Where to go from here?

It's great to see that the Mackenzie Valley Pipeline has been approved by Canada's National Energy Board.  It's possibly the most significant regulatory step in a mega-project that's been more than three decades in the making, and that means that in terms of planning and permitting, we're reaching the home stretch.

The question is, what happens now?  It may be as much as two years before Imperial Oil announces whether or not it will build the line, but that doesn't mean the region lies dormant.  Gas exploration in the Mackenzie Delta was fairly active a few years ago, but has dwindled to nearly nothing in the past year as exploration companies became wary of the regulatory process.  It's safe to say that exploration should pick up as early as 2011.  While many critics still point to supposedly abundant shale gas, there are still some questions to be answered about just how economical this gas is, and how easy it is to recover in an environmentally responsible manner.

As well, shale doesn't really solve the issue of declining conventional reserves in Western Canada the way Delta gas might.

The shovels aren't yet in the ground, but we're getting closer.

Green Light for Mackenzie Line

Mackenzie gas pipeline OK'd by NEB - CBC.ca website

The long-awaited ruling from the National Energy Board has come: The MVP has official approval, albeit with some conditions.  I haven't had a chance to review them yet, but I'd suspect there aren't any serious deal-breakers.

The approval goes to cabinet now, but any significant changes are seen as unlikely.

Some analysts are mistakenly seeing this as a competing line with the Alaska Highway line, which simply isn't the case.  Different markets, different purposes, and access to different fields.  Both are viable under the right circumstances.

And would would those "right circumstances" be?  Well, the MVP gets built first, and gets a few years of having the market to itself while the Alaska line continues development. During this period, it should show a healthy profit and a decent return to investors.  The gas it supplies will also help cover current declines in the Western Canada Sedimentary basin.  As the Alaska line starts bringing gas onstream, the MVP will have already paid a considerable portion of its own capital costs and have established fields from which to ship.

Terribly surprising?

Some N.W.T. pipeline recommendations rejected - Vancouver Sun

The Canadian Federal and Northwest Territories governments have not adopted all the environmental recommendations made by the Joint Review Panel.

This really isn't a surprise; at least some of these recommendations are better served by the proponents, for one thing, and some would appear to directly contradict current policy.

I repeat: I'm not dead yet!

Don't give up on the gas pipeline: AlaskaDispatch Blog

The Alaska Dispatch blog gets a lot more visibility than I do, but I want to pass this piece along. Essentially, there are a lot of things going on behind the scenes right now. It's not all terribly visible, but it doesn't mean there isn't work being done.

AGIA is not a failure at this point, in fact it's moved the ball forward considerably. The process of permitting a line is expensive and time-consuming.

We'll have a much better idea of just how feasible the TCAlaska project is when they release the results of their Open Season.

Prentice Leaves Politics

CBC News - North - Baird takes over Mackenzie pipeline file

This was a surprising development: Canadian Environment minister Jim Prentice suddenly announced his retirement from politics, taking a senior executive position with the Canadian Imperial Bank of Commerce. With this departure, the MVP file is being handed to John Baird.

This CBC piece includes some quotes from analyst Ian Doig suggesting that Prentice may have left over frustrations with the MVP, though I have to say that seems unlikely. There has been considerable speculation on exactly why Prentice chose to leave now (not to mention some raised eyebrows over his moving immediately into a powerful position with one of Canada's largest banks), and there could be any number of reasons why he chose to go now.

US Midterms: Fallout?

I didn't comment much during the height of the US midterms, in part because I was far too entertained by the Alaska races to actually spend time writing about them.

In the final analysis, the results of two of the races stood a chance to affect Alaska Highway projects, and in both cases we seem to have the status quo: Sean Parnell is still Governor, and it looks likely that Lisa Murkowski will return to the US Senate (as of this writing, the write-in ballots have not yet been read, so there could be some controversy, but it looks like a strong finish for the incumbent).

In terms of getting a project underway as soon as possible, this was likely the best outcome we could hope for.  Parnell was appointed to replace Sarah Palin when she resigned as governor, and has stood in full support of her AGIA process, under which TransCanada Pipelines is the successful licensee.  Murkowski, at the federal level, has a strong role to play in making sure that the loan guarantees currently in place don't go anywhere, and in expediting the permitting process where she can.  Her experience with this file will be valuable in the next year.

AGIA opponents hounded Parnell during the campaign, insisting he press for the release of results from TCPL's open season earlier this year.  Evidently, he didn't see the need to do this, though there is some sense we'll see this by the end of the year.

Just a litte longer...

