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Northern Gas Pipelines, (Alaska Gas Pipeline, Denali - The Alaska Gas Pipeline, Mackenzie Valley Gas Pipeline, Alaska Highway Gas Pipeline, Northern Route Gas Pipeline, Arctic Gas, LNG, GTL) is your public service, objective, unbiased 1-stop-shop for Arctic gas pipeline projects and people, informal and rich with new information, updated 30 times weekly and best Northern Oil & Gas Industry Links on the Internet.  Find AAGPC, AAGSC, ANGTL, ANNGTC,  ANGDA, ANS, APG, APWG, ANGTA, ANGTS, AGPPT, ANWR, ARC, CARC, CAGPL, CAGSL, FPC, FERC, GTL, IAEE, LNG, NEB, NPA, TAGS, TAPS, NARUC, IOGCC, CONSUMER ENERGY ALLIANCE, AOGA,AOGCC, RCA and more...

2009 LINKS: FERC Reports to Congress, 1, 2, 3, 4, 5, 6, 7....; USGS Arctic Gas Estimates; MMS hearings: RDC, Our NGP, AJOC, DH, ADN, KTUU; Enstar Bullet Line: Map and News Links; ANGDA; Alaska Energy Forum; Prosperity Alaska

2008 LINKS: Shell Alaska OCS Study; Mackenzie Gas Project EIS; Join the Alaska Gas Pipeline Blog Discussion; Governor Sarah Palin's AGIA Links; 2007 ACES tax bill links; Department of Revenue 2007 ACES tax documents;  2007 ACES tax Presentations; 2007 ACES tax news; Alaska Gas Pipeline Training and Jobs; Gas Pipeline and Economic Development; Andrew Halcro; Bjřrn Lomborg; FERC's Natural Gas Website Links

WASHINGTON: Alaska Natural Gas Pipeline Act; History of H.R. 4; DOE Energy Bill Position, 6-02; Daschle-Bingaman Energy Bill (Alaska, Sec. 1236 & tax credit, Sec. 2503 & H.R. 4 Conferees), Tax Credit; See amendments, "Energy Policy Act of 2002";  "Alaska Natural Gas Pipeline Act of 2001 (Draft)" & Background Paper, 8-9-01;Alaska Legislature Joint Committee position; Governor's position; Governor's 10-Point Plan; Anadarko Analysis; U.S. Senate Energy Committee Testimony, 10-2-01 - text version;  U.S. Senate Energy Committee Testimony, 9-14-00; Report on the Alaska Natural Gas Transportation Act of 1971, prepared by staff of the Federal Energy Regulatory Commission, 1-18-01

ALASKA: 1-23-03, Governor Frank Murkowski's State of the State Speech; 2002 DRAFT Recommendations to 2003 Legislature; '02 Alaska Legislation; Alaska Highway Natural Gas Pipeline Policy Council; Joint Legislative Gas Pipeline Committee; 9-01 Alaska Models: Canadian Routes, LNG, GTL; HR 4 Story; Cook Inlet Supply-Demand Report: AEDC; Commonwealth North Investigation & Our Article; Report: Backbone; Legislature Contacts; State Gas Pipeline Financing Study; 5-02 Alaska Producer Update; Kenai: "Oil & Gas Industry Issues and Activities Report, 11-02"; Alaska Oil & Gas Tax Structure; 2-27-02 Royalty Sale Background; Alaska Gas Pipeline Office opens, 7-01, and closes, 5-02; Betty Galbraith's 1997-1998 Chronology Our copy.

CANADA: 1-10-03, "Arctic Gas Pipeline Construction Impacts On Northern Transp."-Transport Canada-PROLOG Canada Inc.-The Van Horne Institute;Hill Times Reports, 8-30-02; 9-30-02, Cons. Info. Requirements; CBC Archives, Berger Commission; GNWT Economic Impact Study, 5-13-02; GNWT-Purvin & Gertz Study, 5-8-02; Alberta-Alaska MOU 6-02; Draft Pan- Northern Protocol for Oil and Gas Development; Yukon Government Economic Effects: 4-02 & PPT; Gas Pipeline Cooperation Plan Draft & Mackenzie Valley Environmental Impact Review Board Mackenzie Valley Pipeline MOU Draft, 6-01; FirstEnergy Analysis: 10-19-01; Integrated Delta Studies; National Post on Mackenzie Pipeline, 1-02;Northern Pipeline Act;  Haida Nation v. British Columbia; Indian Claims Commission; Skeena Cellulose decision -- aboriginal consultations required, 12-02; Misc. Pipeline Studies '02

COMPANIES: Alaska Gas Producers Pipeline Team Newsletter, 7-27-01; APG Newsletter: 5-02, 7-02 & 9-02; ArctiGas NEB PIP Filing Background; NRGPC Newsletter: Fall-02;  4-02 ArctiGas Reduces Field Work; BP's Natural Gas Page; Enbridge Perspective; Foothills Perspective; Williams Perspective; YPC Perspective, 7-02

 MEDIA REFERENCE: Alaska Journal of Commerce; Alaska Inc. Magazine; Anchorage Daily News; Canadian Broadcasting Corporation; Fairbanks Daily News Miner, Juneau Empire; Northern News Services; Oil & Gas Reporter; Petroleum News Alaska; Whitehorse Star, etc.

EXTENDED CONFERENCE NEWS: Alaska Support Industry Alliance, Anchorage Chamber of Commerce Canadian Institute, Insight Information, Inuvik Petroleum Shows, International Association of Energy Economists, Resource Development Council for Alaska, Ziff Energy Group











Northern Gas Pipelines: Please Scroll Down for December News

12-31-2001, New Years Eve:  "Alaska's Role in a National Energy Policy".  The Alliance's 2002 'Meet Alaska' Conferences features another star cast, including: company executives, statewide elected officials and Canadian/U.S. Federal Cabinet officials.  For more information on this Sheraton Anchorage Hotel conference coming on 1-25, see the agenda here.      *     Morris News Agency, by Rose Ragsdale, ANCHORAGE -- 2001 was an uncommonly good year for Alaska's oil and gas industry. Prices remained strong for the millions of barrels of crude oil the industry produced and shipped mostly to the West Coast and for the millions of cubic feet of natural gas produced and consumed within the state....  That was 2001.     *        Now, looking at 2002....  Houston Chronicle, by Hanaba Munn, WICHITA FALLS -- Making a living in the oil patch is like riding a bobbing pump jack full of ups and downs.     *     Henry Hub gas prices: 12-28: $2.68; 12-21: $2.66; year ago: $9.33.    *       Canadian Press, by James Stevenson-CALGARY (CP) - After a year of unprecedented big-name takeovers in the Canadian oil patch....   *   One of our New Years Eve resolutions was to reorganize the "Quick Reference" items in the left column; it has been done.

12-29/30 (Weekend): TULSA -- Steve Malcolm, president and chief operating officer of Williams (NYSE: WMB), announced today that J. Douglas Whisenant (Photo-right) has been promoted to president and chief executive officer of the company’s interstate natural gas pipeline division.  See our 12-10-01, related storySee relevant story below.     *     Anchorage Daily News, by Tim Bradner (Photo, left, 5-01, Kenai) - ... Costs of a pipeline by any route are very high, and gas prices, alas, are low again. While there's no doubt about long-term North American demand and supply trends -- we'll be using more natural gas, and our existing sources are running down -- and that large new supplies will be needed; the question is when. ...Cambridge still sees a four- or five-year delay in the market being able to absorb 4 billion cubic feet per day of North Slope gas, which is the volume the producers say is needed to make the pipeline work financially. ... However, there are opportunities even with a pipeline delay, and let's not lose sight of them. One of them is gas-to-liquids, a technology that converts methane, the main component of natural gas, into high-value liquid products such as ultra-clean diesel that can be shipped down the existing oil pipeline. ... What's unfortunate, however, is that many of our state leaders have been so preoccupied with a gas pipeline that they've seemed to cold-shoulder companies, including major firms, interested in possibilities of GTL here. Three years ago senior executives of Sasol, the South African energy group that has done pioneering work in gas-to-liquids and coal-to-liquids, visited Alaska. A prominent legislator, no longer in office, told them the company, and GTLs, were not welcome in Alaska. Ouch! Other firms, including some now operating in Alaska, are very interested in GTL possibilities but perceive the politics of gas in Alaska to be too divisive. The perception is that the state of Alaska does not encourage GTL development. That's unfortunate. Alaska can't afford to gain a reputation of being closed to new ideas and different approaches. ... (See our GTL page here, our Christmas Eve editorial here, and our reference to the reputation issue, here.)     *     Anchorage Daily News commentary, by Rep. Jim Whitaker, calling for state ownership of a gas pipeline. - Astute readers will appreciate that this is an outstanding example of the prevailing, "my way or no way" Alaska political mentality described above, earlier referenced in these news reportsA detailed research project has recently recommended against state ownership of a gas pipeline.  Other recent news suggests that a state government with a +/-$1 billion\year deficit would have difficulty obtaining investment funds, even if the investment were attractive. -dh

12-28: Whitehorse Star - Crown royalty revenue collected by the territorial government is being shared with Yukon first nations in accordance with land claims final agreements.  Cheques totaling approximately $942,000 are in the mail, the government said last week.  “I am pleased Yukon and first nation governments reached an agreement on the implementation of the sharing arrangements for Crown royalty,” Economic Development Minister Scott Kent (Photo, 11-29-01, Houston) said in a statement.       *      National Post, by Carol Howes, CALGARY - When OPEC producers meet in Cairo today to announce their expected cuts to oil production, they will not add any final moments of drama to one of the most tumultuous years for the energy industry.     *       Houston Chronicle - Natural gas for January delivery fell 35.6 cents, or 12 percent, to $2.555 per thousand cubic feet on the New York Mercantile Exchange. It was the biggest one-day decline for a most-active contract since Feb. 5.     *      CBC, Whitehorse, Yukon - Foothills Pipelines is getting ready to offer Alaskan gas producers a "half-price" pipeline to the south.   The scaled-down pipeline would carry a slightly lower volume of gas, bringing costs under $8 billion, less than half the current estimate of a larger pipeline.  Instead of an expensive 52-inch pipeline all the way to Chicago, Foothills is proposing a smaller size pipe from Alaska to Alberta.   The 42-inch pipe would cost $7.6 billion according to a Foothills spokesman.  It would connect with existing pipelines in Alberta and on to the western U.S.A..  The Alaskan Gas Producers aren't commenting on the half price proposal. They are wrapping up their own $100 million feasibility study.      *     Anchorage Daily News, by Nicole Tsong  - Pipeline Shooting Trial Scheduled for Fairbanks Venue.

