncan inquired about volume assumptions.  Boykin said the project would require gross volumes of 8.7 BCF/D of which 2 BCF/D would be returned to the producers; the project would pay only for the gas actually taken.  Duncan asked if Boykin thought the producers would sell the gas for $.75.  Boykin said, “I don’t think the producers want a pipeline built right now, period.”  He said that until an offer is made, producers can conclude a market doesn’t exist and no pipeline should be built.  “At the point someone makes an offer the refusal to sell could be examined…because all of a sudden a market has been established.”  He said that when actual offers to purchase gas are made the pressure to sell will increase.  Duncan probed further on volume issues, first determining that present proven ANS gas reserves are in the 35 TCF range.  “You need 9 MCF/D for 30 years?” he asked Boykin, who said he did.  Member Frank Brown concluded that this daily volume of gas would require reserves on the order of 90 TCF.  Duncan observed that this volume condition for the Authority project represented 3 times the proven reserves of the North Slope.  Corbus asked Boykin if he saw any reason the state couldn’t form an ‘authority’.  Boykin said he had two concerns about that.  Investors would want a slice of the permanent fund as security, and redoing all the work his authority team has completed could cause loss of time and the window of opportunity.  Member Jack Roderick (Photo above, left) asked about the Authority’s assertion that it did not fall under requirements of the Natural Gas Act.  Boykin said the Act specifically excluded entities such as authorities but this one would still be subject to export permits.  In answer to another of Roderick’s questions, Boykin said the tax-exempt nature of the project could provide project savings of about $900 million/year.  Persily observed that authority-type financing had not experienced a project so massive as a pipeline from Alaska to the lower 48.  He asked Boykin about the price the project needed to deliver gas to the Lower 48.  Boykin said the number was around $3.10, which produces the 1.7 debt service coverage ratio (LNG to Asia improves the ratio).  Persily said that at this point in the department’s research, there was skepticism the authority project could be financed.  He pointed to difficulty with long term contracts: unlikely for the Lower 48 market and of diminished importance in Asian markets.  He said the economy and market dynamics have changed dramatically since last year and that the “…window of opportunity is closing as we speak.”  Marks said that Cambridge Energy Associates believes the LNG market is not robust, that long-term contracts for such large volumes were not likely.  He found it unlikely that investors would support a project of which 55 TCF of the assumed throughput was not proven.  “We would be skeptical you could obtain financing for that amount of undiscovered reserves,” he said.  Duncan said the Port Authority should be complimented for developing a creative approach to deal with multiple markets.  He asked Boykin what action the state could take to facilitate his project.  Boykin replied that the “biggest problem” is that the producers don’t want to move forward.   He said the project needed companies like Duke and Enron to “…put 75 cents on the table,” and for the state to support that offer.  The state can take three steps, Boykin said: tell the producers to sell the gas if they have offers in the $.75 range; support an expedited permitting process; and, support a port authority process.  Member Ken Thompson pointed out that the Energy Information Agency is still forecasting long-term prices for natural gas in the $3 range.  He said no major forecasts are made on current prices and that 2008 is in the long-term forecasting target period.  He said the recession, low interest rates and massive layoffs with an attendant manpower surplus creates, “…a major opportunity to build new pipelines.”  He added that the authority concept might be viable for related infrastructure and could be considered for a $2 billion line segment to a hub trading facility in Interior Alaska and Boykin agreed.  Robson (Photo, with Bill Walker-Boykin's colleague) said that if the state had controlling interest in a pipeline owners have a right to implement contract carriage.  “If the state had less than controlling interest,” she said, “it wouldn’t have a right to capacity and access to the line.”   Roderick asked about the state nominating capacity for its 1/8 royalty interest.  Robson said that, “If the state leaves its gas in-value, there is no need to nominate capacity.”   If it takes its gas in kind, she said, it would probably be sold on the North Slope and the shipper would have the responsibility for obtaining pipeline access and capacity.  She added that if the state took gas in-kind for sale at another location, it would assume the responsibility of nominating capacity.  Member Rhonda Boyles asked about the length of open seasons.  Robson said there typically is a 30-45 day period for interested parties to come forward and provide assurance that they will pay for capacity and sign ship or pay agreements.  For smaller volumes to Fairbanks, she said (up to 50 MCF/D), producers could basically “squeeze it in” without requiring nominated capacity.  Answering another question, Robson told Boyles that it would be possible to have multiple open seasons by several pipeline entities.  Boyles then asked if economic models representing the various scenarios were available.  Marks confirmed that models would be provided but that these didn’t apply to a port authority concept.  He added that staff believes there is no Asian market for the gas since demand in those countries is already under contract.  He said that much of the world gas supply available for LNG is at or near tidewater without having to pay the penalty of an 800 or 400 mile pipeline.   Persily responded to Duncan’s question about state ownership of an authority by saying he believed a change in federal law would be needed to achieve the tax exempt status envisioned by authority proponents.  He said the tax exempt portions of the line would be those serving the public.  As examples, he said that if 3% of the gas were used in the state, perhaps 3% of the line could be tax exempt; if the LNG port were available for public use, it could be tax exempt.  Duncan asked about the stability of state tax policy.  Persily said that the legislature could change laws in any given year, a problem, Robson said, which could concern pipeline owners.  Marks told the committee Alaska has a regressive fiscal system.  He said the legislature could share risk by modifying the tax structure so that the state would take less of the pie when revenue was high and more of the pie from a more profitable project.  Representative Croft gave an eloquent argument for state ownership.  Basis of his position is that ownership resolves rather than creates conflicts of interest and litigation.  If the state’s gas interest were in the 25% range (i.e. royalties plus severance tax), the state could own 25% of the gas pipeline.  Then, when a decision favored the pipeline at the expense of wellhead price, the state would benefit in the proper proportion.  In public testimony, Harold Heinze emphasized to the Committee the important role of the state as an owner of the rights of way.  Under Title 38, he said access can be granted with a number of conditions that provide benefits to the citizens and protections to the state.  Jerry McCutcheon, a long-time industry observer, discouraged consideration of any gas pipeline saying that the ‘highest and best use of the gas is what it is doing now,’ referring to its use in repressurizing the reservoir and with tertiary recovery techniques, enhancing oil production. 