Pipeline leader lays out three-year plan - Northern News Services

At the Prospects North 2010 conference in Yellowknife last week, an Imperial Oil executive laid out a timeline for the preliminary work that would need to be done before a decision could be made whether or not to go ahead with the Mackenzie Valley Pipeline project.

This would assume, of course, that the National Energy Board issues an approval for the project (without unacceptable conditions). We were expecting such a decision last month, but it has been put off until sometime in November.

Curb Your Enthusiasm

Denali gas line bids called 'significant': Gas Pipeline adn.com

The Denali Project announced the conclusion of their Open Season on Monday, claiming "significant" volume had been bid for among potential shippers.

To be honest, this really sounded like a paint-by-numbers press release, with nowhere near the energy or optimism that TCPL seemed to exude at the conclusion of their own Open Season back in July.

And, let's face it, there's not a lot of enthusiasm for northern pipeline projects, at least not at the moment. The Deepwater Horizon most directly affected BP, but it really affected public opinion of oil production in general. Never mind that these are gas projects, which in general tend to be "cleaner" from the exploration phase right to the consumer, oil companies in general rank somewhere down the list with personal injury lawyers these days.

That will change, but probably in no meaningful way that will save Denali. BP stands to be on the hook for considerable $$$ to clean up the Gulf of Mexico, and there have been suggestions they are ready to leave Alaska completely. I find it hard to believe they feel that strongly committed to this project. And without them, there's not much left.

One can hope they have data and other assets that will benefit TCPL...

Figures...

Mackenzie pipeline decision delayed - regulator Reuters

We'd hoped that the NEB's final report would be issued in September. Now, on the last day of the month, we learn that they don't have all the information they require for their final report. Given how long this process has been dragged out so far, I guess I shouldn't be surprised.

Cross your fingers and hope they can hold to that projected November release...

Glimmers of Hope

Giving hope a chance - August 15, 2010 - Petroleum News

Gary Park's op-ed piece for Petroleum News recaps some recent bid activity for exploration leases in the Beaufort Sea, and he suggests that the recent successful bids might indicate some cautious hope that the Mackenzie Valley Pipeline project will proceed soon.

The subtext here is that while the natural gas lines will be essentially paid for by conventional, land-based production, the real potential lies in the opportunity to tap offshore gas resources.

Alaska Loses a Legend

CBC News - North - Ex-U.S. senator Ted Stevens dies in plane crash

If an Alaska Highway Gas Pipeline project ever gets off the ground, there should be a moment of thanks for former US Senator Ted Stevens. However you want to view Stevens' politics, he worked long and hard for the people of Alaska, and that included strong advocacy of the pipeline project. Stevens was lost in a plane crash north of Dillingham, Alaska last evening.

A little more detail...

TransCanada touts substantial interest in Alaska gas line - Alaska Dispatch

On reviewing some of the coverage of TCPL's announcement of the end of its Open Season last Friday, I found this to be one of the better articles, with a little more background on the issues surrounding some of the bids.

A particularly interesting tidbit is that the AGNDA--a group formed to ensure gas supply to the Alaska interior--placed a bid, as they will on the Denali line as well.

Related articles by Zemanta

• TransCanada calls Alaska open season a success (calgaryherald.com)
• Open Season for Alaska Gas Pipeline Closes Friday (abcnews.go.com)

Open Season... Closes

Natural gas pipeline project moves forward: Gas Pipeline adn.com

To hear tell from TCPL's Tony Palmer and Alaska Governor Sean Parnell, a "significant milestone" has been passed in the construction of an Alaska Highway Natural Gas Pipeline, with the ending of TC's Open Season, where bids were solicited from potential shippers on the pipeline. According to Palmer, they've recieved bids for "significant volumes."

Mind you, the project remains something of a political football, with Parnell's political opponent Bill Walker taking shots at the announcement and further criticizing the parties for failing to release the bids to the public.

I seriously doubt that releasing those bids would change much anyway. Most are anticipated to be conditional on establishing more "fiscal certainty" with the State of Alaska on royalties and taxes, so that just opens a different political can of worms. However, the odds are pretty good that since bids are in, the government can quietly start discussing terms with the shippers in conjunction with the pipeline proponents.

Denali's Open Season closes on October 4, and it will be interesting to hear the announcements that come in the wake of THAT.

Move along folks... nothing to see here...

BP asset sale doesn't include Alaska stake - Anchorage Daily News

As has been widely rumored, BP has sold a significant chunk of assets to Apache, including gas assets in Western Canada and 10 fields in the Permain Basin in Texas.  What did NOT happen was the rumored sale of BP's Alaska fields.