12-27:  Commissioner of Natural Resources Announces Offer to Purchase Royalty Gas - Following a public comment period and a public hearing, Alaska's Commissioner of Natural Resources, Pat Pourchot, (Photo, Anchorage, 5-14-01) announced yesterday that the department is inviting offers to purchase Alaska North Slope royalty gas. Royalty gas is the share of total gas production owned by the state. Although the state usually receives cash from the oil and gas lessees for its royalty share, the state has the option of taking its royalty in-kind and selling it itself. Depending on the outcome of the competitive sale process, the commissioner may sell some of the state’s royalty gas that would be produced if a North Slope gas pipeline is built. The rising interest in a gas pipeline project among the North Slope producers and others, coupled with the possibility of an open season for nomination of pipeline capacity as early as 2002, have created interest in purchasing state royalty gas. The open season is a request from the pipeline sponsors to potential gas shippers to make a firm commitment to ship gas on the pipeline. Potential buyers are invited to submit proposals to the State. The State has issued a “Solicitation for Offers to Purchase Alaska North Slope Royalty Gas.” Offers must be received at the address below no later than January 31, 2002. All offers received by the deadline will be opened and announced at a public meeting scheduled on February 1, 2002 at 8:30 am in Room 240 of the Robert B. Atwood Building, 550 West Seventh Avenue, Anchorage, Alaska.

Please see our earlier report summarizing background on this process, as explained by Bonnie Robson, Deputy Director, State Division of Oil and Gas.  *  Anchorage Daily News story by Paula Dobbyn, here.

Copies of the Final Finding and the Solicitation for Offers to Purchase Alaska North Slope Gas are available at DNR, 550 West Seventh Avenue, Suite 800, Anchorage, Alaska 99501-3560, or by contacting Kevin Banks at (907) 269-8781 or via e-mail:   The Final Finding and Solicitation for Offers to Purchase Alaska North Slope Royalty Gas may also be downloaded from the Department’s Website at

12-26:  O & G Journal: Energy futures prices got a boost in international markets prior to the Christmas holidays.    *    O & G Journal: US drilling activity continued to fall with 882 rotary rigs working this week, officials at Baker Hughes Inc. reported Friday. Losses were reported in all categories. The number of land rigs working this week was down 18 to 751; offshore rigs dropped 5 to 114; and the number of active inland water units dipped 2 to 17. Of the rigs working, 741 were drilling for natural gas, down 16 from the previous week. Another 140 were drilling for oil, down 10, and one was unclassified.      *    See our story re: "Canadian Solidarity", Alaska Oil and Gas Reporter.   

12-25:  Hallelujah.   *   FYI: Yesterday's commentary (below) attracted about 2 dozen emails from friends throughout North America.  Thankfully, all expressed warm season's greetings.  But about half of our speed readers had obviously only read the letter from "Wishing" to Santa, and not Santa's reply following it.  Each letter represents only half of the message.    

12-24 (Christmas Eve):  Gas pipeline news this week is light as all gas pipeline stakeholder thoughts turn to home.  Before news afresh begins breaking after the holidays, perhaps it would be well to spend a quality moment or two reflecting on where we've been this year and where we wish to be in 2002.  After all, our millions of individual decisions in the coming year will produce some grand, cosmic formula revealing the future of northern gas pipelines.  -dh

"All I Want for Christmas"

Dear Santa:

I'd like an Alaska gas pipeline for Christmas.  It should be in place, producing money by 2004, please, in time to supply 1/4 of Alaska's $1 billion+ budget deficit; and let our politicians balance the rest without increasing my taxes or reducing my services.  I'd like the pipeline to be 'diversified', too.  It should go to a Fairbanks 'HUB' (where I'd like a new petrochemical industry established by someone for some market).  I'd also like someone to put an inexpensive gas distribution line to every home in Fairbanks.  To be fair, I'd like someone to take propane from the HUB and ship it to 230 Alaska villages at a reasonable cost, somehow.  Then, I'd like someone to build a line from the HUB on down to Valdez and arrange for Tokyo Gas to sign a 20 year, "take or pay"  contract at a price high enough to pay for the pipeline as well as another petrochemical facility in Valdez.  To take care of my friends in Southeast Alaska, I'd like propane and maybe LNG to be provided by barges or small cryogenic tankers to all our coastal citizens at a reasonable price, by someone.  Since Southcentral Alaska may be running short of Cook Inlet gas, I'd like someone to build a branch of the pipeline from the Fairbanks HUB down to Anchorage.  See, that would displace enough gas that the Kenai Peninsula would retain adequate supplies for its residential / industrial users for another 20 years.  Lastly, I would like for most of the gas to move from the HUB on down the Alaska Highway to make sure that the folks in the Lower 48 have plenty, but I'd want to make sure there were enough liquid gasses in the high pressure line that we could profitably supply Alberta with some of the petrochemical feedstock she needs to be supportive.  Oh, and I almost forgot, please make the price of gas high enough so we can afford subsidies, generous rights-of-way payments to 10,000 landowners, and still have plenty of money for our state government and please build a separate Mackenzie Valley Pipeline for Canada. 

And, I'd rather not have the gas produced at all unless it's done my way. 



P.S.  If you have money left over, could we have some to invest as equity in the gas pipeline and would you please make sure we get at least a 12-15% return on our investment?

Dear Wishing:

All fathers, including Father Santa, instinctively want their children to have all that they wish for.  However, one responsibility a father has is to lovingly tell his children that we don't always get everything we wish for at Christmas.  Sometimes, you get a present you think you'd rather not have and it turns out the be the best one after all.  (See P.S., below.)  I don't know if that will be the case this year, but on this Christmas Eve, I can now divulge your gifts.

1.  You will be blessed--more than most--with another year of freedom and life in the wondrous North.

2.  You will be given intelligence, courage, friends, armaments and vast resources.

3.  You will be given the freedom to break your own trail, to direct your own future path in the wonderful frontier before you.

4.  You will be blessed with the politicians that you, yourself, choose to help lead the quest.

5.  The above, basic gifts will enable you through your own wisdom, ingenuity and integrity to successfully confront your challenges.  Success, the greatest gift, will be highly savored for you will have earned it and you will pass this knowledge to your heirs.  Your failure, also shouldered by your children, will only come with misuse of the gifts.

My greatest hope for you is that you embrace the true spirit of Christmas, use well what you have been given, make good decisions, treat everyone with respect, teach your own children well, and endeavor toward 'endless progress'.  Obtained as you have so presumptuously wished, the presents you requested would not delight you, would not eliminate the fundamental budget problems you have created, would shackle free enterprise and deliver the generations following you into debt and misery.  They represent a child's irrational thinking, depending as they do on the imprudent acts of others and requiring no effort or risk on your part.



P.S.  One Christmas long, long ago, I asked for a new bicycle and a 410 shotgun.  Being a poor 11-year-old did not prevent the dreaming.  After a humble family service around our Nativity scene, wise Father gave me a snow shovel and a box of shotgun shells, my only presents.  I did not appreciate these gifts at the time, but by spring I had earned enough from the neighbors to buy a new bike and a used shotgun.  To this day, I love my Father as much as I respect him; and, he has never worried that I would ever confront a reasonable challenge I could not overcome.  That year I emerged into the real world, began absorbing the true Christmas message and took the first small steps toward a lifelong appreciation for free enterprise.  (Additional reference: Voice of the Times, by William J. Tobin)

(See related news of last week.  Photos: Sharing Christmas and Summer outside author's Anchorage office.)


12-22/23 (Weekend): Regarding the ominous fiscal reports from Alaska in last week's/weekend's news (which must impact gas pipeline investor opinions), here is the Kenai Peninsula Clarion's view"The longer Alaskans avoid the difficult choices involved in a long-range financial plan, the worse the pain is going to be. The longer we wait, the fewer options we will have."  There is also this Clarion letter-to-the-editor: "It's time for Alaskans to realize that if we want a "future" some tough decisions have to be made now!"     *     Fairbanks Daily News-Miner (Re: Rep. Jim Whitaker)- Whitaker will also keep pushing his proposal from last year to make the companies that hold state leases for the gas on the North Slope pay a combined total of at least a billion dollars a year (Underline added) to state coffers if they do not soon bring the gas to market. ... He is reviving his 2-year-old proposal to create a state-owned corporation to finance and own a pipeline to bring Alaska natural gas to market if it is economically feasible, which Whitaker insists it is. 


Northern Gas Pipelines wonders so many things as 2001 makes way for a new year of opportunity..  We wonder how rational state leaders on the edge of fiscal crisis could even take time to consider investment in a multi-billion dollar pipeline.  If the money were available, would there be a budget crisis?  If investment money magically appeared, why would politicians rush to invest it in a pipeline when the experts say the feasibility is unproven?  We've also stood in amazement over the last year as several political leaders competed for attention in criticizing the very producers who provide the majority of state revenue and have the ability to invest in a pipeline and other projects.  We wonder what politicians hope to gain by again pushing for a new, $1 billion/year tax on the gas producers if  it is not feasible to produce the gas.  We wonder, in the face of fiscal crisis, why Alaskan politicians are not talking about "incentives", "improving Alaska's investment climate", "tax stability", "regulatory clarity", "public/private partnership".  Lacking budget discipline and free-market creativity, Alaska's elected leaders at all levels seem fixed on bluffing companies right up to the edge of the 2004 fiscal cliff, hoping to earn more general fund revenues or a favored pipeline route--before it's too late--with intimidation.  We wonder why we've seen so many sticks and not one carrot.  We wonder if free enterprise is still alive and well on the Last Frontier.  We wonder if elected leaders have any idea of the negative seeds they might be planting now, as companies forecast multi-year spending priorities in Alaska and elsewhere.  Finally, we don't wonder that Alaska's reputation is at risk.    -dh 

(Please review the news items last week and weekend, if you haven't.  It is factual, not alarmist, to say that the fiscal crisis looming in the State's future soon threatens to overshadow and impact virtually all other issues).  