By mid-afternoon, Chairman Corbus told his committee it, “…was time to make a couple of decisions.”  He reviewed the charge of the committee to make recommendations to the governor regarding state ownership of a gas pipeline and tax policies related to the project.  Following are the draft recommendations approved by the committee (PLEASE NOTE THAT SUPPORTING ARGUMENTS WILL BE INCLUDED WITH THE THREE RECOMMENDATIONS WHEN THEY BECOME AVAILABLE):  1. The Committee believes the pipeline is economically feasible for certain investors and should be undertaken with private financing. We recommend against direct state investment unless there is clear evidence of economic benefits to Alaska that cannot be achieved through other regulatory or political mechanisms.     2. The Committee encourages exploration of creative financial structures to facilitate all or part of a gas pipeline and/or in-state gas infrastructure, provided such entities finance their activities through private markets.     3. The Committee recognizes that state tax policy is one of several tools that could play a role in influencing pipeline development, but reserves a decision. It is premature to decide how to use this tool until there is more definition of a project and the nature of its ownership. (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record.  -dh...Draft Revision: 10-05-01)  

10-4:  TACOMA, Wash. - In a speech at the 75th annual Propeller Club Convention and Merchant Marine Conference at the Tacoma Sheraton, Governor Tony Knowles (Photo-right, 9-10, Anchorage) said the economies and environment of Alaska and the Pacific Northwest are closely linked and mutually benefit each other. "Today, I call for a stronger alliance between states and industries to meet our nation's energy needs, to keep our economy prosperous, and to protect our environment," said Knowles, a Democrat nearing the final year of his two terms as Alaska's governor. "Alaska is stepping forward as America's energy storehouse to do exactly that on two fronts: oil and natural gas development. "Today, America's best prospect for a major new oil and gas discovery is in the Arctic National Wildlife Refuge, an area in Alaska's far northeast corner that is about the same size as South Carolina," Knowles said. "Just a small portion of this refuge along the coastal plain is believed to contain up to 16 billion barrels of oil. That's enough to produce 2 million barrels a day for more than 20 years, about a quarter of the current daily domestic production. Environmentally responsible development in the Arctic Refuge would be good for America - producing thousands of jobs, improving our energy security, reducing prices at the pump, improving our nation's trade deficit, and a host of other reasons."  Knowles said national energy legislation that's already passed the U.S. House would limit the oil development "footprint" in the Arctic Refuge to just 2,000 acres. Industry can meet that challenge by using amazing technology, including directional drilling that can reach oil five miles away and 20,000 feet deep, he said.  Knowles also called on the maritime group to support an Alaska Highway natural gas pipeline, which could carry a projected 100 trillion cubic feet of Alaska natural gas to the energy-thirsty Lower 48 to meet the growing demand for electrical generation, industry, transportation, and consumer use.  "Over its 45-year life, this pipeline, the largest privately funded construction project in American history, would create about 160,000 jobs across every industry sector imaginable and virtually every state and grow our country's Gross Domestic Product by $300 billion," Knowles said. He noted that development in Alaska has long benefited the Pacific Northwest region. For example, Alaska ranks third among the Port of Tacoma's top trading partners, accounting for $3.5 billion worth of two-way trade. A study jointly sponsored by the Tacoma and Seattle Chambers of Commerce found that business between Alaska and the region generated nearly $3 billion in earnings and accounts for 90,000 Puget Sound area jobs. …about half of Alaska's North Slope crude oil goes to Puget Sound refineries. At $20 a barrel and up to 500,000 barrels a day, that accounts for about $3.5 billion worth of oil a year being processed in Washington. Knowles said all development projects in Alaska are subject to a tough environmental standard he calls "doing development right," which means use of sound science and technology, enlightened stewardship, and an open public process. "Using that standard, Alaska has supplied up to a quarter of America's domestic oil production from the nation's two largest oil fields," Knowles said. "At the same time, we're protecting the nation's most pristine environment inhabited by more caribou, grizzly bears, bald eagles, and mosquitoes than the rest of the country combined."  Knowles was awarded the maritime group's first "Propeller Club Maritime Governor of the Year" award for his efforts to expand business opportunities.    *       While the Senate Energy and Natural Resources Committee took testimony of key Alaska natural gas stakeholders Tuesday in Washington the Ziff Energy Conference in Portland focused on energy needs of the Pacific Northwest. Alaska State Department of Revenue economist, Roger Marks (Photo, 7-01) presented background on the Alaska situation, the inherent economics of North Slope gas, and the institutional tensions surrounding the project, particularly the route, and the issue of the current applicability and exclusivity of ANGTS. The conclusion was that nothing has been determined and the outcome will be subject to very dynamic forces.  Please feel free to review his entire presentation here.

10-3:  The Governor’s Alaska Highway Gas Pipeline Policy Council, State Ownership/Tax Committee will meet again TODAY, 9 a.m., Sheraton Anchorage Hotel.  Agenda includes a brief overview of meeting's purpose, Bill Corbus, Chair; Alaska Gas Pipeline Authority equity issues:  Rigdon Boykin, O’Melveny & Myers and Department of Revenue; Pipeline access rights under Contract Carrier vs. Equity Ownership – Bonnie Robson, Division of Oil and Gas; Potential State of Alaska financial commitment for access to Pipeline as a Contract Carrier: Department of Natural Resources & Department of Revenue; Presentation on State Ownership – Representative Eric Croft; public testimony and Committee deliberations/recommendations. (Report to follow. -dh)   Houston Chronicle, Reuters- … But economic obstacles, tumbling gas prices and a squabble over routing still stand in the way of a gas pipeline that would run anywhere from 1,800 to 2,100 miles from Prudhoe Bay to Alberta where it would tie into existing lines. National Post, by Peter Foster--The federal government should have a clear two-word message for Tony Knowles, the Governor of Alaska, when he comes to Ottawa next week to discuss Arctic gas pipeline development: "Back off."