Soooo, BP's Alaska gas assets remain in play, and BP remains an Alaska pipeline player.  For now.  I really wish I could be a fly on the wall when in the meetings where they figure out how much gas they want to ship on TCAlaska's line...

Hint, hint...

Feds need to expand Arctic sovereignty efforts: premier - Vancouver Sun

NWT Premier Floyd Roland took the opportunity to promote the MVP project at the annual gathering of the western Canadian premiers. Among its other benefits, it will improve Canada's claims of northern sovereignty.

This is true, of course, and the economic benefits are important, but where Roland begins to "jump the shark", if you will, is when he raises the spectre of an Alaska Highway project taking the lead. He raises the threat for an obvious reason: he wants Canada's federal government to support the MVP the same way that the US government has supported the Alaska project.

That the Alaska project will pull ahead is unlikely; the MVP is considerably further along in the permitting process (and in fact will get the final word from the National Energy Board within the next two months), so this feels a bit like an empty threat.

There's no such thing as an "All-Alaska" gas project...

Walker fights to open gas pipeline files - Anchorage Daily News

Yes, this item goes back a couple of weeks now, but indulge me for a minute.

It's inevitable that when you're talking about the kind of money that gas sales could provide for the state of Alaska, that projects can become political footballs.  The Republicans are holding their primaries for this November's gubneratorial elections, and current GOP Gov Sean Parnell is being pressured to release TCPL's Open Season results before the August primary.  Challenger Bill Walker believes that the entire AGIA process has been a bust, and thinks that TCPL's shipping commitments will bear that out.  He then goes on to accuse Parnell of "hiding" this, and promises that as Alaska Governor, he'll make sure an "All-Alaska" pipeline project gets built that will pipe gas to Valdez, liquify it, and send it out on ships.  After all, that works for oil, right?

I have no dog in the hunt whatsoever, but I can smell the political BS when I come across it.  Let's remember that Sarah Palin herself suggested she favored the "All-Alaska" project, at least before she made it into office.  It's a convenient, populist platform that plays into the deeply patriotic feelings of the Alaskan population.  The trouble is, it won't work.

Why not?  First off, the numbers are questionable.  We're still looking at upwards of $20 billion to build a line down to Valdez and establish the liquifaction plants.  Once they're built, those plants will need huge amounts of energy that will likely come from burning off some of the gas.  I'm not an engineer, and if anyone knows better I welcome a correction, but I'm guessing that will take upwards of 20% of the product off the table right away.  Even beyond that, the capacity to ship will be down compared to a pipeline into Canada.

Once that gas makes it on to a ship, there are issues, too.  The Jones Act prohibits ships built outside the US from shipping between two American ports.  The most likely port for the ships to sail to?  Kitimat, BC.  Where the gas will ship through Canada anyway.

The second issue?  There's really no such thing as an "All-Alaska" gas project, because at the end of the day, most of that gas has to ship OUT of Alaska to find a market.  The vast majority of the gas has to leave the state, whether it be on a pipeline into Canada, or on an LNG tanker going who-knows-where.  And setting aside the technical issues and the economics, LNG is a much more "fluid" market (pardon the pun) than piped gas.  If you have a customer in, say, Japan who finds a cheaper supply of LNG than yours (and given that $20 bln in capital costs, that might not be hard), you'll need to find a new place to send those ships.

I understand that the "All-Alaska" line sounds good in Alaska.  Particularly for people who have a vested interest in Valdez, which stands to lose jobs and money as the oil supply declines.  But wanting something doesn't make it a good idea.

Shakeup on the North Slope?

Fairbanks Daily News-Miner - Interior Alaska politicians have mixed reactions to BP sale rumors - Fairbanks Daily News-Miner

A bit of a roundabout trip for this development, as the piece I cite is actually a reaction to a report in London's Sunday Times that BP is in talks to sell its stake in Prudhoe Bay to Apache. But, since this is the piece where I actually read the news (and since the Sunday Times charges for its subscriptions), we'll go with this one.

For those who don't know, Amoco Petroleum was one of the pioneers on Alaska's North Slope, possibly its most important one. Amoco was bought out by BP long ago, but much of Amoco's value was in its North Slope position. BP selling its North Slope stake is akin to the White House announcing that the Library of Congress had been outsourced to Google.

The News-Miner piece has a quaint feel to it; State Representative Jay Ramras suggests this sale means the state needs to reform O&G taxes to encourage investment, which conveniently ignores the little issue of BP needing all the cash it can get its hands on these days.