12-21:  Anchorage Daily News, by Tony Hopfinger- An energy consulting firm believes that developing the North Slope's natural gas fields -- the largest untapped gas reservoirs in North America -- is not feasible for at least 13 years. North America is burping with smaller gas supplies that should keep the lights on throughout this decade, said Ed Kelly, North American gas researcher for the prestigious Cambridge Energy Research Associates.  ... The state was among several dozen clients that signed on for the Cambridge Energy study of world LNG markets this year, paying $27,500, said Larry Persily, state deputy commissioner of revenue. The study concludes a multibillion-dollar Alaska LNG project doesn't make financial sense.  ... But LNG supporters, like Scott Heyworth of Anchorage, believe their project would cost less and provide more jobs and more state revenue.    *       Phillips Petroleum Company brought the Light to the United States for the first time last year and the company is again making it possible for the message of the Light to be shared with Americans.  The Light is a 13-year tradition started by the Boy Scouts in Austria. Every year, Austrian Scouts travel to Bethlehem to light a lantern from the Eternal Flame near the spot where Jesus was born. The Light is kept in a special container to keep it burning continuously so that it may be shared with others as it travels from country to country. The Light has traveled to more than 36 countries since the tradition began. ... The Scouts will present the Lights' message of peace to New York Mayor Rudy Giuliani and New York City firefighters and police officers at the site of the World Trade Center at a ceremony TOMORROW.  (Contact: Rich Johnson, 918-661-9326).     *      Calgarian John Myers urges investors to be aware of potential impacts of middle eastern activity on energy.  If some version of the concepts he envisions occur, needless to say that the entire gas pipeline dynamics are subject to abrupt changes in timing and direction.  While this reference is promotional, its contents probably contribute to our readers' balanced library.     *     Whitehorse Star, Chuck Tobin-In a survey released by the Fraser Institute on Tuesday, the industry rates the territory as the second-worst jurisdiction in Canada as a place to invest.  (NWT story and Fraser link in 12-19 report below)  In a related CBC storyWhitehorse, Yukon - Yukon placer miners are worried about an upcoming review of regulations.       *     Other publications are picking up on the 12-18 report below re: "The Imperatives of Arctic Natural Gas Development".   See 12-19 Oil and Gas Journal Online. HOUSTON, Dec. 19 -- The Mackenzie Valley corridor in Canada will almost certainly be the choice route for the proposed Arctic gas pipeline, not through Alaska, said two University of Houston professors.           *     A modest 'reader recognition prize'  finally found our 36,666th 12:35 a.m. Friday, working late or early.  Congratulations, Curtis Thayer, Alaska Gas Producers Pipeline Team.  His prize: the two 30 year old Arctic Gas logo items in 'new' condition are a simple, paper coffee cup place mat with logo and logo description on reverse and an embroidered logo patch, given to Arctic Winter Games participants in the early 1970s.    On 12-7 the 34,000th reader, Daniel Kish, won an original Arctic Gas coffee mug while working late in his Senate office in Washington.

12-20:  Beware of holiday computer viruses.     *       Petroleum News Alaska-Cambridge Energy Research Associates now believes that the window for Arctic gas has moved out some five years - to about 2015.     *     Anchorage-Members of the "Task Force on Jobs and the Economy since September 11", created by Gov. Tony Knowles as a way to examine impacts on all facets of the state's economy, presented their findings to the governor today.     *     New Canadian/US dollar conversion calculator: permanent link at bottom of right margin column.

12-19:  CBC, Yellowknife, N.W.T. - The Northwest Territories is a better place for mineral investment than it was a year ago.  That's the conclusion of the Fraser Institute, a conservative think-tank based in Vancouver.  The territory ranked fourth in Canada, and 11th in the world for its investment attractiveness according to the institute's annual ranking. ..."The policy assessment of the Northwest Territories improved," said Laura Jones, the institute's Director of Environment and Regulatory Studies.  "So in a number of specific factors like environmental regulations, regulatory duplication, and taxation, the score on policy improved." ... The Northwest Territories had a higher ranking than either Nunavut or the Yukon....   *       Financial Times, by David Buchan-Shell, the world's second-largest company, is interested in reinforcing its upstream activities and in gas and power.

12-18:  Reserve these dates for an important new Insight Conference in Edmonton re: "Aboriginal Oil and Gas Development Projects", 4-25 & 26.  We will provide details under 'Upcoming Events' in the right column, as they become available.     *      "NEW ARCTIC GAS STUDY--University of Houston Professors Ronald Oligney and James Longbottom announced completion of their study, "The Imperatives of Arctic Natural Gas Development" at the Canadian Institute's recent Arctic Gas Symposium.  "Primary Messages" of the study are: 

  • The Unites States must pursue 12 Bcfd of natural gas production from the Arctic, not 4 or 6 Bcfd--America needs the gas!
  • Oil or natural gas supply disruptions--whether geopolitical or infrastructure related--quickly destroy 10 million U.S. jobs.
  • The $3 Mcf price floor for natural gas necessary to support Arctic pipeline development will emerge in the next 24 months.
  • Risk and uncertainty are the greatest roadblocks to Arctic pipeline construction, not the much-debated standard financial variables.
  • Staged pipeline construction is the obvious mechanism to materially reduce costs, risk and uncertainty.
  • Under almost any political, financial or price scenario, a natural gas pipeline down the Mackenzie corridor will be developed first.

Oligney and Longbottom, both with Arctic technical backgrounds, have produced a thorough study, rich with charts, graphs and references.  While construction cost estimates are yet to be verified by other technical studies, the phased concept is intriguing.  The professors have kindly made the study available to Northern Gas Pipeline readers.  Readers with technical critiques and responses--preferred over simple opinion statements--are invited to send them here where we will post them.  Readers may download the full study here.     *     CBC, Whitehorse, Yukon - The Senate Committee dealing with the Yukon Act has postponed its hearings until February to the applause of the Kaska Nation.   Another important industry website links to Northern Gas Pipelines: Thank you, Resource Development Council for Alaska!     *     On the GTL Front: Brussels — European Union (EU) ministers have authorized a total ban on sulfur in petroleum fuels beginning January 1, 2009, reports Reuters. EU experts say zero-sulfur fuels will speed the introduction of fuel-efficient technologies and have positive environmental effects as well.   ***   Off-Road & Marine, Washington, D.C. — Former Sen. Robert T. Stafford, honorary chairman of the Clean Air Trust, has called on the federal government to tighten pollution restrictions on diesel engines.    *     Houston, Texas, Dec. 18, 2001 - Burlington Resources Inc. (NYSE: BR) today announced plans for capital investments of approximately $1.3 billion during 2002, contrasted with comparable combined full-year expenditures by Burlington and Canadian Hunter Exploration Ltd. of $1.6 billion during 2001.  Totals for both years exclude capital for acquisitions.  The vast majority of next year's exploration and production capital is earmarked for development programs in Canada, the U.S., Algeria and the East Irish Sea.  Burlington also announced that the U.S. $2.1 billion (CAN $3.3 billion) acquisition of Canadian Hunter was completed on December 6, 2001, and that key Canadian regulatory approvals have been received for the acquisition of certain producing properties from ATCO Gas for U.S. $352 million (CAN $550 million).  Contacts: Financial: John Carrara, 713-624-9548; Media: James Bartlett, 713-624-9354.  

12-17:    Another important industry website links to Northern Gas Pipelines:; thank you, CC Technologies!     *    Last of the Arctic Gas Symposium reports are coming.....     *     Significant gas pipeline/producer-related, government fiscal developments: Friday and weekend reports, below.     *     Access our special page reporting on:  "RDC's Alaska Resources 2002: Can Alaska Compete?", with photo links.    *    NNS, by Derek Neary- ...feasibility study for a Mackenzie River bridge....     *   CBC, Yellowknife, N.T. - Paramount Resources is considering postponing $40-million worth of work planned for the Cameron Hills near the Northwest Territories-Alberta border.

12-15/16-01 (Weekend):  Peninsula Clarion, by McKibben Jackinsky--It wasn't the cookies and coffee that attracted the crowd at Anchor River Inn on Thursday evening. It was tables filled with information on the Kenai Kachemak Pipeline Project.     *     FRIDAY- A FLURRY OF BUDGET POSTURING IN ALASKA WHICH COULD AFFECT GAS PIPELINE DECISIONS.  First, Governor Tony Knowles (Photo-right, 9-10-01) proposed an FY 2002 budget, that would be about $200 million higher than the FY 2001 budget, saying "This budget is responsible for today and for a strong future tomorrow,".   Then, the Senate and House leadership (i.e. represented by House Speaker Brian Porter {Photo-left, 12-14-01}, Senate President Rick Halford {Photo-left, below, 12-14-01} and Senate Finance Committee Chairman Dave Donley {Photo-right, below-r, 12-14-01}) held a press conference rejecting such increases in face of current deficit spending.  In the conference (Photos-below), Halford said, "It is difficult to take that kind of proposal seriously when we have such a serious problem with our fiscal regime."  Porter said, "The Legislature will continue using missions and measures to invest state resources wisely in the programs we know deliver results to Alaskans. We will also be considering prudent limits to growth in state spending, and stand ready for debate and possible action on any other realistic proposals legislators may bring forward to meet the state's financial challenges."  Donley added that, "The real obligation here is to take a leadership role and develop consensus."  Northern Gas Pipelines participated in the press conference.  "The Alaska gas producers have said that for any pipeline project to move forward, they need fiscal clarity.  Facing similar fiscal challenges, Alberta's Premier Ralph Klein is in the process of cutting another $300 million from his budget after an earlier cut of over $1 billion.  Do you wish to send the Alaska producers a message that the fiscal gap will be solved by achieving efficiency in government or by increasing their taxes?", we asked.  Halford responded that the fiscal gap has grown incrementally and will be reduced incrementally"; that "a $200 million increase is not the way to begin developing a long range fiscal plan".  Donley said the Senate last year passed two pieces of legislation that could serve as the 'bedrock" of future fiscal policy (See our earlier, related story).  He said the Legislature and Governor need to give citizens confidence that efficiency and reforms will be undertaken before new revenue sources are tapped.  In his statement, Knowles said, "I'll be addressing the equally important revenue side of the picture in detail in my State of the Budget address in the opening days of the legislative session." (See Anchorage Daily News story.)     *     Anchorage Daily News-Senator Frank Murkowski calls for gasline meetings.  See our earlier story.     *     FAIRBANKS DAILY NEWS-MINER by Sean Cockerham-Borough Mayor Rhonda Boyles has decided that the Alaska Gasline Port Authority is now on a more realistic track and that she will no longer withhold $50,000 requested by the group.  ...  Boyles--who has held back the money for almost a year--said she had become uncomfortable with the aggressiveness of the port authority.  ... "We (now) have, I believe, a more realistic approach," she said. "We may never be able to build a $22 billion project ourselves. But the port authority might be a tool that other people would want to use."     *     Tuscon Citizen, by Mari N. Jensen-- ... If only 1 percent of the methane gas hydrates in the United States were tapped, America's natural gas supplies would more than double, according to the U.S. Department of Energy.  "If we can figure out how much is available and how to exploit it, we have a huge energy reserve available," said Mary Poulton, head of (University of Arizona's) mining and geological engineering department and a lead researcher on the team.  ...  U.S. demand for natural gas is projected to increase by almost 50 percent in the next decade, said Brad Tomer, the petroleum engineer who oversees DOE's program.  ...  UA scientists are working with BP Exploration (Alaska) Inc., the petroleum company, and the University of Alaska-Fairbanks to figure out where the hydrate deposits are in Alaska's North Slope and how to get at them.  The UA team, one of six funded by the U.S. Department of Energy to investigate the possibility of using hydrates as an energy source, is funded with $13.3 million of the $30 million DOE is spending on methane hydrate research. UA's portion is $2.5 million.  ...  Scientists believe that gas hydrates were accidentally tapped in the 1970s in a northern Siberian gas field named Messoyakha, said Timothy Collett, a geologist with the U.S. Geological Survey in Denver who is collaborating with the UA-BP-UAF team. ...UA geologist Roy Johnson said the team will answer three questions: "Where do gas hydrates occur? How much might be there? How we might develop tools that can help other people find them more easily?"  ...Robert Hunter, the BP petroleum geologist who manages the project UA is involved in, said the research is not something BP "would go out and do on their own, but BP is willing to work with DOE to find out if (gas hydrates) are a viable energy source for the future." ...Hunter said that although there are still many technical hurdles, if the research project is successful, BP might begin a pilot project to tap gas hydrates by 2006.  ... For map, go to our "Maps Page" and for more information about gas hydrates: U.S. Department of Energy,; U.S. Geological Survey Woods Hole Field Center gas hydrate websites

12-14-01: Alaska Producer Update: Nailing down costs is the target of a $100 million study expected to be completed by BP, ExxonMobil and Phillips’s gas commercialization team by the end of the month.  The group is assessing the economic feasibility of a natural gas pipeline from the North Slope to Chicago.  Curtis Thayer (Photo, Spring-01), spokesman for the joint study group, said safety, security operational integrity and protecting the environment are always key priorities.  “Those were key before Sept. 11 and remain so.  There is no doubt that September 11th raised the profile of security issues around the world”.   Thayer stressed again that most of the line would be buried, regardless of route.    He was unwilling to speculate on the current status of cost estimates resulting from the ongoing study effort.  Last August, the price for the Beaufort route was estimated at $15.1 billion, about $2 billion less than the highway route, Thayer said.    