YESTERDAY, THE U.S. SENATE ENERGY AND NATURAL RESOURCES COMMITTEE MET IN WASHINGTON TO HEAR TESTIMONY ON PROPOSED PRODUCER SUGGESTED LEGISLATION AND RELATED ARCTIC GAS TRANSPORTATION ISSUES.  Please find the individual testimony here; we are also making it available for your future ‘Quick Reference’ in the left margin column.  Please see our later, 10-15-01 editorial here.  What follows here are notes on summary presentations and statements made during the questioning periods.  Journalists wishing to use this or other stories, please follow 'Journalists' link above the flags.  (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record.  -dh...Draft Revision: 10-03-01)  

Alaska Gov. Tony Knowles (Photo-right, 9-10, Anchorage) sought congressional support for the pipeline project and more on his presentation was offered in yesterday’s news (Review Knowles’ ’10-Point Plan’, left column).  Frank H. Murkowski, Alaska, Ranking Member (Photo-left, 8-01, Anchorage), was interested in the Governor’s views on producer requests for fiscal certainty.  Knowles acknowledged Alaska had developed an ‘oil tax regime’ and that modifications were being considered.  Mary L. Landrieu, Louisiana suggested that while an Alaska gas pipeline was important before September 11, it is now critical to U.S. efforts toward greater energy self reliance.  Evan Bayh, Indiana recalled his father voting on the Alaska Natural Gas Transportation Act of 1976 (ANGTA) and observed that the gas price spikes last winter, “…remind us it is a project whose time has come.”  Ben Nighthorse Campbell, Colorado spoke of the different routes proposed and wondered how Knowles’ preferred highway route compared to alternative routes from cost and security viewpoints.  Knowles responded that the $2 billion difference between the northern and southern routes was unproven, that producer studies are still underway, rendering current cost estimates inexact.  He said a highway routing was more secure than an LNG system involving tanker transport to distant ports.  Murkowski emphasized that no party should perceive incentives discussed during the hearing as subsidies.  Dianne Feinstein, California further questioned Knowles about the $2 billion cost difference after a pleasant exchange about the superior quality and taste of Alaska wild salmon.  Knowles said the difference was yet to be established, that an important routing consideration was the view of North Slope residents seeking to protect marine mammals.  Feinstein wondered who would pay the difference in cost.  Knowles opined it would be the consumers; adding that ANGTA needs no legislative action though some provisions need updating.  Larry E. Craig, Idaho suggested that transporting Alaska gas was not an issue of ‘if’, but ‘how’ and ‘when’.  He wondered what Alaska was prepared to do to help with incentives, cost and certainty issues.  Knowles responded that long-term projections of gas price would support a project, that the Federal and state governments should undertake supportive action.   State Sen. John Torgerson (Photo), R-Soldotna, head of the Alaska Legislative Joint Committee on Natural Gas Pipelines, expressed the state's strong opposition to a northern pipeline route -- a route under the Beaufort Sea and down the Mackenzie River Valley.  He then discussed the dozen proposals his Committee was presenting for consideration (Review Joint Committee proposals, left column.)  Patrick Wood, chairman of the Federal Energy Regulatory Commission, said that obtaining access to Alaska natural gas was not a question of 'if' but 'when'.  He said that insofar as ANGTA is a quarter century old it would be helpful if Congress provided the FERC with flexibility to prevent litigation.  He said a second option would be for sponsoring parties to file an application under the Natural Gas Act and that such an application could move forward with an application under ANGTA.  He said one of FERC’s concerns with proposed producer legislation is that all relevant filings must be in hand before the deadline process could begin, an observation supported later in the day by the Phillips Alaska representative.  Drue Pearce (Photo, 9-27, Anchorage), Alaska affairs advisor in the Department of the Interior spoke of Interior’s priorities of developing the National Petroleum Reserve, ANWR and the gas pipeline and underlined the Department’s on and off shore expertise in regulating such projects.  Robert Kripowicz, acting assistant secretary for fossil energy in the Department of Energy said that by 2020 the nation would need an annual gas supply of 35 TCF, a 52% increase over current demand.  He said the Administration remains route-neutral and believes the marketplace should make that determination.  Jeff Bingaman, New Mexico, Chairman (Photo, below) asked Torgerson why, if he felt his Committee needed more producer information before recommending legislative action, that the U.S. Senate shouldn’t take the same position.  Torgerson did not challenge the assertion.  Bingaman asked Kripowicz about his route neutral position.  Kripowicz said that without an application being filed it is difficult to recommend legislation.  He hoped companion legislation would not be held up but declined an official legislative recommendation absent an application being filed.  Murkowski asked about Environmental Impact Statement requirements.  Wood said the ANGTA EIS is 23 years old; changes in law and technology could make it subject to review.  Thomas R. Carper, Delaware, in discussing incentives, was mindful of the ‘Chrysler Bailout’, in which warrants were issued.  “In the end, when they became profitable, we actually shared in that success.”  Murkowski pointed out that Alaska gas was on state land, unlike ANWR or natural resources found on other Federal lands.  Joseph Marushack, vice president of ANS gas commercialization for Phillips Alaska (Photo, 9-01, Anchorage), said a project would be possible if all of the stakeholders were to work together.  He said a project could potentially result in over $70 billion in income to various governments over the life of the project.  Among other project risks, he cited gas price uncertainty, size of the project and steel availability.  He said his company sees some advantages to a southern route, but looks for a streamlined process, fiscal certainty and no government mandates.  (See this morning's Anchorage Daily News article, by Liz Ruskin and Sam Bishop's Fairbanks Daily News-Miner Washington Report.).   Terry Koonce, president of Exxon-Mobil Production, represented the largest holder of Alaska North Slope gas.  He said project costs were now estimated at between $15-17 billion, but that no economically feasible project has been developed.  He said the proposed producer legislation (Review ‘Alaska Natural Gas Pipeline Act of 2001’ in left column) could create a level playing field; it would be open to all parties and not affect the viability of a project filed under ANGTA provisions.  