As for pipeline implications, I'm going out on a limb to say that if this report is accurate, and the deal is actually concluded, that it effectively kills Denali. Why? Because BP has no reason to build a pipeline it won't be shipping its own gas on, and Apache doesn't have the clout to pick up the torch on a massive (and expensive) project that was already swimming against the current.

Tell me I'm wrong.

Couldn't have said it better...

Mackenzie a must-do - Financial Post

Canadian finance journalist Diane Francis nicely summarizes why the MVP "must" proceed, and I largely agree whole-heartedly.  I take a little issue with her assertion that this project is the only way to achieve sustainable economic development in Canada's north, but it's certainly the best prospect we'll have for a while.

Alaska pipeline rivals not in direct talks, outgoing TransCanada CEO says - Brandon Sun

Alaska pipeline rivals not in direct talks, outgoing TransCanada CEO says - Brandon Sun

Not so fast, I guess. According to Hal Kvisle (who retired as TCPL's CEO this week), there have been no "direct talks" about a merger of his Alaska Highway Pipeline project and that of Denali proponents BP and ConocoPhilips.

Kvisle said that any contact has strictly been related to possible shipping volumes on their line. Since TCPL (or "TCAlaska", if you will) is conducting its Open Season to obtain shipping commitments right now, this is entirely appropriate, and--at least in theory--should have no bearing on how the projects might work together in the future.

In practice? Well, that may be another story. For one thing, if sensitive talks were in progress, I'm thinking Kvisle would deny it regardless. And for another, if BP and their partner are developing cold feet, then they might be making a larger shipping commitment.

This whole thing might look a little odd to those outside the industry. Here we have shippers aligned with competing projects (ExxonMobil is working with TCAlaska, and BP and ConocoPhilips are pushing the Denali project); it would seem that these competitors would go out of their way to discredit the competing project by "under-committing" to the competitor. The truth is, though, that this has been the way they've done business in the oil and gas industry for decades. The other thing to remember is that if BP committed to ship a considerably larger volume of gas on its own line than it would on TC's, it would definitely raise some eyebrows.

Denali: The Death-Watch Begins

Talks Begin to Join Pipeline Projects - Houston Chronicle via Alaska Highway Pipeline blog

Kudos to AK Engineer in picking this item up from the Houston Chronicle. It's a big one.

To me, the Denali project was something of a red herring from the beginning; more of an effort to discredit the AGIA process than a serious project. That there is now a quiet public acknowledgement that Denali's proponents (ConocoPhilips and BP) are now seeking to merge their project with TCPL's is significant.

This is actually very, very good news. Everyone knew that there was no way both projects would be built, and Denali was the dark horse from the outset. It diverted attention and resources, and perhaps even some credibility, from TCPL's AGIA-sanctioned project. A single project that enjoys the support of ALL the North Slope producers stands a much better chance of proceeding to construction.

The timing of this announcement is significant, too. There's still over a month on TCPL's Open Season; if the Denali proponents are quietly shifting support, it will be somewhat less of a surprise when the nominations close and they are both found to have "thrown in" with their competitor.

None of this is a huge surprise. I noted myself that BP's difficulties in the Gulf of Mexico could ultimately hamper its ability to remain in the Denali project. I think I'll engage in a little wild speculation here and suggest that the Obama administration may have applied a little political pressure on BP to move this way.

Denali Project: Can BP Stay In?

Oil spill puts future of BP in doubt - Calgary Herald

While this story makes no reference to Denali (or any other northern project, for that matter), it's worthy of discussion because of the potential fallout.

BP is in some serious trouble. As this story points out, they've lost 30% of their market cap since the spill started, and the situation seems to deteriorate by the day. I find it hard to believe that this can actually improve chances of them investing upwards of $20 billion to build their share of the Denali Pipeline.

Mackenzie Valley gas pipeline "good for Canada": N.W.T. premier

Mackenzie Valley gas pipeline good for Canada: N.W.T. premier - Canwest

Can I confess I hardly find this worth mentioning? Of course NWT Premier Floyd Roland supports the MVP. Of course he's trying to drum up support by reminding us of benefits like $808 million in tax revenue, and 200,000 person-years of employment. Of course he's fear-mongering with the threat of being overtaken by the Alaska line (which seems somewhat unlikely, to be honest).

About as surprising as... sunrise?

CBC News - North - Only 10 Mackenzie pipeline recommendations OKed

CBC News - North - Only 10 Mackenzie pipeline recommendations OKed

This headline's a bit misleading. The Joint Review Panel approved the MVP project, with a list of 176 conditions. As this headline points out, the Canadian and NWT governments have accepted as written only 10 of them, a seemingly tiny fraction.