Budget and Tax Concerns up North

ANCHORAGE--The economic recession and associated, lower energy prices are taking a financial toll on Citizens in both northern Canada and Alaska, as elsewhere.  Yesterday, the Alaska Senate Finance Committee Chairman, Dave Donley, and former Alliance president, Bill Stamps offered two significant presentations on this sensitive subject.  Northern Gas Pipelines pays attention to such fiscal matters since, in addition to regulatory policy, tax and budget matters weigh heavily on the minds of potential northern investors, including those considering gas pipelines. (CALGARY, CBC  - Premier Ralph Klein says more cuts might be needed if revenues stay low.  "If the revenue stream is, as of budget time in 2002, as it is today, then we will have to find about $300-million in additional expenditure cuts." In October, the Alberta government sliced $1.3-billion from this year's budget.    *     DAWSON CITY, Whitehorse StarJack Layton, the president of the Federation of Canadian Municipalities, has a message for the communities of the nation: they’re being short-changed by the senior levels of government when it comes to financing.  “I’m really just trying to underline for our municipal colleagues that our financial situation compared to the federal and provincial governments is untenable. It’s not sustainable and it has to change.”     *     Yellowknife, NNS - City day-care facilities will have to wait until February to see if there will be any new money for them in the territorial budget.  ...Minister Jake Ootes, who is responsible for day cares, said he wants to give more money to subsidize low-income people who need to use the service.)                 *****See our commentary*****

“… our twin economic anchors in Alaska of oil and government appear unsustainable in the long-term." Bill Stamps, 12-13-01

Stamps (Photo, 12-13-01) complimented Governor Tony Knowles' policy that, ”Alaska is open for business”, saying it has produced new lease sale programs partly accounting for “… interest from new, large producers and several independents” like Anadarko, and an aggressive capital and spending program announced recently by Phillips Alaska Petroleum Company.  He also mentioned exciting new activity in the Cook Inlet area.  “Unocal has gone from trying to sell their property twice in recent years,” he said, “to doubling their exploration activities for oil and gas and they are experiencing very good success.  Phillips is drilling around Anchor Point, Marathon recently brought Wolf Lake on line in the Kenai National Wildlife Refuge, Forest Oil is spending millions of dollars and has put the first new platform in Cook Inlet in over a decade, Agrium bought the chemical plant in Nikiski, and BP built a pilot GTL plant in Nikiski.  Unocal and Marathon announced the formation of the Kenai Katchemak Pipeline LLC along with Enstar and Homer Electric to provide natural gas services to the southern end of the Kenai Peninsula and new supplies for South-central Alaska.”

Then, he cautioned that, “… our twin economic anchors in Alaska of oil and government appear unsustainable in the long-term.  And in the near-term, fallout from September 11th – and the national recession – has cast a cloud over our entire economy.”

Referring to a subject we have covered here in some detail, he said, “Our state budget is now over $900 MM in the red.  We are facing another budget short fall of almost a billion dollars – similar to where we were a couple of years ago before oil prices shot up and bailed us out again.  (Governor Steve Cowper applied this fiscal reality to gas line planning in our 12-12-01 report.)

This short fall means we will have to draw down our Constitutional Budget Reserve to less than $2 billion by the end of the fiscal year and with a projected draw of $1.3 billion in 2003, Alaska will empty our budget reserve account in less than three years.  In other words Alaska will no longer have the bailout stash that has been used for years.” 

Stamps was properly concerned about what elected officials with backs pressed against a wall will do.  “What would new taxes such as a modified economic limit factor (ELF) program do to future development of fields such as Liberty, NPR-A, Meltwater, Palm, West Sak, Schrader Bluff, Borealis and others?” he asked.  “Probably cancel some and restrict the development of others.  A modification to ELF would devastate the Cook Inlet oil industry.” 

Then he suggested that, “…a moratorium on taxes is in order while the legislature focuses on the big picture and can decide on a clear path to a solid fiscal plan.”  He and other support industry leaders are planning to communicate this concern to the Legislature, set to reconvene in Juneau this coming January.  Please see Stamps' full presentation here.

"The numbers are staggering."  Senator Dave Donley, 12-13-01.  

Donley (Photo, 12-13-01) spoke partly to update the Alliance membership on budget challenges, partly to answer some of the concerns raised at an October Alliance meeting by North Slope Borough Mayor George N. Ahmaogak, Sr.  He first pointed out that as serious as the situation is now, the Legislature has reduced per capita general fund spending to $3,800, or $921 less than in FY 1979.  He displayed a chart of the Constitutional Budget Reserve Fund demonstrating that without Legislative restraint, the CBR savings would have evaporated by last year.  At current spending rates and with current oil price projections, the fund will be exhausted before 2003.  At that time, the state could have a $1+ billion annual deficit with no savings in place.  He said the current Senate majority long-range financial plan is to: "Maintain budget discipline; Continue to utilize outcome based budgeting to increase government efficiency; Fix the Constitution by passing SJR 23 and SJR 24; and, Adopt fiscal gap reducing legislation."  The first would correct constitutionally limited spending loopholes which realistically provide no spending limitations at all.  The second would, according to Donley, "Restore the original intent of the 1990 Constitutional Budget Reserve Amendment," by withholding the ability of a small group to hold the majority hostage at budget approval time in return for pork barrel pay-offs.  He then briefed members on the intent of SB 186, the legislation opposed by Ahmaogak.  He said it would limit per capita municipal bonding to $15,000 (65 times higher than the statewide average); limit the local share of oil and gas property tax to 10 mills for any municipality exceeding this limit.  The limit would be phased in over a 10 year period; allow a municipality to refinance existing debt in excess of this limit; and allow a municipality to generate new debt in excess of this limit at an annual rate of $1,000 per capita.  This change would generate about $100 million in new revenue to the state.  From the Borough's perspective, of course, it would have an opposite effect.  (We will provide actual text here, when it becomes available.)  

Comment:  "Such is the nature of political struggle as governments become highly dependent on resource revenue or government grants, when resource prices fall and/or when rates of production and/or national revenues diminish.  In such situations, political leaders should beware of becoming too tax-dependent on a few resource industries or other governments.  Industries should, in turn, be cautious about--and must discount-- investment into an economy that could become too dependent on them.  With the stroke of a tax pen, project economics can change overnight, and even retroactively, after investment dollars have been locked and frozen into a permafrost trench."  -dh 

12-13-01:  More Arctic Gas Symposium reports are up today; more will be uploaded.  The report on a new Arctic gas university study, now being edited, will be especially newsworthy.     *     THIS MORNING: Senator Dave Donley, Alliance. We will have a detailed report for you tomorrow morning with charts and graphs outlining Alaska's upcoming fiscal legislation.    *     March 7-8, Arctic Gas Symposium, Calgary...This will be another big one.    *   VANCOUVER, BRITISH COLUMBIA--Westcoast Energy Inc. (A Foothills Pipe Lines, Ltd. owner) TODAY announced that securityholders had approved the acquisition of Westcoast Energy by Duke Energy.  "The acquisition by Duke Energy was recommended to the securityholders by the Board of Directors as being in the best interests of Westcoast and the securityholders," said Michael Phelps (Photo-right) Chairman and Chief Executive Officer of Westcoast Energy. "Obviously by the vote taken here today, securityholders have clearly supported that recommendation.  This vote moves us one step closer to completing the transaction.   Subject to obtaining court and other regulatory approvals, we anticipate that the arrangement will be completed in the first quarter of 2002," said Phelps. "The support of the Westcoast Energy securityholders marks another important step taken in this acquisition process," said Fred Fowler (Photo-left), Duke Energy's Group President, Energy Transmission. "We're pleased with the vote of confidence and will continue to work diligently to close the transaction as soon as possible."      *     WASHINGTON-- Alaska Sen. Frank Murkowski announced today he is inviting the newly reformed consortium of natural gas transmission companies to Washington to meet with the owners of Alaska's North Slope natural gas in an effort to improve the chances for construction of an Alaska gas line.  Murkowski said he hopes the meeting will occur in late January or early February before the U.S. Senate takes up a comprehensive energy bill. "The purpose of the meeting will be to try and get a better understanding of the different points of view and seek ways to advance the commercial prospects of this project," Murkowski said.  "Clearly it's in Alaska's best interests to have a southern route and the gas  transmission group is a very valuable asset for promoting this project."  Murkowski said if the producers and the gas line group cannot meet together, the invitations will be extended separately.  He said the State and the Legislature will be invited to join the discussion.  The State of Alaska owns a one-eighth royalty share of North Slope natural gas. Murkowski noted that the State's role in getting the gas to market has not been addressed in any detail.  "With the new year it's time to get this issue to the forefront," Murkowski said.  "We'll be inviting representatives from the Legislature and the  Administration to participate so that we can find out what is truly in the best interests of the people and the State of Alaska and get this project moving."  Murkowski also said he will meet with Vice President Dick Cheney early next year to discuss energy issues, including the Alaska gas line. 