Koonce said that his company does not ask for incentives or subsidies.  If a project is not currently economic, he said, the company will attempt to improve the economics or wait until economic conditions improve.  The producer’s $100 million feasibility study could be continued, he said, only if the route were not mandated and if the project could be completed in a timely way.  (See Boston Globe article, by H. Josef Hebert, Associated Press)   Robert Malone, regional president for BP America, pointed out that the three producers have underway the only current feasibility study for moving north slope gas to market, that it is a work in progress and that it has yet to reveal an economic project.  He said the proposed producer legislation was not ‘etched in stone’ but that the Federal and state government could work to provide regulatory support, simplicity and fiscal clarity.   He said the producer legislation would encourage more participants.  He said that Alaska has made it clear it supports a highway routing, that no routing decision could be made until all the information is available, that his company will support a route with which Alaska and Canadian stakeholders agree.  He added his support for a process to bring the various parties together, emphasizing that no single party should be seen to have an exclusive monopoly to build the project. (Review Producers’ Updated PowerPoint Presentation, 10-1-01.)  Richard Glenn (Photo), the vice president of lands for Arctic Slope Regional Corp. said his Alaska Native Claims Settlement Act of 1971 corporation represents more than 8,000 shareholders and is the largest private landowner on the North Slope.  He told members there is an estimated 60 TCF of undiscovered gas reserves south of the Prudhoe Bay field and urged the committee to be mindful of routing and access to capacity issues.  He also spoke of the access to opportunity, for jobs and other benefits for rural Alaska.  On the matter of routing, he said, “We are aligned with our governor on this issue.” Patricio Silva, an attorney for the Natural Resources Defense Council, said he represents a membership of 500 thousand ‘scientists, lawyers and environmental specialists’.  He said his Council could support the highway route under ANGTA if a new EIS is required.  William Sullivan, executive vice president of Anadarko Co. spoke for the ‘world’s largest independent oil and gas company, working hard to supply America’s energy needs’.  He said that any legislation should consider companies with yet to be discovered gas reserves, providing for access to the pipeline on equal terms, no discriminating tariffs and expanded capacity as needed (Review Anadarko position, left column).  Chairman Bingaman, seeking clarification on the need for legislation observed the Administration has no position until an application has been filed ('proposal is on the table'), the legislation might therefore be premature.  Marushack said that critical to the process of developing an economic project was to have a clarified, well-defined permitting process providing certainty and removing some timing risk.   Koonce said the issue of risk includes costs, markets, and permitting; that legislation could remove one area of risk.  He said about 9 TCF of gas in the Mackenzie Delta appears to support an economically feasible project, that on routing it is premature to rule out any options.  He said that a northern route could result in environmental benefits including a smaller development footprint and fewer emissions.   Malone said that the 25-year-old ANGTA had yet to produce an economic project, that legislation could create a level playing field.  Murkowski recounted the need for some legislation: limiting judicial review, expediting permitting, establishing a coordinating office, etc.  “The problem I have is that we have no economic project before us,” he said.  He said he was willing to take up the legislation but saw no need to add it to the National Energy Act, “…until we have the results of your work at the end of the year….”   Murkowski then inquired about ANWR development timing and estimated reserves opinions of the panelists.  Koonce said with help of the state and Congress development could take about 6-8 years, including the process of seismic evaluation, discovery, delineation and construction whereas a normal process would be closer to a 10 year range.  Sullivan observed it was ‘cavalier’ for some critics of ANWR development to say it would provide only a 6 month supply.  Malone spoke of Alaska’s vast reserves of coal, oil and natural gas, saying all would be needed.  Marushack offered the Alpine oil field as a model for ANWR development.  Murkowski asked about Mackenzie Delta reserves.  Malone reported that his company owns acreage but has no development underway.  Marushack said his company had no holdings in the Delta.  Koonce said his company controls about 60% of the total 9TCF of Delta reserves.  He said Mackenzie Delta gas can be developed and will go forward with or without Alaska gas but said certain synergies could be achieved if Prudhoe Bay and Delta gas shared a transportation system.  Murkowski referred to northern route difficulties including prospects for ‘ice scour’, distance between compressor stations and permitting difficulty.  Koonce said that both routes have challenges with all of their constituencies.  He said while gas pipelines have not been built under ice regions, marine pipelines were common and he didn’t see ice scour as being a significant problem.  Murkowski asked if the producers would be satisfied if the committee took up legislation subsequent to having year-end results of the producer feasibility study.   Marushack said his company has taken a systematic approach to moving ahead and that the proposed legislation is an effort to reduce risk, that expediting legislation would support the feasibility effort of the team in moving toward an open season process.  Malone repeated the value in and opportunity to bring parties together, that the Committee could prove to be a catalyst in bringing the parties together to produce an application.   Murkowski said he would encourage Chairman Bingaman to move the legislation forward.  He admitted some would question proceeding without an application, but “…as I see it, it is justified for expediting the process.”  He repeated his hope that Senate colleagues do not see the legislation as a subsidy.  Mark Aron, vice chairman of CSX -- the parent of Yukon-Pacific Corp., sponsor of the all-Alaska route (Trans Alaska Gas System, TAGS), said CSX is the driving force behind the Yukon Pacific project.  He said he didn’t wish to “cast stones” on any project and that the economics will decide what route the gas will take.  He asked for a level playing field for all projects.  He said Yukon Pacific could serve domestic and foreign markets.  He touted the advantages of an ‘All-American line’ which would pass by a majority of Alaska’s population, is cost competitive and has completed “…the vast amount of the permitting process”.  