What the reader discovers in the body of the news item is that 77 other recommendations may be acceptable with modification, and that 61 others are out of the scope of these governments (i.e. they need to be addressed by regulators and proponents).

Did he say that out loud?

CBC News - North - N.W.T. gas could gain from U.S. spill: minister

I don't know what to think of this one. NWT Industry Minister Bob McLeod has suggested that the looming eco-disaster in the Gulf of Mexico could actually be good for the MVP project.

And, yes, he's likely right. A few weeks ago, Barack Obama announced new regulations to expand offshore drilling in US waters. In the wake of BP's tragic accident, this proposal is now pretty much "dead in the water", if you can pardon the pun. The energy from that anticipated drilling will have to come from somewhere. Even if the demand remains high for oil, that only puts more pressure on producers to develop more of the Athabasca Oil Sands.

Even so, this seems a little opportunistic, at least at this juncture, but when an Industry Minister attends an industry conference (in this case, the Offshore Energy Technology Conference in Houston), I guess he has to say something.

***

I haven't mentioned the April 20 explosion of BP's Deepwater Horizon well, 50 miles off the coast of Louisiana in this blog, because I want to maintain a tight focus on the two pending northern pipeline projects. However, this event will be something of a game-changer and it's going to have an impact on these projects. So, since Bob McLeod brings it up, it's time for me to weigh in...

Right now, I'm praying that BP's rather daring scheme to place a heavy "cap" over the spewing well works. The idea is interesting: place a big, heavy box over the wellhead, and pump the watery oil in the box up to the surface where it will be collected in boats. Who knows, it should even be refinable. This is one of those things that hasn't really been done before, and at this point it's the only hope that this oil slick doesn't get a LOT bigger.

Regardless of whether this works or not, there's already a huge slick making its way toward land. It's bigger than the Exxon Valdez spill of 1989, and threatens an absolutely massive stretch of coastline in the Southern US, Mexico, and the Caribbean. The optics are going to be impossible to miss. As of now, this shows the potential of being an ecological disaster of historical proportions.

What are the implications? Some of them are already being seen. It's turning the legislative agenda in Washington upside down as we speak, as lawmakers there prepare to consider new energy policy later this year. Voters will be very vocal in their opposition to any expansion of offshore drilling. That doesn't mean new drilling won't be permitted at all, but it's safe to say even now that there will be much less than previously expected.

So, the immediate fallout is a drastically slower expansion of offshore drilling in the US. That's a safe bet. Further out is a little murkier, but I think there are a few assumptions we can safely make. First, the taste for oil in general is going to decline, and the demand for gas could grow even faster. Even if oil consumption isn't affected, there will be more reliance on non-aquatic sources. Like the Oil Sands. All the while, conventional gas production keeps declining across North America, even in the wake of significant Shale Formation discoveries.

Yes, the future does look good for natural gas, and northern pipelines as a result, but that doesn't mean I'm happy about the circumstances.

Who says these projects aren't moving?

TransCanada assesses Alaska pipeline interest - CBC News

It's on, baby! TC's Open Season kicked off yesterday, the next regulatory step in the long saga that is the Alaska Highway Natural Gas Pipeline.

"What's an 'Open Season'?" you ask? It's a period of time where TransCanada takes submissions from shippers interested in sending gas down its line after it's built. The Open Season helps determine the economic viability of the project, a mandatory step in getting approval for the project from US federal regulators.

Fingers crossed!!

Like Tom Petty said...

Mackenzie pipeline hearings conclude - CBC News

"The Waiting is the hardest part..."

It's done. The regulatory hearings for the MVP have finally concluded. See you in September...

Clearly, not all FNs think alike...

CBC News - North - Inuvialuit leader backs Mackenzie pipeline

Nellie Cournoyea, chair of the Inuvialuit Regional Corporation (i.e. the head of the Inuvialuit as a First Nation) expressed her support for the MVP at the National Energy Board hearings, urging approval for the line even in the absence of an agreement with the Dehcho First Nation.

Cournoyea makes the point that all of the anchor fields are actually within her region, hence the majority of the environmental impact. Impacts further down the line would be minimal...

The Biggest Piece of the Puzzle

CBC News - North - Don't OK pipeline without land claim: Dehcho

I'm going to go out on a limb and say that today was probably the most important one in the NEB's Yellowknife hearings. Most important because today's testimony relates to what really remains the thorniest issue to be resolved before an MVP project can go "in the ground", the approval of the Dehcho First Nation.