12-12-01:  HOUSTON--Below we report on a speech delivered last week (12-6-01) here to the Interactive Energy Conference by Alaska's former governor, Steve CowperAs governor, Cowper managed Alaska's recovery following the economic recession of the mid-80s, from 1986 to 1990, presiding as well over the State's Exxon Valdez oil spill response. He led the first post-Cold War delegation to the Russian Far East in 1988, and played a major part in opening that region to US trade activity. He was Lead Governor for Energy for the National Governors Association and Chairman of the Interstate Oil & Gas Compact Commission (IOGCC, which completed its annual meeting in Santa Fe this week under leadership of Alaska's current governor, Tony Knowles).  After his governorship, Cowper served as President of the Northern Forum, an international organization of 24 northern regional governments from 10 nations. Since 1992 he has been managing partner of Steve Cowper & Associates, located first in Anchorage, Alaska, and as of this year in Austin, specializing in corporate political strategy. Recently he also joined the law firm of Hance Scarborough Wright, headed by former Congressman and Texas Railroad Commissioner Kent Hance, with offices in Austin, Dallas, Washington DC, and (as of February 2002) Anchorage.  As readers will note, Cowper brings many of his political skills to the table in taking on one of the most difficult of assignments: analyzing the political direction and likely outcome of northern gas pipeline projects.  -dh

After reviewing North Slope oil & gas history, Cowper focused on Alaska's fiscal regime.  "For twenty years," he said, "almost all the State of Alaska's revenues have come from the oil patch. There is currently a sequestered surplus which will last another two or three years, but when that's gone, unless there is another fat hog to kill, the State will have to start shutting down the public sector, even in the unlikely event of a reimposition of the State's income tax."  He said that basic government services like schools and public safety are jeopardized, "...unless another fat revenue stream comes along."  (Reference: 'economics' reports, here.)

After briefing participants on Alaska "boom and bust" cycles of the 70s and 80', he turned to gas pipeline options, describing the four major concepts: the northern route, the southern route, an LNG export project, and movement of gas energy in the form of GTL through the Trans-Alaska Pipeline System (i.e. at last count, there were no less than four Alaska groups studying or promoting LNG options and one political advocate group). 

"Now there are a lot of engineers in this room," he said, "and a lot of IT specialists.  All of you are accustomed to dealing with math and with logic, which is pretty much the same thing as math. You also probably believe in a free market system. If somebody should ask you to pick the best of these four options - with "none of the above" as an additional possibility - you would turn yourselves right away to making a cost-benefit analysis of each option, and judging from the rumored content of state and industry reports nobody else is allowed to read, here is probably what you would find."

He then critiqued the alternatives:

  • "The LNG option is too expensive....
  • The pipeline down the Alaska Highway - known as the "Foothills route" from a 1977 Act of  Congress approving the route for Alaska gas transportation in those days of heavily regulated natural gas markets - is quite a bit longer than the "over-the-top" route,  and it bypasses substantial Canadian gas reserves....

  • The "over-the top" route is shorter and less expensive; moreover, it picks up the Canadian reserves, reducing transportation costs from both sources....

  • The gas-to-liquids option would extend the life of the existing oil pipeline.  ...  The market for GTL, which would be used for cleaner diesel fuel and other uses, is not settled as of this date.  Marketing of the cleaner but more expensive diesel fuel may require governmental clean-air mandates.

  • The 'none-of-the above' option preserves the other options for another day. In the meantime all that gas down in the reservoir may be creating a problem for oil production at this stage of development...."

Cowper said that though most observers a year ago expected the free market to determine the outcome, "Today, you know it ain't so."  He then described the political players.  "The state of Alaska", he said, "wants ... high-wage construction jobs.  The pipeline construction worker is to Alaska what the cowboy is to Texas.  Even though a less expensive line would deliver more revenue over the years because of a lower tariff, that doesn't hold a candle to the lure of another pipeline boom.  Anybody who expresses a different view is advised not to enter a bar in Fairbanks after 8:00 PM."

"The Canadian government", he said, "is the one that will decide where the pipeline right-of-way will go in its own country."  Then he posed what he characterized as a logic question: "... if you were in charge of Canada, would you approve of a line that bypassed all the Canadian gas and brought huge quantities of Alaska gas through your country into the US, displacing existing Canadian exports, or would you be more likely to back a line that picked up your stranded gas, created wealth in your country, and sent your resources as well as Alaska's to the US?"

He then described the importance of the North Slope Borough, its related Native regional corporation and Canadian First Nations.

He suggested that the final routing decisions should be made at the top levels of each federal government.  "The place to start is at the top. The US and Canadian governments have to decide that this project is going to get done, and then they have to preempt other jurisdictions and make the rules.  The first rule will have to be that the most cost-effective route is the one chosen.

In conclusion, Cowper itemized a final political and business solution, "based on what I read, the 'over-the-top' route is the clear winner from a cost standpoint. Canada likes it because it picks up their reserves. A deal has to be cut as to what proportion of US and Canadian gas goes into the US market on what time schedule. Probably some Canadian government financial guarantees will be in order. The Canadian First Nations land claims will have to be settled.  Labor deals will have to be cut, including the participation of Alaskan workers on the Canadian portion of the line. They wouldn't displace Canadians;  there's not enough of a Canadian workforce to handle a project of this size."

He said that if the respective national governments did not take control of the process, the more likely outcome would be eventual development of an Alaska North Slope GTL project.

(We have provided for your further review and convenience the full text of Governor Cowper's speechHere is information for editors who wish to reprint this or other original work herein.)

12-11-01:  BARTLESVILLE, Okla. --- The board of directors of Phillips Petroleum Company has  approved $3.5 billion for capital projects in 2002.  This exceeds estimated 2001 capital spending of $3.1 billion.  E&P's 2002 capital budget is $2.6 billion, $52 million higher than estimated 2001 spending.  Forty-three percent of E&P's budget is targeted domestically, with Alaska operations receiving 72 percent of planned U.S. spending.  Phillips has budgeted $238 million for exploration activities  worldwide, with 31 percent of that amount allocated domestically.  More than half of the domestic total will provide for a significant exploration program in Alaska with wells planned in the National Petroleum Reserve-Alaska and on the North Slope.  Outside the United States, significant exploration  expenditures are planned in Kazakhstan, Angola and Norway.  The company intends to spend $807 million for its Alaska operations.  Large projects include the ongoing construction of four Millennium Class tankers to transport crude oil to the U.S. West Coast, development of the Meltwater, Palm and West Sak fields in the Greater Kuparuk Area, development of the Borealis field in the Greater Prudhoe Bay Area, and capacity expansion at the Alpine field on the western North Slope.        *     (WHITEHORSE) -- An international committee of legislators committed to the construction of an Alaska Highway Pipeline Project held its first meeting in Whitehorse this past weekend.  The Alaska Highway Pipeline Committee is comprised of legislators from Alberta, Alaska and Yukon. To date, its members include: Alaska State Sen. John Torgerson (Photo-right), chair of the Alaska Legislature's Joint Committee on Natural Gas Pipelines; Yukon Economic Development Minister Scott Kent (Photo-Left above, 11-29-01); and Alberta MLA Mark Hlady (Photo-Left below), chair of the Alberta Government's Standing Policy Committee on Energy and Sustainable Development.  Yukon Legislative Assembly Members and Alaska Legislators have provided Northern Gas Pipelines with the hyperlinked Markstatements above, for your review.       *    Northern News Services by Richard Gleeson, Yellowknife - Multi-billion dollar mergers and takeovers among international oil and gas giants have created new twists in the race to ship northern gas to the energy-starved United States. On Nov. 18 Houston-based Conoco completed a $35 billion merger with its Oklahoma neighbour, Phillips Petroleum.  "Clearly, the Mackenzie Delta is very important to Conoco and Alaska is very important to Phillips," said Conoco spokesperson Peter Hunt. "I think it's reasonable to presume that this increases the impetus to find economically feasible ways of developing both sets of reserves in a way that neither one strands or blocks the other."   ...  With the merger, two of the three corporations with the largest holdings in the Mackenzie Delta now have even larger holdings in Prudhoe Bay.   ExxonMobil is the other conglomerate with a foot in each camp. One of its subsidiaries, Imperial Oil, holds the largest share of known reserves in the Delta. ...The 'over the top' route would link Prudhoe Bay to the Mackenzie Delta via an undersea pipeline. Gas from both fields would then be piped south down the Mackenzie Valley. ..."In principle, if you build a bigger diameter pipe, that would normally improve the economics," said Hunt. "Beyond that, it's really not possible to comment in detail."  ... For more than a year, Mackenzie Valley producers have studied the feasibility of a Mackenzie Valley pipeline. Early in the new year, Alaska producers expect to complete their own $100 million study early of the feasibility of building a pipeline along the Alaska highway and through the southern Yukon.   "From the perspective of the Mackenzie Delta producers group and the opportunity they're looking at, it's business as usual," said Hart Searle, the group's spokesperson. ... "The most viable one, and the cheapest one so far is the Mackenzie Valley route," said NWT Development Minister Jim Antoine. (Photo-left, 11-29-01) "We don't want to see Beaufort-Delta gas stranded."   Antoine said interest in the Mackenzie Valley pipeline and arctic gas was high among oil executives at the Arctic Gas symposium in Texas last month (See our story here, along with Antoine's comments).      *     See our report tomorrow on former Alaska Governor Steve Cowper's recent speech: "THE BIRTH AND POSSIBLE DEMISE OF THE BIGGEST ENERGY PROJECT IN NORTH AMERICAN HISTORY"    *     Note our new listing for: Inuvialuit Environmental & Geotechnical Inc.*     For the most current Arctic gas pipeline status, please review the reports posted this weekend, yesterday and today for the 1. Canadian Institute's recent Arctic Gas Symposium in Houston, and 2. Resource Development Council for Alaska's Anchorage Conference, as well as 3. Friday's full Alaska Revenue Forecast report.   Please note that the reports are still being edited and completed entries are uploaded periodically.     *     ANCHORAGE--Yesterday, Alaska State labor economist, Neal Fried (Photo) told Anchorage Chamber of Commerce members that the state has now secured a 14 year trend of economic and employment growth.  "2001 has been a good year qualitatively and quantitatively," he said with the state adding 4,700 jobs during the year and with payroll up 6%.  Fried offered a flood of numbers of probable interest to state budget makers and companies considering Alaska investments.  During the 1995-2000 period, Alaska's rate of growth (1.6%) was lower than the rest of the country (24%).  More encouraging is Alaska's #3 position, out of 50 states, for household income, pegged at $52,876.  Explaining this phenomenon, Fried says, is probably that Alaska has a greater percentage of its citizens in the workforce.  Of more interest to gas pipeline policy makers and potential pipeline investors is the unemployment rate.  Politicians seem intent on trading certain gas pipeline revenue benefits for jobs, but Fried says, "We are enjoying some of the lowest unemployment rates since statehood, 5.9% in 2001.  If anyone out there," he said, arms outstretched to the audience, "has considered leaving your present employer and taking another job, this would be the time."  Fried said Alaska is #1 in per capita Federal expenditures, at $9,456.  In answer to questions about Alaska's fiscal crisis, Fried said that while economists in other departments provide budget forecasts he is aware that savings accounts supporting the operating budget are projected to be depleted in the next few years.  (Download his presentationSee related story on State Revenue Projections.AP version of the story.  -dh      *     WASHINGTON--An informed Washington reader told Northern Gas Pipelines last evening that Senator Tom Daschle will not pursue energy legislation until late January or February.