Scott Heyworth (Photo, 7-01, Anchorage), chair of the Citizens Initiative for the All Alaska Gasline spoke of an important American principal: the right to petition government.  He said that giving tax breaks was not an answer; that an All American line was the answer.  He reported poll results expressing LNG project support by 60 percent of Alaska’s citizens and his successful voter initiative which, “…in the first 18 days produced 25% of the required number of signatures.”  (See “Our Gas, Our Future”, left column.)  D. Michael G. Stewart (Photo, below-right, 7-01, Anchorage) with Dennis McConaghy (Photo, below-left) co-chief executive officers of Foothills Pipe Lines Ltd., sponsor for the existing "southern" Alaska Highway pipeline project (Alaska Natural Gas Transportation System, ANGTS), addressed concerns of their project.  They believe ANGTA is still the prevailing law and that ANGTS has a mandate to build the project flowing from the intense competition and certification process of the 1970s.  They oppose the producer suggested legislation.  Murkowski asked about the ‘$4.2 billion withdrawn partner liability’.  McConaghy said he was happy to inform Members that he has agreement with all of the former partners to reenlist in the project and that a memorandum of understanding reflecting that development would soon be completed and presented to the producers before the end of the year.  He said a condition of reenlistment was agreeing to a release from accumulated liability.  Murkowski verified that another result of that development would be to present FERC with a filing verifying the release of liability.  Forrest Hoglund, chairman and CEO of Arctic Resources Co., advocate of the northern gasline route, said ARC was proposing the shortest, fastest route for northern gas and asking for no subsidy.  He said a problem with the two pipelines needed to accommodate the Foothills project is that one would have to go first.  He advocated the “one pipeline solution”, arguing the pipe was readily available, the project could be staged and the cost would be far lower.  He said Alaska could receive $100 million/year more with the ARC project and the U.S. Treasury would capture $5-10 billion more.  He said ARC was also asking for a fair playing field.  Keith Bailey, chairman and CEO of Williams questioned the need for legislation at this time.  He said there would be time later for any ‘targeted’ legislation needed.  He said the project could consume the entire world steel capacity for a year and that “…time is of the essence to meet the needs of our economy this decade.”  Bailey’s company has established the Williams Arctic Team now producing a feasibility study for processing the pipeline’s natural gas liquids in Alaska.  He said the Williams concept is that at any point along the pipeline, one could have petrochemical development that could compliment some of the economic development needs of the state.  (Review Williams Arctic Team petrochemical feasibility project here.)

(Note: last edit of material, 10-01-01.  -dh)

10-2:  WASHINGTON-Senator Frank Murkowski said of the U.S. Senate Energy and Natural Resources Committee hearing this morning that, “An Alaska gas pipeline is on the horizon.  While the challenges will be great and the project immense, I am certain we are up to the task.  When complete, the pipeline will be much more than just one of the world’s largest engineering projects.  It will be a critical part of the nation’s energy security.     *       WASHINGTON-Saying it meets national interests for a secure, substantial, and long-term source of  clean energy and would create thousands of needed jobs, Gov. Tony Knowles went before the Senate Energy Committee today to push for federal legislation to start work on the Alaska Highway Natural Gas Pipeline.  "Tapping into America's largest known natural gas reserves of 35 trillion cubic feet, this long-term supply of affordable energy will increase consumer confidence and business investment," Knowles said. "The critical step in realizing this economic and energy boom is strong, creative, and focused national interest legislation that could come from this Committee and this Congress."      *     ANCHORAGE-At noon today, following Senate gas pipeline hearings, Alaska’s Lieutenant Governor Fran Ulmer (Photo) briefed Anchorage Rotary Club members.  She reported that Governor Knowles testified today on the importance of an Alaska gas pipeline to the state and to the nation.  She thanked Alaska Highway Natural Gas Pipeline Policy Council Co- Chairmen Jim Sampson and Frank Brown for their service and Commonwealth North for improving public understanding through initiation of its study (See hyperlink in left column).    *      WASHINGTON -- Alaska Sen. Frank Murkowski (Photo-left) today urged the producers of North Slope natural gas to sit down and reach agreement on the route and construction incentives needed to start construction of a gas line.      "It is my hope that after today, after airing the respective conditions in some detail, we can come together again soon -- in a less formal setting either here or in Alaska -- to work collectively to achieve the start up of an economically viable project to bring Alaska gas to market via the southern route -- a project as bold and imaginative as any ever conceived," said Murkowski. He made his statement opening a four-hour Senate Energy and Natural Resources Committee hearing into the prospects for an Alaska natural gas pipeline.      "In the end, America can not allow itself to become dependent on overseas sources of natural gas (because) the potential for disruption of supply makes this solution to our energy needs simply unacceptable. Getting North Slope gas to consumers in the Lower 48 is vital to the long-term energy security of the nation," he said.  Murkowski, noting his support for a federal tax change to allow seven-year accelerated depreciation for all gasline projects, expressed caution about the federal government providing huge subsidies.  He pointed out that just last week Federal Reserve Chairman Alan Greenspan and Former Treasury Secretary Robert Rubin questioned the advisability of subsidizing the project since it "would set a bad investment precedent and draw down the current surplus for an unreasonable duration," according to Greenspan.  The Senator said a bigger issue for the future of the gasline is whether the State of Alaska can commit to provide the producers with "long-term fiscal certainty. A project of this magnitude must have the certainty that the whims of the state's taxing authority are tied in real terms to the market price of gas," said Murkowski.  Murkowski said he is still waiting for the producers to finish their feasibility studies and to explain how "technological advances" can help to lower estimated costs.  