The actual testimony sounds reasonable: Dehcho Grand Chief Sam Gargan appeared at the NEB's hearing today and presented a message that essentially states that the Dehcho cannot possibly sign on to the MVP before settling their own land claim. And, since the Dehcho occupy roughly 40% of the route planned for the pipeline, their approval is crucial. On the surface, this sounds obvious.

Anyone who knows the background here knows there's more to it. The way it actually looks (to me, an outsider) is more like the Dehcho has been using their approval of the MVP as a huge bargaining chip in their land claim negotiations with the Canadian Federal Government. This probably isn't entirely fair, but there has certainly been a history of confrontation, especially when it came to the tenure of former Dehcho Grand Chief Herb Norwegian. Norwegian was almost legendary as the "last man standing" against the project, and he never wavered in his demand for land claim settlement before agreeing to the MVP.

The trouble is, they tried to play off both sides against the middle. Now, they're kind of stuck. Many communities within the Dehcho territory have come to side agreements with the project proponents, eroding the position of the First Nation as a whole.

Is it fair to accuse the Dehcho of being opportunistic? There's a fantastic quote in this news item that came from George Erasmus, the Dehcho's chief negotiator:

Getting the new things that are different from the other agreements takes time, because they will like to keep as much as what they have already and we would like to create the new things, and the new instruments, and the new regimes.

I don't think it's stretching things to take this as an indication that they are looking for things that other FNs didn't get in their agreements.

The most encouraging fact that comes out in this piece is that the Dehcho actually supports Imperial Oil's request to push back the commitment deadline, as it takes a little pressure off them in their land claim negotiations. Again, I'll go out on a limb and say that with this endorsement, Imperial will probably get the extension they're asking for.

Like the song said, "Give Me Just a Little More Time"

Mackenzie pipeline backers seek more time - CBC North

At the NEB Hearings today, proponents of the Mackenzie Valley Pipeline (henceforth to be abbreviated here as the MVP) asked the board to extend its proposed "sunset" date three years, to 2016. Opponents, predictably, want no such extension.

There are a number of reasons why the proponents would seek this extension. First off, current gas prices don't support this project, plain and simple. The MVP backers are hoping to see a stronger gas market before committing to construction. Second, they have not yet worked out the whole "fiscal framework" thing with the feds...

Mackenzie Endgame

Final Mackenzie pipeline hearings to start - CBC News

The final National Energy Board hearings on the Mackenzie Gasline begin today, in Yellowknife. This isn't "news" per se, since this has been scheduled for months, but I'm especially struck by Imperial Oil spokesman Pius Rohlheiser's comments:

We believe it's a sound, potentially economic project that has the potential to provide meaningful, long-term positive benefits to a variety of stakeholders, including the companies involved, and governments, and the people of the North

This comment is a gratifyingly emphatic endorsement of the project by its most important proponent.

While I support this project, I hope these hearings provide an opportunity for all stakeholders to present their respective points of view.

Denali Price Tag: $35 bln

Denali Projects Alaska Gas Pipeline Cost at $35B - ABC News

So that's Denali's number, $35 bln. Or, if you like, $6 bln less than TC's estimate to run a line to Alberta.

Wonder where they're saving that money?

100 Years of Natural Gas Supply from Shale? It’s More Like 6 Years.

100 Years of Natural Gas Supply from Shale? It’s More Like 6 Years. - Petroleum Truth Report

I'm not a Petroleum Engineer, but it's intriguing to see some evidence out there that the gas market may tighten much faster than many analysts would have us believe.

I'm not just throwing this out there as an attempt to grasp at any straw that supports Northern Pipeline construction; there is a legitimate debate going on out there to suggest that there may be some funny numbers out there in the shale gas game.

Let's remember that shale is still relatively new. It involves some different exploration and production techniques, and may well have a different production profile (and lets not even start on the potential environmental issues). We don't totally know, because the models only show us so much, and a number of players have some pretty strong motivation to stick to the best case scenarios to attract investment.

The NEB breaks out its whittling knife

Mackenzie project gets energy board conditions - CBC North

The National Energy Board, in its draft list of recommendations for conditions on the Mackenzie Valley Gasline project, has decided to disregard roughly two-thirds of the recommendations of the Joint Review Panel.

The draft list shows the NEB proposing 55 conditions of the project, out of 176 in the JRP's report.

Most interesting to me is the condition that the project must be started before the end of 2013. I'm guessing that if a decision is made, it will be underway somewhat before then.