12-10-01:  TULSA -- Cuba Wadlington Jr., president and chief executive officer of Williams’ gas pipeline division and executive vice president of Williams, died this morning of complications related to cancer. He was 58. (Northern Gas Pipelines joins in expressing sympathy to the Williams employee family for this poignant loss.  Cuba's positive leadership style touched everyone fortunate enough to have known him; his many contributions to the gas pipeline industry in general and Arctic gas work, specifically, will be forever remembered.  Cuba posed for this photo on May 24, 2001 following a briefing to Commonwealth North's Gas Study Group in Anchorage.  -dh)  “This is a huge tragedy for Cuba’s wife, Ann, and their family, for the numerous charitable organizations for which he worked so tirelessly and for his many friends, including the people who make up our company. We treasured his determination and leadership,” said Keith E. Bailey, chairman and chief executive officer. “As it has been for the past several weeks, the management of our gas pipeline division in the near term remains in the able hands of the leadership team that Cuba selected to manage our systems.” Only weeks ago, Wadlington was asked to describe his philosophy on leadership: “I believe that to be a true leader you must have a vision for the future and be ruthlessly committed and focused on making that vision reality. True leaders have the capacity to take a diverse group of employees from all levels and deploy strategies that optimize their capabilities. Leaders do not surround themselves with people in their own image; instead they surround themselves with diverse and highly talented people. This is the type of leadership that I focus on in all aspects of my life.”  (See the official announcement here.  See relevant story above.)         *     Larry Hutchinson, Executive Director, has kindly informed us of the new web page the SAHTU SECRETARIAT / SAHTU DENE COUNCIL have prepared; please see our link here.  As with other Canadian Aboriginal and Alaska Native organizations and companies, this rural powerhouse of cultural heritage and land ownership has created a state-of-the-art web presence, especially valuable for its many contacts and links.     *     Thursday a reader suggested a contest for the 34,000th visitor!  The prize would be the author's original Arctic Gas coffee mug, in new condition, 30 years old...complete with Inukshook logo (Photo-right, "Stone Man of the North"). WE HAD A 6:02 P.M. EST FRIDAY WINNER...DANIEL KISH, PROFESSIONAL STAFF, ENERGY & NATURAL RESOURCES COMMITTEE (SENATOR FRANK MURKOWSKI),  IS RECOGNIZED AND REWARDED FOR WORKING LATE! -dh 12-8/9-01 Weekend:  See Associated Press report of the Revenue Forecast press conference we reported yesterday, below.  

2-7-01:  The Department of Revenue released its Fall 2001 Revenue Forecast at 9 a.m. today.  (See report below.)  Revenue Deputy Commissioner Larry Persily (Photo-right, 11-29-01) announced the forecast at a press conference in the third floor conference room at the Capitol.  Tax Division Director Dan Dickinson (Photo-left, 11-13-01) and Chief Petroleum Economist Chuck Logsdon (Photo-lower right, 9-27-01) participated in the press conference from the Department of Revenue conference room in Anchorage.  Please learn the value of searching this site by pasting each of the above three names here.  (Long-time Northern Gas Pipelines readers and those considering alternative northern investment decisions, know Alaska to be a deficit-spending state {i.e. financed with depleting savings accounts} over 80% dependent on oil, with prices down and production revenue declining.  Alaska faces serious fiscal challenges with which any gas pipeline project could help.  Caution: even were a gas pipeline operating by 2003-4, an impossibility, a $1 billion + deficit in that timeframe could be 200-300% higher than projected state gas pipeline revenue {i.e. taxes and royalties}, thus requiring other extreme cost cutting/revenue generating measures beginning this year.  The Alaska 2003 budget cycle begins as the Legislature convenes early in 2002.  Legislators know that while a gas pipeline will eventually help with their budget challenge, it is only one of many components.  See TODAY'S full report here.   -dh.)         *           The Joint Pipeline Office reports on the status of the Kenai-Katchemak Pipeline Project: "Involved in this project is development of natural gas supplies in South-central Alaska and delivering natural gas to residents in the lower Kenai Peninsula.  The project team is comprised of ENSTAR Natural Gas Company, Homer Electric Association, Inc., Marathon Oil Company, and Unocal Alaska.  The project team has scheduled a community meeting for December 13, 2001, 5:00 p.m. to 7:00 p.m. at the Anchor Point Inn in Anchor Point.  Information about the project will be available and comments recorded.  For more information, call (907) 264-3793.        *         INUVIK (Photo)-Brian Desjardins tells Northern Gas Pipelines that, "We have confirmed the next Inuvik Petroleum Show - Conference & Exhibition.  It will be June 20 & 21st, 2002.  Information will be out in the New Year!"  That show is listed in the right column under 'Upcoming Events'.  We will keep you posted.  -dh        *     Note: this weekend, we will post our reports on last week's RDC and Arctic Gas Symposium meetings.

12-6-01: Houston Chronicle, by Michael Davis- ... Enron also holds a stake, along with TransCanada and Williams, in the Northern Border pipeline system, which moves gas from the Canadian border just north of Montana into Indiana....     *     CBC, Inuvik-The Beaufort Delta will soon be teeming with researchers from around the world studying an exotic form of natural gas.     *     As Northern Gas Pipelines told readers night before last, Senate leadership planned to and then did unveil the Democrats' "comprehensive energy legislation bill" yesterday afternoon.   Please refer to page 103 of this complete draft, provided courtesy of Ron Oligney, University of Houston.  Any pipeline company may file with FERC for a certificate for any route.  The bill provides for a loan guarantee under certain conditions and specifically states that the Alaska Natural Gas Transportation Act of 1976 is unaffected by this legislation.  Please compare with similar language in the draft "Alaska Natural Gas Transportation Act of 2001", in the Quick Reference column-left, earlier considered by the Senate Energy and Natural Resources Committee.  (See Liz Ruskin's Anchorage Daily News story; and, a report from the Natural Resources Defense Fund.-dh)            BELOW,  ALASKAN LEADERS OPPOSE SENATE ENERGY BILL PROVISIONS AFFECTING ALASKA:

WASHINGTON -  After Daschle introduced the second Democrat energy bill of this session of Congress Senator Frank H. Murkowski said, "It is encouraging to see the Democrat leadership acknowledge the critical role energy policy plays in ensuring our national security.  But I am absolutely dismayed at the partisanship that has gone in to putting this bill together.  Every step of the way, the Republicans and many Democrats haven't been allowed to share their ideas.  With the Energy Committee long since shut-down, we cannot expect a public hearing, let alone a chance to mark-up the bill."

He said that Daschle has not announced when the Senate will vote on any energy bill.  "At the last bill introduction in March Senator Daschle said, 'America is faced with a grave energy problem that will get worse if we do not act. This bill addresses our energy problems head-on.'  He was right.  The problems have gotten worse and our energy dependence has increased because this issue hasn't been addressed."

"The Democrat bill includes provisions dealing with the development and transportation of natural gas owned by the State of Alaska.  These provisions were developed behind closed doors and without consultation from Alaska's Congressional delegation or Democratic Governor.  It is one thing for the
Majority Leader to take issue with the strong support of Alaskans to develop federal land in Alaska.  It is quite another for the Majority Leader to dictate to Alaskans how state-owned resources will be developed," he said.

Gov. Tony Knowles (Photo-right) also criticized the national energy legislation introduced yesterday saying the Democrat plan fails to meet the energy and job needs of the nation and Alaska. While claiming to back development of a natural gas pipeline to the lower 48, Knowles said the bill sponsored by Senators Tom Daschle (Photo-upper left) and Jeff Bingaman (Photo-lower left) fails to take necessary steps to ensure gasline development and ignores the nation's need for new domestic oil development.  "Today's long-awaited energy bill contributes more to Washington's rhetoric than the nation's energy needs," Knowles said. "The bill fails to specify that the Alaska Highway project is the only environmentally sound route that will put America to work and supply American consumers with reliable, affordable energy."

Knowles noted that the bill was drafted without consulting with Alaska and fails to include any of the specific recommendations developed by environmental, Native, business, and civic leaders that Knowles presented when he testified before the Senate Energy Committee in October. "With little more than a vague reference to the use of American labor and steel in the project, this legislation turns its back on American jobs at time when the nation is in recession," Knowles said. "By failing to be route specific, 30,000 high-paying jobs a year in steel mills, transportation, engineering,
and construction are being delayed by at least a decade."

"The bill contains another major flaw - no provision for the environmentally responsible development of oil and gas beneath a small portion of the coastal plain of the Arctic National Wildlife Refuge designated by Congress to be studied for oil and gas development," Knowles added. "Alaska has proven we know how to do development right. All Americans deserve an honest up or down vote in the U.S. Senate on ANWR development."

"My administration will continue full speed ahead working with the producers, pipeline companies, and other potential private sector partners to make the Alaska Highway natural gas pipeline commercial," Knowles said.

From Legislative Watch, an alert email service of the Natural Resources Defense Fund: On 12/5, Senate Majority Leader Daschle (D-SD) introduced a Democratic energy bill that would require greater use of renewable fuels, more efficient air conditioners and heat pumps, and increased use of corn-based ethanol in gasoline. The legislation is an alternative to the Republican-backed energy bill, which seeks to open the Arctic National Wildlife Refuge to oil drilling and provide huge subsidies to the fossil fuels and nuclear energy industries. Instead of more oil and coal subsidies, the Democratic proposal  would seek to begin to replace America's dependence on foreign oil and an aging electricity system with clean, efficient new technologies. While the bill currently lacks key components on fuel efficiency and energy efficiency incentives, environmental groups are working to ensure that strong provisions will be included in the bill after relevant committees complete work on these areas.       *

Important reports of last week's activity are still in progress; you may check for finished entries by reviewing our new Canadian Institute and Resource Development Council for Alaska extended news pages.

12-5-01:  WASHINGTON-Senator Jeff Bingaman's office faxed a message to Northern Gas Pipelines last night announcing that Senate leadership will unveil the Democrats' "comprehensive energy legislation bill" at a 5 p.m. press conference this afternoon.     *     ANCHORAGE-Rhea DeBosh reports from the Joint Pipeline Office (JPO) that a summary report of the Environmental Impact Statement's (EIS) scoping comments on TAPS right-of-way renewal is available for the public to review.  The summary report & second EIS newsletter can be viewed online by visiting the TAPS Renewal EIS web site at      *     CALGARY, Alberta – December 5, 2001 – (TSE: TRP) (NYSE: TRP) – TransCanada PipeLines Limited today announced it has entered into a memorandum of agreement with AltaGas Services Inc. to form a partnership to jointly purchase the remaining rights and obligations of the 706-megawatt Sundance B Power Purchase Arrangement (PPA) from Enron Canada Power Corp.   more....  (Note: TransCanada owns half of Foothills Pipe Lines, Ltd.; Enron is a participant in the Alaska Highway Pipeline Project.  -dh)     *      Petro-Canada outlined Tuesday its newest plan to develop Alberta's rich oil sands-an ambitious scheme that involves an investment of almost $6 billion over the next 10 years.  (See FirstEnergy link, left column, and Mackenzie Valley Pipeline/Delta gas implications.)     *     DESCO International has added Northern Gas Pipelines to its Industry News Links.