He also stated that, given conflicting testimony as to whether changes are needed in the 1977 permitting process for a highway route to quickly proceed, he is willing to consider crafting federal legislation to expedite federal permitting for a southern route.  He further added that he wants to ensure that any project will allow secondary gas industries to develop in Alaska and allow for the active participation of all the producing energy companies and resource owners in Alaska. "Significant progress has been made since the last hearing we had on Alaska gas and a great deal of money has been spent by the producers to assess the economic viability of a gas project -- but we still haven't crossed the finish line. That is something we must do," said Murkowski.   During the hearing Alaska Gov. Tony Knowles sought congressional support for the pipeline project, and state Sen. John Torgerson, R-Soldotna, head of the Alaska Legislative Joint Committee on Natural Gas Pipelines, expressed the state's strong opposition to a northern pipeline route -- a route under the Beaufort Sea and down the Mackenzie River Valley.  Other witnesses included: Patrick Wood, chairman of the Federal Energy Regulatory Commission; Drue Pearce, Alaska affairs advisor in the Department of the Interior; Robert Kripowicz, acting assistant secretary for fossil energy in the Department of Energy; Terry Koonce, president of Exxon-Mobil Production; Robert Malone, regional president for BP America; Joseph Marushack, vice president of ANS gas commercialization for Phillips Alaska; Richard Glenn, the vice president of lands for Arctic Slope Regional Corp.; William Sullivan, executive vice president of Anadarko Co.; Patricio Silva, an attorney for the Natural Resources Defense Council; Mark Aron, vice chairman of CSX -- the parent of Yukon-Pacific Corp., the sponsor of the all-Alaska route (Trans Alaska Gas System, TAGS); Scott Heyworth, chair of the Citizens Initiative for the All Alaska Gasline; Keith Bailey, chairman and CEO of Williams; Forrest Hoglund, chairman and CEO of Arctic Resources Co. -- the parent of the northern gasline route -- and D. Michael G. Stewart with Dennis McConaghy, co-chief executive officers of Foothills Pipe Lines Ltd., sponsor for the existing "southern" Alaska Highway pipeline project (Alaska Natural Gas Transportation System, ANGTS).      (More reports to follow….  –dh)

Northern Gas Pipelines is monitoring the U.S. Senate Energy Committee hearing today, 10 a.m. EDT; you can monitor it too.  See this page for details.   See witness list here, and link to Committee's 9-14-00 testimony in left column.  To supplement, see the Alaska Natural Gas Pipeline Act of 2001 draft, column left, along with the Alaska Legislature's, Governor's, Anadarko's, and State Economist's viewpoints.  Also, review other economists' counsel here.  To complete your backgrounder, we've produced reports on several meetings last week.  Two follow this in today's report, others you can review in previous reports of the last few days.  Today could be a watershed, or, it could result in committee action that would produce a watershed result: project incentives, project routing, project expediting legislation are all on the table.  -dh    (NOTE: JUST PRIOR TO 2 P.M. EDT THE COMMITTEE CONCLUDED THE HEARING.  LATER TODAY, WE WILL OFFER A BRIEF SUMMARY, INCLUDING QUESTIONS AND ANSWERS.  HERE IS THE JUST AVAILABLE LINK TO THE FORMAL TESTIMONY OF WITNESSES; WE HAVE ADDED IT TO THE 'QUICK REFERENCE' SECTION IN THE LEFT COLUMN FOR YOUR FUTURE USE, AS WELL....)

PORTLAND-ZIFF ENERGY GROUP presents the Second Annual Pacific Northwest Gas Strategies Conference here, TODAY, featuring a number of experts with northern gas pipelines interests.  The conference will focus on new energy supplies for the Pacific Northwest and how "the burgeoning demand" will be satisfied.  In particular, conferees will learn of the potential for how "...new Alaska Slope gas production will be delivered to the PNW.  Speakers include:  Wil Condon, Alaska Department of Revenue Commissioner; Art Eastly, President & CEO, Canadian Forest Oil; Randy Jespersen, SVP, BC Gas Utility Ltd.; Peter Lund, VP, PG&E national Energy Group; Joe Marushack, VP, ANS Gas Commercialization, Phillips Alaska; Kirk Morgan, Director Business Development, Williams; Lanny Outlaw, President & CEO, Western Gas Resources;  Paula Pyron, Executive Director Northwest Industrial Gas Users; Rick Harper, Assistant to the President, NW Natural; Gary Schmitt, Director, Capacity Marketing and Customer Services, Questar Regulated Services Co.; Michael Stewart, Executive Vice President, Business Development, Westcoast Energy Inc.; Steve Wright, Acting Administrator & CEO, Bonneville Power Administration; Don Zinko, VP Marketing, Colorado Interstate Gas.  (NOTE: MESSRS. MARUSHACK AND STEWART APPEARED IN WASHINGTON AT SENATE ENERGY COMMITTEE HEARINGS TODAY.  -DH)      *     CBC, Yellowknife- ... Resources minister Joe Handley has been selling the advantages of the Mackenzie Valley route, but he's being cautious about the latest news from Alaska.  "It certainly doesn't hurt us that we're the only viable pipeline in the north right now," he says. "We'll celebrate when we have a pipeline but it's a little early right now to do that."  That's because N.W.T. 's pipeline may not return enough to investors either.  Industry analyst Roland George says Mackenzie Delta producers will have a hard time earning a profit with gas prices are at $2.20. They need to be at about $3.  "Project developers are a bit concerned as to whether the low prices we see now is an indicator that maybe there are lower prices in the future," he says.  Producers also want to see broad local support for a pipeline. Several First Nations, especially in the Deh Cho area, have rejected any current pipeline proposals.     *     Whitehorse Star, AP-Oil companies looking into the feasibility of building a natural gas pipeline from Alaska’s North Slope to the rest of the United States say the project is too pricey.     *     Northern News Services by Dave Sullivan, Fort Simpson (Oct 01/01) - If a pipeline is built up Mackenzie Valley, Northerners hope they won't be shut out by unions like the last time a pipeline went through part of the same corridor.      *     Northern News Services, by Thorunn Howatt, Yellowknife (Oct 01/01) - Leaders from the NWT's Sahtu region signed a deal with Texan Forrest Hoglund's Arctic Resources Company last week.  ...  "I would say it was a good meeting," said Hoglund. He refused to say what was in the agreement but confirmed that a memorandum of understanding was signed.  Larry Tourangeau represented the Ernie MacDonald Land Corporation out of Norman Wells, and Hoglund said members from Tulita, Deline and Fort Good Hope were also present.   ARC recently promised regions access to $50,000 each to be used for investigation and legal fees associated with pipelines.   Although there are no producers committing to sending gas down the proposed line, "our proposal is going to be so attractive to the producers they will join us," said Hoglund.