Sparks Fly in Calgary

Alaska pipeline feud heats up between key players - Calgary Herald

The friction between TCPL and the Denali pipeline proponents generates considerable heat but very little light at the Arctic Pipelines conference in Calgary this week.

This piece from the Calgary Herald largely sums up the debate so far, but doesn't really reveal anything new. However pointed the comments might be between each projects' representatives, though, the exchange seems reasonably respectful. Thank God.

CBC News - North - Mackenzie pipeline backers agree to update

CBC News - North - Mackenzie pipeline backers agree to update

This is a little unexpected. The conventional wisdom here said that the NEB would judge the project on its technical merits, and leave the economic questions to the proponents. For the NEB to request this update seems a little out of line.

New Pipeline Construction Down in 2010

Special Report; Pipeline construction plans slow for 2010 - Oil & Gas Journal

Interesting (if long) piece detailing a number of major projects around the world, including synopses of both northern pipeline projects.

One casually thrown out fact of significance is the reminder that TCPL recieved NEB approval for the Canadian portion of the Alaska Highway Pipeline project. Now, that approval was granted decades ago, and is currently subject to a challenge before the Supreme Court of Canada (Enbridge challenges that the approval is out of date, TCPL contends that they've fulfilled all legal obligations over the years to maintain it).

Gas market goes global

Gas market goes global - Calgary Herald

Interesting opinion piece about how the Russian giant Gazprom is delaying development of a remote gas field, with some parallels to the situation in North America.

I was most interested in this quote:

Others point to the inability of the shale gas in the United States to offset declines in conventional fields as one reason prices should continue to strengthen...

TCPL Formally Files Open Season Plans

TransCanada files open-season plan for proposed gas line - Anchorage Daily News

Another significant milestone in the long, long road to bring Alaska natural gas to market. TCPL has filed notice with the US federal energy regulator for its intention to hold its "Open Season" to gather shipping commitments for the line.

The filing contains provisions for both a land line through Canada and a line to Valdez, where gas would be liquified and shipped... well, we're not totally sure where.

Oh, that wasn't obvious at all...

Canada pipeline report may help unlock federal funds - Vancouver Sun

This report helpfully suggests that with the Mackenzie Pipeline project being conditionally approved by the Joint Review Panel, that it might assist in talks between the project proponents and the Canadian government for financial support.

In other news, water is found to be "wet"

The Empire (or Imperial, at least) Pushes Back

CBC News - Money - Environmental panel's demands could kill Mackenzie project

Imperial Oil has served notice that they're not crazy about some of the conditions placed on development of the Mackenzie Valley pipeline project. Some of the points they take issue with:

• A requirement that all operations in the area of the Mackenzie Delta bird sanctuary must be no louder than 50 decibels 300 metres away from the fence.


• Strict requirements on reporting a number of activities (such as garbage incineration)


• Detailed permafrost assessments before trenching is performed

Doubtless these requirements do add to the cost of the project, and there will likely be some back-and-forth in front of the NEB to determine how crucial these conditions are. I'm somehow doubtful that these conditions will be allowed to kill the project, though.

2010: The Timeline So Far...

We're not even through January, and from the timetable of events already scheduled 2010 is shaping up to be an extremely significant year in the history of both northern pipeline projects.

For instance...

Denali sets open season date - Petroleum News

This item outlines plans for the Open Season for the Denali Pipeline project, one of two currently aiming to build the Alaska Highway Pipeline. The other project (AGIA/TCAlaska) will be filing its Open Season plan with FERC at the end of January, with the Open Season itself beginning in May. Denali's plan will be filed in April, and (with approval) will begin in July.

The Open Seasons are of crucial significance; simply put they give producers in the North Slope region the opportunity to say how much gas they'd likely ship through either of the proponents' pipeline projects. These results will essentially provide a sense of how economically viable either project would be...

Mackenzie project gets hearing dates - Petroleum News

This item announces the last regulatory round for the Mackenzie Valley pipeline project, the final hearings before the National Energy Board. These will begin in Yellowknife on April 12, and are scheduled to wrap up in Inuvik on April 25. The NEB panel will then work on their final report, expected in the fall.

While these items represent different phases in the regulatory process for each project, each is crucial. It should be an interesting year...

Arctic gas lines: Adversaries or teammates?

Arctic gas lines: Adversaries or teammates?: Alaska Dispatch, January 13, 2010

Not a bad piece, though the title's a bit misleading; one expects some comparison/contrast between the projects, and there really isn't any save for the mention that the Mackenzie line is far further along in the regulatory process than the Alaska line.