12-4-01:  Anchorage Daily News-ANWR Down in Senate, for Now; Washington Post versionNew York Times version.    *     HOUSTON, (BUSINESS WIRE) -- Researched by (Industrial Information Resources Inc. Houston, Texas). BP Exploration (Alaska) Incorporated  (Anchorage, AK), a subsidiary of BP (NYSE: BP) (LSE: BP.L) (London, England) is nearing completion of an $86 million grassroot Gas-to-Liquids Pilot plant in Nikiski, Alaska. BP Exploration selected Kvaerner Process (Houston, Texas)... (See our stories here.)     *    Calgary, Alberta – TC PipeLines, LP (the Partnership) ... announced that based on currently available information, the recent downgrading of Enron Corp.’s credit ratings and other events involving Enron, should not have a material adverse impact on the Partnership’s financial condition.  However, it is premature to determine with certainty whether and to what extent the Partnership may be impacted by these  events.  The Partnership holds a 30% general partner interest in Northern Border Pipeline Company.  The other 70% general partner interest is held by Northern Border Partners, L.P., a publicly traded limited partnership, of which Enron controls two of its three general partners.  Northern Border Partners, L.P. is not affiliated with TC PipeLines, LP. more....     *     Houston, Texas, December 4, 2001 - Burlington Resources Inc. (NYSE: BR) today announced the acceptance of its C$53.00 per share cash tender offer to acquire all the common shares of Canadian Hunter Exploration Ltd. (TSE: HTR) by Canadian Hunter's shareholders.  Burlington also announced that it has received all the necessary regulatory approvals concerning the acquisition of Canadian Hunter. 

12-3-01:  We're back.  Our stories of last week's events (11-26 REPORT) will be so extensive, with so many downloadable presentations and so many important developments and perspectives--that we will be posting them Sunday, through the first of the week.  We believe you will consider this series of reports worth the wait!  They will also provide decision makers, influence leaders, researchers and journalists with a substantial addition to the archives, for future reference.  The material presented could be of special relevance to Alaskan and Canadian provincial/territorial elected leaders and the strategic directions they are undertaking. -dh     *     Co-Chaired by Anchorage's Judy Brady, Executive Director of the Alaska Oil and Gas Association (Photo) and Houston's Matt Janisch, Managing Director of BMO Nesbitt Burns Inc. (Photo-right), the Canadian Institute's Arctic Gas Symposium produced such a rich array of information that we've established a special page for readers.  The star cast of presenters was led with keynoters: Jim Antoine, Northwest Territories Minister of Aboriginal Affairs & Resources (Photo-right), Scott Kent, Yukon Territory Minister of Economic Development (Photo-middle) and Murray Smith, Alberta Minister of Energy (Photo-left).     *     Resource Development Council for Alaska: The Alaska Highway Natural Gas Pipeline Policy Council: Final Report to the Governor was released, providing much detail, and is consistent with the policy direction given it at the beginning of the year. -dh   *   more coming....      *     OGJ Online by Maureen Lorenzetti, WASHINGTON, DC -- Pat Wood III, the US Federal Energy Regulatory Commission chairman, Thursday said federal legislation isn't needed to accelerate construction of a pipeline to deliver Alaskan gas to the Lower 48 states.  He told a meeting of the Energy Bar Association that an existing interagency task force would be able to speed the permitting process, when and if an application is filed at FERC. ... The FERC chairman said the gas pipeline is a key element of national energy strategy, but the companies building the line should determine the route, not governments....       *     CONGRESSIONAL QUARTERLY: Senate Republicans will get a test vote today on their energy policy measure and a six-month moratorium on human cloning they are seeking to attach as an amendment to a popular railroad retirement measure. Energy and Natural Resources ranking Republican  Frank H. Murkowski, Alaska, hopes to win more than 50 votes for his energy amendment to demonstrate that a majority of the Senate supports opening the Arctic National Wildlife Refuge (ANWR) to oil drilling. Foes of the ANWR proposal including John Kerry, D-Mass., threaten to filibuster any bill that includes the provision. Minority Leader Trent Lott, Miss., acknowledged that  Republicans may have muddied the energy issue by adding the cloning moratorium to their amendment. If, as expected, Republicans fail to limit debate on their amendment, the Senate will vote on limiting debate on an amendment by Majority Leader Tom Daschle, S.D., that would  replace the language of the underlying bill (HR 10) with the text of the railroad retirement bill (HR 1140).

11/28-12/2:  Somewhat personal--Since we will be participating in the Arctic Gas Symposium the balance of the week, Northern Gas Pipelines has prepared for faithful readers the following useful reports to satisfy your demand for information.  Read three exclusive reports below for a Senator's take on Congressional action, a report on yesterday's meeting of economists, and the latest outlook from the Alaska Gas Producers Pipeline Team, with our comments.  (Please take a moment during the next few days to Email us with your ideas: what should we be covering that we aren't?  What are we doing well or not so well?  What isn't anyone covering that should be?  What ideas do you have for improving this simple but content rich website?  Would you like to be a volunteer reporter and supply stories/photos of gas pipeline-related events?  Did you at one time work on one of the gas pipeline projects; if so, would you please provide us with your own story, 2-20 pages!)  Lastly, let us tease you.  One of our Canadian readers is a 9th grader named Jeremy who has assumed responsibility for producing a school paper on Arctic gas pipelines.  We have assisted him with contacts and web links.  By mid-December we look forward to sharing with you the correspondence and final product; we are sure that it will reinforce your confidence in the generation for whom we are really working on pipeline projects.  If you are willing to offer your help or expertise to Jeremy, please email us at the link above and we'll put you in touch.  This thoughtful young man would deeply appreciate your help.    *     CBC, Yellowknife, N.W.T. - Politicians and business people from the Northwest Territories are selling Texans on their territory today.     *    DALLAS - Team Canada's latest trade mission to the United States...   *          Inuvik, N.W.T. - About thirty scientists from around the world will be in the Mackenzie Delta this winter...drilling for natural gas hydrates.


  (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: 11-28-01)

Northern Gas Pipelines-Senator Frank Murkowski said this week that he intends to attach an energy bill to a $110 billion agriculture bill and that ANWR exploration will be a component.  Failing that, he said, “We also have some other strategies for adding ANWR to other legislation.” (Photo, 11-3-01)

In answer to questions posed by Northern Gas Pipelines, Murkowski’s office provided a statement quoting the Senator as saying he was pleased with movement in the development of an Alaska Natural Gas Transportation System. 

"I am happy to say that less than two weeks ago,” he said, “I stood shoulder to shoulder with eight of North America's premier energy transportation companies as they announced reconstitution of the Alaska Highway natural gas transportation system partnership.  (See our earlier story.)

"This effort comes in addition to the work already put forth by a consortium of Alaska North Slope producers, Phillips, Exxon, and British Petroleum.  These companies have invested over $100 million dollars in analyzing the technological and economic feasibility of constructing the gas transportation system,” he said.  "While the producers' initial findings indicate that the project is still marginally uneconomic, I am encouraged by the level of effort they have invested….”

Murkowski said that reconstitution of the pipeline companies' partnership and continued efforts by producers set the stage for joining forces in the development of the gas transportation system.  "I have always believed that construction of this $20 billion mega-project is going to take the combined efforts of both pipeline and energy production companies.” 

He said that the re-emergence of the transportation companies should end speculation regarding a northern route.  "The Highway route affords Alaska access to a vast reserve of clean energy and feedstock for future industrial applications,” he said. 

Murkowski believes the highway route protects options to bring LNG into Valdez and gas feedstocks into the Kenai to further develop petrochemicals.  “While this effort proceeds,” he said, “I will continue to consider introducing any legislative changes needed at the federal level to make a gasline a reality for Alaskans."

Murkowski added that the U.S. needs a comprehensive energy policy and that, following 9-11 less dependency on foreign nations in unstable areas is vital.

WASHINGTON, D.C. (Late last night, this came in.  –dh)-- Alaska Sen. Frank H. Murkowski…, released the following statement after Senate Majority Leader Tom Daschle said that he would not move an energy bill until next year.  (HOUSTON CHRONICLE-"I don't know that we'll have the opportunity to complete work on the energy bill before the end of this session," Daschle, D-S.D., told the Senate....; Anchorage Daily News)

"Next year is not soon enough for energy.  These are volatile times.  To be so dependent on such an uncertain corner of the world places American lives at risk and our economic future in jeopardy.  …I still believe we have an obligation to solve this problem.  I remain committed to bringing about a vote on energy - if the leadership will not set a date certain this year, I will use whatever procedural means are available to make that occur.
       "Just yesterday President Bush explained more of Iraq's role in harboring terror and discussed  their refusal to allow in weapons inspectors.  Yet, in the midst of September's attacks, we imported a record 1.192 million barrels of oil a day from Iraq, the most since July 1990.   If Baghdad is our next target after Kandahar, what's going to happen to that oil?  Can we replace it?  …
      "Last week we lost two American sailors who had stopped a tanker smuggling Iraqi oil.  Our dangerous reliance on Saddam's oil is not only putting too many Americans in harm's way, it further strengthens his rule. 
      "With a comprehensive, national energy policy with solutions that begin at home, we can ensure our energy security and our national security….
      "…  If we have time to deal with the railroads, we certainly have time to do energy…."

Northern Gas Pipelines-“Alaska Energy Economists Discuss Cook Inlet Gas Supply and Relationship to North Slope Gas Decision.”  Yesterday the Anchorage chapter of the International Association for Energy Economists gathered to hear a joint presentation by three State Division of Oil and Gas officials representing the Department of Natural Resources.

Bill VanDyke, Petroleum Manager first spoke on overall Cook Inlet activity (Reference: AEDC study; and, earlier presentation). 

(Our Canadian and Lower 48 readers should know that discovery of the Swanson River Field on the Kenai Peninsula (bordered by Cook Inlet) in 1957, led the Territory to successfully advocate statehood with Congress and the Eisenhower Administration.  At that time, there were no gas industry,  transmission lines or distribution systems.   At statehood, in 1959, companies were organizing a successful LNG Japanese export project using the abundance of gas.  At one time, Southcentral Alaska, including the largest city of Anchorage, had a 50-year supply of gas with prices below a quarter an MCF in the early days.  Times have changed.  The biggest city became a modern metropolitan center of business, transportation, education and industry and in 2001 gas reserves are in jeopardy.)