10-1:  ANCHORAGE DAILY NEWS, by Ben Spiess--With natural gas prices collapsing and oil companies saying last week that a North Slope natural gas development does not make financial sense, the key question seems to be: Is the project dead?  The answer, observers say, is no.  (This is another good, current review of Alaska positions as we prepare for U.S. Senate Energy Committee Hearings in Washington, tomorrow.  –dh)     * Commonwealth North (CWN) members gathered in the ballroom of the Captain Cook Hotel on September 25 for a briefing on their six month study on gas commercialization: “Bringing Alaska’s North Slope Gas To Market: Framing the Issues.”  Retired Enstar president Richard Barnes (Photo-left) and University of Alaska-Anchorage Chancellor Lee Gorsuch (Photo-right) co chaired the volunteer study group with help from CWN executive director Duane Heyman.  After approximately 25 weekly meetings, the study group provided about a dozen recommendations, led by this one: “The State should work to optimize its interests in the commercialization of ANS gas without undermining the commercial viability of less preferred routes or projects.”  After presenting the report (Your copy is available by clicking on CWN, above), CWN president Nancy Usera (Photo-left) began asking audience submitted questions.  “I cannot recall when we’ve had so many questions of our speakers,” she said.  Asked why GTL is not a more active alternative, Barnes said that a pipeline seems to be more economic at this time at presumed threshold prices of $3-3.50/MCF.  Questioned about state ownership, Barnes said that while the study group recommended careful study of financing alternatives and there are benefits, there are also significant risks.  On the subject of in-state use of the gas, Gorsuch observed that when the state leased land tracts to the industry, for all practical purposes it committed 7/8 of gas to be found and achieved a 1/8-royalty interest.  Barns said that an “over the top” route would probably preclude in-state use while a highway could permit it; but pressure for in-state use could compromise a project.   Gorsuch responded to a question as to why the study group did not endorse an LNG system.  He said that to the group’s knowledge there were yet to be any long-term take or pay contracts supporting such a system.  The speakers were asked why they did not condemn the over the top route and they held that it would be “unwise” to discourage a project if it were the only viable one, particularly when it provided income benefits.  Gorsuch acknowledged that while CWN members might have a preferred route, that preference comes at a cost, and trade offs are inevitable.  He pointed out that developing existing gas reserves had a further benefit of providing access to “extensive potential reserves” which could result in significant economic development.  Heyman pointed out that the fiscal regime of Alaska has no ability to capture benefits of in-state use.  Gorsuch referred to enthusiasm for the Highway route partly emanating from desires for in-state use, but said that stripping gas liquids from the line operates in Alberta’s favor with its existing NGL processing infrastructure that would have to be duplicated in Alaska.  Heyman said Alaskans should be mindful that Canada has a similar number of competing interests that need to be fully appreciated as well.  The speakers characterized the report as ‘interim’, saying that there was too little known at the present time to make final routing decisions.  Usera said CWN would continue to follow gas pipeline issues until a project becomes feasible.  Please click here for full report.  (Study Group Participants included:  Eugene Bjornstad, Gary Carlson, Alan Christopherson, Lauren Colas, Larry Crawford, Michael Cunningham, Brian Davies, Dave Dengel, Daniel Dieckgraeff, William Evans, Walter Featherly, George Findling, Mano Frey, Ray Gardner, Scott Goldsmith, Heather Grahame, Joe Griffith, Dave Harbour, Nadine Hargesheimer, Joseph Henri, Walter J. Hickel, Max Hodel, H.R. “Ky” Holland, Dianne Horbochuk, Larry Houle, Ken Konrad, Jack Laasch, Marc Langland, William Large, James Linxwiler, David MacDowell, Joe Marushack, Joan Mccoy, Christy McGraw, Jim Mendenhall, Mike Metz, James Miner, Brian Murkowski, Michael O’Connor, Arden Page, Drue Pearce, Mary Ann Pease, Morton Plumb, Herbert Ray, Jerry Strang, Stephanie Szymanski, Rupert Tart, Curtis Thayer, Ken Thompson, Nancy Bear Usera, Angus Walker, Bill Walker, David Wight.  Staff support: Denali Daniels, Hartig Fellow, and Irina Fel.)     *     In meetings later in the day (9-25), the Governor’s Alaska Highway Natural Gas Pipeline Policy Council held committee meetings then a full session, producing much different conclusions than the CWN volunteer citizens reached.  In the morning, In-state Gas Use and Future Opportunities chairman Ken Thompson presented Texas’ Deputy Land Director, David Hall (Photo-left) to members.  Hall said that his state authorized in-kind marketing of royalty gas in 1983 and now takes about ½ of its royalty gas ‘in kind’, enabling “…us to provide it to customers at a low price….”  He said the practice of the state marketing a portion of its own royalty gas produces higher value (i.e. since school and other government ‘customers’ don’t have to pay taxes and other fees normally included in commercially provided gas.)  He said the practice also reduces the audits and disagreements that would otherwise be associated with taking all of its royalty ‘in value’ from a large number of gas producers.  Member Brian Davies (Pictured-center, with Esther Wunnicke-left and Mike Navarre-right) established that the lower rates provided to schools and other government customers meant that commercial power companies—which are state taxpayers—end up selling less gas, providing less income to the state.  Member Carl Marrs clarified with Hall that the state through statutory mandates obtains spare capacity pipeline access and makes no payment for gas conditioning.  Thompson inquired about lease terms and Hall provided a “Miscellaneous Pipeline Easement Form”.  Member Rhonda Boyles inquired about the relative ‘autonomy’ of Hall’s division, and Thompson determined that Hall’s office receives disclosure of ‘affiliated transactions’, deals that could add to producer profits down stream or indirectly when sale of initial gas volumes was more modest.  Hall’s presentation concluded with a chart reflecting 2001 oil and gas royalty income of about $240 million of which about half was marketed by his division.  Chairman Thompson invited Bonnie Robson to the table; Robson is Deputy Director of the Alaska State Division of Oil and Gas.  She began by addressing royalty income.  “Last year,” she said, “the state received over $1 billion in royalty payments.”  She then discussed in-kind issues, advantages of which included in-state job creation, in-state investments, new projects producing tax revenue and the possibility of lower cost energy.  She pointed out that under state leases the state could give producers a 3-6 month notice of the state’s intent to switch between the taking of royalty gas “in-kind” and “in-value”.  As to disadvantages of taking royalty “in-kind”, she said that, “In the past, the state has almost consistently gotten less for its oil taken in kind than it could have received in value.”  