The article quotes Jack Weixel from Bentek Energy as speculating that "Alberta may actually end up needing the gas more than the lower 48..." because of declining conventional reserves there. This is a significant point that relates to both the Mackenzie Valley and Alaska Highway gasline projects: conventional gas reserves are declining all over North America. This, at a time when prices are low and there is a strong political push to move industry to natural gas as a fuel source in place of petroleum oil or coal.

"But, of course, there's all that shale gas..." is the argument there, but we need to avoid taking that for granted. Shale is absolutely going to be an important source of gas, but there are some significant questions about it, too, both environmental and economical (shale is still uneconomical for prices below $8/MMcf and significant questions remain around groundwater and ultimate well production life).

If either project were completed and running today, it would be uneconomical. This piece suggests that neither would be economical in the next 5 years, either, but since neither one could come onstream before that, the point is moot. In fact, when either project is announced, energy consumers throughout North America will make their long-range plans accordingly.

Local Benefit: Heat and Power

CBC News - North - N.W.T. keeps community natural gas study secret

Sometimes lost in all the discussion of money, jobs, and potential environmental issues with pipelines is the potential long-term benefit to communities near the line.

This piece discusses the possibility of using gas from the Mackenzie Gas Line to power and/or heat communities along its alignment. This is a huge benefit; it's a reliable, clean (cleaner than diesel, certainly), and relatively cheap heating source. The CBC piece doesn't discuss this, but power can easily be part of the equation, too, when cogeneration power projects are built in conjunction with compressor stations.

Of course, this discussion applies to the Alaska Highway gasline as well, with implications up and down the highway. I'm envisioning Beaver Creek with power and gas from the line, and the cost of living and working in Whitehorse could drop dramatically.

...and the show goes on...

CBC News - North - Mackenzie pipeline hearings set for April

This, of course, is a matter of form; we've known for years that the JRP decision would be followed by a final round of hearings by the National Energy Board. This round will allow for some "final arguments", and will ultimately approve or deny the project.

The NEB hearings are not a rubber-stamp, nor are they meant to be as comprehensive as the near-4-year Joint Review Panel hearings. They are meant to be a final stage for representatives of major stakeholders to promote their various points of view for the NEB's consideration.

These hearings will finish on time, and their report will be on time. Nothing to worry about here.

Apex Resources "very pleased" with JRP approval

Apex Resources Group Inc. (Pink Sheets APXR.PK) Announces That After Nine Years The Mackenzie... -- SALT LAKE CITY, Jan. 6 /PRNewswire-FirstCall

Well, it's good to see SOMEBODY's happy. Apex Resources issued this release basically to gloat over their 3.745% stake in the Itiok I-27 property, saying they are "very pleased" that the Mackenzie line has been approved by the JRP...

Well, it was nice while it lasted...

Swords already drawn over Mackenzie report - The Globe and Mail

The ink isn't even dry over the JRP report (figuratively speaking, of course... since it was released on the Internet I should maybe say the electrons are not yet discharged?), and there is apparently already discord among other producer groups. This piece from The Globe and Mail suggests that if the feds are to provide support this line, that they may have a few questions to answer first. Producer groups in Alberta may apparently object to a supply of gas from the Mackenzie Delta if the federal government provides any degree of support. Alberta supplies have declined in recent years, and a new supply from northern Canada may do some degree of damage to what is left of the market.

I haven't editorialized much over the run of this blog to this point, but sometimes one has to draw a line: it's the height of hypocrisy for Alberta gas producers to object to this project. Back in the 1950s it became clear that natural gas was plentiful in Alberta, and that there were some significant challenges in bringing it to market. The (Social Credit) government of the day decided to support this new industry with a huge infrastructure investment, namely the Alberta Gas Trunk Line. This investment brought huge amounts of gas to market. And, yes, the producers paid for this investment over time, to the point where the Alberta government was able to successfully spin off this investment to the private sector, but this investment was initially made when government was the only major player able to provide it.

The basin that has provided so much wealth to the natural gas producers of Alberta is being drawn down, and the time is coming to find new supplies. Producers in the Mackenzie Delta have been waiting to sell this gas for decades now, and their time has come.

It's not as if Alberta receives no benefit from Mackenzie Delta gas; it will still require transport on Alberta pipelines, corporations based in Alberta will provide much of the development and personnel for the project, and--most importantly--liquids from this gas will provide feedstock for Alberta's petrochemical plants. Plants like the Novacor Chemicals ethylene plant near Red Deer that is one of the biggest plastics producers in the world.

It's not to say that this project isn't open to criticism, but to call federal participation somehow discriminitory against Alberta producers is kind of two-faced, if you ask me.