VanDyke (Photo, 11-27-01) described a large number of existing reserves and said that on shore and off shore there is much new exploration activity planned for this year and next year, including coal bed methane exploration advanced by a new Alaska player, Evergreen Resources.  “There are no big surprises this year,” he said.  “Production meets demand.”  With the exception of Swanson River recovery efforts, he said, “the big gas fields continue to supply about 90% of production.  He said typical annual use and current production is 217Bcf.  With about 2.1Tcf of reserves, a 10 year supply remains.  Though lower 48 reserves usually average in the 7 year range, the 10 year horizon for Southcentral Alaska is of particular concern, not just because citizens can experience several weeks of sub-zero weather.  Decisions need to be made soon on Kenai Peninsula industrial use of gas and he provided a chart of “Gas Hypothetically Available for Local Utility Use”.  Phillips Petroleum Company’s LNG operation uses a little more than a third of production, while Agrium’s fertilizer plant processes a little less than a third.  The balance is used by utilities for power and heat generation, by other industrial and field applications.  The state is faced with a dilemma of perhaps having to terminate one or both of the major industrial operations to safeguard utility use if exploration is not successful.  But VanDyke said, “I believe there will be reserve additions in the next few years”.

Tim Ryherd, Geologist, summarized a rather active “Cook Inlet Exploration Summary” (Photo, 11-27-01).  He then elaborated on the “sufficient new and planned exploration” on public and private lands.  In an interesting chart on the “Timeline of Cook Inlet Exploration”, he demonstrated that a relatively low level of drilling in the past has led to little discovery.  “Exploration for gas has been very limited,” he said.  “Even when explorationists found gas, they were looking for oil”.  Of 267 total oil and gas exploration wells drilled in Cook Inlet through 2000, he said, only 24 were gas exploration wells.  “Much of the Cook Inlet basin area,” he said, “is underexplored, especially with such new technology as 3-D seismic exploration.”

Will Nebesky, an economist and commercial analyst, was also speaking before the last meeting over which he was presiding as president.  He briefed the audience on gas consumption by category (industrial, utility, power generation, and field operations) and the royalty value to the state and how it is calculated.  Royalty value is determined by the higher-of clauses in the lease and by settlement agreements that attempt to capture fair market value.  Historic commercial arrangements for many Cook Inlet gas dispositions index gas prices to oil markets.  There appears to be a new effort to build in a Henry Hub spot market component in determining value.  He displayed forward-looking charts showing a dramatic supply drop, including scenarios involving the addition of 1Tcf of new supply, no new supply, and curtailments of industrial use.  He concluded by demonstrating the relatively small magnitude of Cook Inlet gas supply compared with Alaska North Slope gas.

  • Alaska North Slope (ANS) gas production (with reinjection and no significant sales) is 8Bcf/d.
  • An Arctic gas project could envision initially selling 4Bcf/d.
  • The State’s ANS royalty share would be about the same as total current Cook Inlet production, .4-.6Bcf/d.
  • A potential demand in Fairbanks for ANS gas could be projected at about .04Bcf/d.

(Obtain this updated PowerPoint presentation here.)

Comment:  Just as Cook Inlet production is declining, so are state revenues.  Alaska currently spends more than it takes in, making up the balance from fast depleting savings accounts.  The savings account reserves are on an even sharper decline than Cook Inlet gas reserves and will be used up before the end of the decade.  Even revenue from an ANS gas pipeline would only slow the decline in revenue, not reverse it.  The concern for Cook Inlet production, the industry jobs/tax base it supports and gas supply for Fairbanks are only a few of the reasons why political leaders in Alaska are so focused on enabling an Alaska Highway or Trans-Alaska LNG project.  Either could bring the huge ANS reserves closer to major population centers.  Now, readers outside Alaska may come to understand why there continues to be tension between the desire to achieve maximum value for ANS gas—maximum income for the state--and the desire to keep Alaskans employed and their homes warm.   A long delay of an ANS gas project, however, would jeopardize both goals...the worst outcome.  -dh

ANCHORAGE-Alaska Gas Producers Pipeline Team (AGPPT) Year-long Feasibility Project Approaches Conclusion  (Northern Gas Pipelines Report and commentary). 

Not surprisingly, the political leaders of Alaska, Northwest Territories and Yukon Territory have made their political support known for various project routings based on what they perceive to be the best interests of their constituents.  It is valid for politicians to reflect their political views in regulation and law.  It is also true that political acts cannot necessarily command economic feasibility nor compel private investment.

Various companies bought the leases in Arctic areas, explored, found oil and/or gas.  Their constituencies are shareholders who provided the exploration funds expecting a fair investment return.  If governments did not specify route and mode for transporting resource in the original lease agreements, companies are entitled--indeed required--to produce the most efficient system in faith with shareholder expectations.  Accordingly, the companies are obligated to make rational, non-political decisions for moving their resource to market. 

The AGPPT feasibility study for commercialization of Alaska North Slope gas was scheduled for completion at the end of 2001.   The final route was also expected to be identified and an application filed with Canadian and U.S. governments by year-end or shortly thereafter.  Several things have happened over the last year including a dramatic slide in the market demand and price for gas.  Also, the AGPPT has argued that a keystone in project feasibility is fiscal/regulatory 'clarity' in Alaska and Federal legislation, neither of which has occurred.  Neither does it look likely that the AGPPT will file project applications with the two Federal governments by year-end, or shortly thereafter as earlier planned.

So, the team has announced no final routing or feasibility conclusions, though there are interim conclusions we can deduce from statements and actions:

  • Neither the Northern or Southern routes have yet been found economically viable but the shorter Northern route is probably cheaper unless the study produces unanticipated surprises.

  • Based on an application process in both countries during the 70s, the Alaska Highway, southern route was approved as an exclusive route for Alaska gas and the company selected to manage the project was a predecessor to current southern route standard bearers.   Those approvals, memorialized in international agreements and legislation, have never been changed; to change them would seem to require Congressional and other action.  Southern route proponents have said that updated revisions to the nearly 30-year-old 'ANGTA regime' could be helpful even for the Highway route.  An Alaska gas project built by any other sponsor, or using any other route, would require Congressional and other action.  No such action has occurred.

  • The routes, if completed, would supply significant revenue to Canadian and U.S. Federal and local governments; the cheaper route could provide slightly more government revenue.  Many argue, however, that royalty and tax value could be secondary to other stakeholder benefits (See Cook Inlet story above).

  • The Canadian government has stated it is route-neutral, will not offer special incentives but will expedite the regulatory process (See here).  Company opinion varies on the need for Federal incentives.

Affecting the final outcome must surely be the recent announcement of a ConocoPhillips merger combining North Slope and Mackenzie Delta gas reserves of the joined companies.  Three major producers share the significant 35 TCF proven North Slope gas reserves.  Two of the three now have proven reserves in the Mackenzie Delta while the other has exploratory interest there.  Accordingly, shareholders would properly insist that any decision on gas commercialization routing and timing consider company reserves and potential on the North Slope and in the Delta.  Also affecting the outcome are recent announcements that the Alaska Highway Project sponsors have reestablished their partnership (See here) and entered into a cooperative process with the Kaska Nation (See here) and that much Alaska sentiment still supports an LNG system (See here). 

Northern Gas Pipelines this week questioned David MacDowell, External Affairs Manager (Photo, 10-25-01) for AGPPT on the current status of the feasibility study, and next steps.   "We're on track for year-end delivery of engineering, cost, and environmental information," he said.  "These updated costs will provide the basis for evaluation of project feasibility."  We asked MacDowell about timing of the final report.  He said, "the joint team will consolidate all of the data developed during the year, and will forward it to the three sponsor companies for review. It's a lot of information - around $100 million worth.  The sponsor companies will analyze the results and determine potential next steps."  MacDowell said they hope to be in a position to share information about forward plans early in the new year.  He said it is too early to speculate on how year-end results might differ from earlier releases of interim data.  The producers all along have said the individual companies would determine final project feasibility and that this phase of the study effort would be complete around year-end.  Both of these positions remain consistent.  But there seems to be a continuing public expectation that some grand release of routing choice and feasibility will occur at year-end.  If one is guided by actual statements of producers, including this latest one, it seems more likely that:

  • The AGPPT feasibility work will be completed, as stated, by year-end but not likely released publicly at that time.

  • The completed study will be provided to the three sponsoring companies for internal analysis.

  • The individual companies will indicate their assessment of economic feasibility and could indicate preference for a pipeline route and their opinion as to the timetable for filing any resulting applications, for holding open seasons to determine reserve capacity for shippers, etc.  This could occur in the new year, date uncertain.

Some of the possible 2002 scenarios could include:

  • The companies could pursue individual projects or not pursue any projects or delay consideration of projects.

  • Some or all of the producers could work among themselves and/or others to form a new consortium to engage in the regulatory--and subsequently, the pre-construction--phases of one or more projects.

  • The AGPPT could continue its study partnership and evolve into a consortium or disband, having completed its mission.  Note: the AGPPT consists of about 100 employees 'borrowed' from sponsoring companies and about 500 contractors on term assignments.  Dissolving AGPPT should not necessarily be regarded as abandonment of interest in developing a gas pipeline project or as an unexpected event.

  • The Alaska Highway Pipeline Project proponents could, with their reconstituted partnership, respond to a producer invitation and submit an economically viable project proposal (See here).

  • Delta producers could continue momentum of a Mackenzie Valley pipeline regardless of Alaska developments.

Both AGPPT and the Canadian government have logically stated that government roadblocks to any project are more likely to bring down a project than facilitate one.  One scenario could envision government legislation providing legislative incentives for a politically preferred route or disincentives/prohibitions for a politically unpopular route.  Were this to happen, as a trade-off benefiting certain interests, all outcomes could have negative impact on some combination of royalty owners, taxpayers and/or shareholders, future investors contemplating the investment climate of northern, North America.

Northern Gas Pipelines readers, including the author, might instinctively prefer a combination of three routes: (1) an Alaska LNG project "Y" leg from Fairbanks to Valdez; splintering off from (2) an Alaska Highway Pipeline Project route which intercepts gas from (3) a Mackenzie Valley Pipeline.  But were we told we could have that scenario if we were willing to pay for it, chances are we'd commission a study to determine what scenario would produce the best return for our investment of billions of dollars.

Viewing the results of that study, we'd then decide if the perfect project also provided an economic return; if it didn't we'd be obligated to commit our money to a feasible project.  If politicians erected roadblocks to that project, we’d be out of options. 

That very process seems to be playing out now among the primary investors.   We don’t know whether their final decision will turn out to be the most popular conclusion from their viewpoint or ours.  But following an expensive process of prudence and due diligence the results will reflect a scientific approach…and reality (On this subject, here's an economist's opinion).  -dh


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