The administrative cost of selling oil and gas is time consuming and requires experience and expertise, she said.  Member Marrs wondered if the state could contract out the marketing of its oil and gas.  Robson said it was possible, but one would have to pay for such outsourcing and would have to ask if the state would have benefited more by paying for qualified staff.  Davies asked why it appeared that the benefits of taking royalty in kind would do less for Alaska than it does for Texas.  Robson said that Alaska has fewer producers to track.  It also has fewer potential power user customers.  “I have to say,” she said, “that obtaining less from in-kind sales in the past is a sore subject for many of us in the department and we have no intention of allowing that to happen again.”  Cavan Carlton, Director of Williams' Arctic Project briefed the committee on several of the company’s interests.  He said, “Arctic gas is necessary to meet expected North American demand growth,” and that Williams has developed a formal team approach with about ten professionals assigned to the project.  He said that last May, Williams initiated a Petrochemical Feasibility Study associated with development of North Slope gas.  The analysis is ongoing, he said, with an overall study scheduled for release in November.  The study focuses on building a gas processing facility near Fairbanks.  The company would extract methane gas for local use.  It would also remove ethane and possibly propane.  An ethane cracker would convert the ethane into ethylene.  A polyethylene plant would convert the ethylene into polyethylene; the polyethylene pellets produced from the process would move to Anchorage for export to world markets.  Full Council Meeting.   Readers may find the mid-afternoon discussion of interest.  The agenda called for a council discussion late in the day following presentations by the producers, but in the midst of an active teleconference discussion with Alaska’s Washington representative, John Katz, the Council engaged in a discussion of formally endorsing Governor Tony Knowles’ 10-Point Proposal (Also, click in left column) prepared for consideration of the U.S. Senate Energy Committee, meeting on October 2.  The proposal would “Mandate the already permitted Alaska Highway route as the preferred gasline route….” Member Rep. Ethan Berkowitz said, that while his constituents don’t recommend supporting the Highway route he would support the 10-Point Proposal.   “I would like to see someone disprove the All Alaska route (i.e. LNG project),” he said.  Katz responded that any legislation supporting the Governor’s proposal could include provision for a spur line to Valdez “…for export purposes.”  Member Jack Roderick (Photo, left to right, Members Bill Corbus, Peg Tileston, Roderick, and Jim Jansen) observed that Alaska should be cautioned about asking for too many benefits in the legislation.   Thompson said, "The producers were invited today to review these 10 points; they have been given notice and invited to provide input to Mr. Katz.  The final result could be a blend of our views, producer and other views as it is a national project.  ----The Council voted to endorse the Governor’s plan---- Alaska North Slope Gas Pipeline Team representative Robbie Schilhab noted that the “…numbers and data are constantly changing, which is part of the risk posed by the project.”  With that foundation, he said, “We do not presently have an economic project.  We now need to see if we can continue to lower the costs of the project to see if we can reduce the overall cost.”  The price of gas, dipping to below $2/MCF a day earlier, he said, demonstrates the volatility of this sort of project.  Member Wunnicke asked about the impact on project economics of certain incentives that governments could create.  Schilhab said they could enhance the economics of a project but probably couldn’t make the difference between moving ahead or not.  Boyles clarified that producer financing assumptions contemplated 70% debt and 30% equity.  Thompson probed about the value of NGLs.  Schilhab said the feasibility work was based on BTU value, not MCF value.  Thompson observed that a 12% return on equity, together with consideration of NGL and incentive values would produce an economic project.  Schilhab, speaking from an Exxon Mobil viewpoint said that his company saw this as a high-risk project that requires a high rate of return.  He added that, “If we can reduce some of the risks perhaps we can drive down the costs and the ‘hurtle rate’ for each company.”  Jon Rubini asked about the value of ‘price floor’ incentives now being discussed.  Schilhab said, again from his company viewpoint, that if such an incentive came through the legislative process, the legislative process could change it later; thus, the risk would not be improved.  Roderick asked about the importance of Point Thompson gas to the project.  Schilhab said it was required to have an economic project.  Member Charlie Cole asked if Exxon Mobil would leave the gas on the North Slope “for perpetuity” if the project is not economic.  Schilhab said the companies considered it an important asset and would continue efforts to monetize it.  Boyles asked for an opinion on tax exempt financing.  Schilhab said it is a concept that could work.  Regarding the northern route, Schilhab said that a “third party trunkline” could be looked at to provide Alaskans access to the gas.  The cost, he said, would be about $1 billion for a 24-inch line extending to Fairbanks from Pump Station 4.   Alaska Gas Producers Pipeline Team colleague, Joe Marushack, joined in the presentation and referring to earlier questions said that NGL cost had not been included in current numbers but NGL revenue has.  Member Lee Gorsuch inquired about expandability of the system, asking if it was “consistent with episodic open seasons”.  Marushack said that a top priority of the project was expandability.  Gorsuch asked about environmental issues confronting a northern route.  Marushack said there were some, but there are also mountain-crossing issues associated with the southern route.  Thompson said the Council has heard from environmental groups and Inupiat people opposed to the northern route and wouldn’t that opposition result in a 2-3 year delay.  Marushack said the feasibility work had not yet completed risk analysis.  “At the end of the day,” he said, “we will have completed risk analyses on both the northern and southern routes.”  Both routes are safe, he said, and the study team sees “no show stoppers”.  Member Ed Rasmuson asked if the producers anticipated holding an “open season” at the first part of 2002.  Marushack said that schedule could hold depending on if all the major issues were resolved, including route decision, risk containment, etc.   Gorsuch verified that the producers have established no minimum wellhead price.  In response to questions about the source of pipeline steel, Marushack said that such a massive project would tax the limited capability for the particular specifications needed and that steel from the United States, Canada, Korea, Germany, Japan and elsewhere could be required.  (While the author endeavors to produce accurate reports from meeting notes, he encourages all persons and offices named in this and other articles and readers-at-large to provide additions/corrections to ensure validity of the historical record.  -dh 9-30-01