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"N.W.T. fears pipeline guarantee for Alaska"

N.W.T. fears pipeline guarantee for Alaska
By Jeffrey Jones, Reuters
May 25, 2009

CALGARY - The Northwest Territories is worried a little-noticed plan to boost U.S. federal loan guarantees for an Alaska gas pipeline to $30 billion US could raise yet another impediment to the construction of the Mackenzie Valley pipeline.

Bob McLeod, the territory’s minister of industry, tourism and investment, said he will ask the senior Canadian politician in charge of the Mackenzie project to talk to U.S. officials about the proposal to boost the backstop by two-thirds, as spelled out in a comprehensive energy bill.

Backers of the $16.2-billion Mackenzie line through the territory have said the project could face years of delay if the larger Alaska pipeline moves forward first.

Neither has begun construction, despite decades of planning.

“We’re following up on whether the playing field is still level or not, or whether it’s changing with regard to the loan guarantees that have been proposed in the United States,” McLeod said in an interview.

He plans to meet with Environment Minister Jim Prentice in the coming weeks to discuss the issue, and travel to Washington in June to learn more about the one sentence concerning the Alaska pipeline in the National Energy Security Act.

The provision would boost the loan guarantee for an Alaska pipeline from the current $18 billion US. The bill was introduced by Senator Byron Dorgan, a North Dakota Democrat, in April.

TransCanada Corp. has Alaska’s blessing for its plan to build a $26-billion US pipeline to Alberta from the state’s North Slope. Its chief executive, Hal Kvisle, told Reuters in December he wanted Washington to increase the loan guarantee because inflation had cut the value of the current amount.

The Mackenzie project, led by Imperial Oil Ltd., is already beset with regulatory delays, high costs and now the threat of cheaper shale gas supplies located much closer to markets in both Canada and the United States.

Late last year the regulatory panel weighing the social and environmental impacts of the project said it aimed to deliver its report by December 2009, months past the previous target.

Meanwhile, Imperial and its partners are negotiating with Ottawa over a fiscal package, which Prentice offered early this year, under which the government would pick up the bill for roads, airstrips and other infrastructure as well as other aspects of the project.

Mackenzie would run 1,220 kilometres through the Northwest Territories to the Alberta border from the Mackenzie Delta on the Beaufort Sea coast.

It is seen as a development that would open up a new gas supply region for North America and make an important contribution to economic development in Canada’s sparsely populated far North.

McLeod said his biggest fear is that more delays will leave the project vulnerable to being “overtaken by events.”

Some analysts have said it may be cheaper and quicker to develop trillions of cubic feet of gas trapped in shale formations in such locales as Texas, Louisiana and British Columbia.

In addition, the continent’s capacity to import liquefied natural gas from the Middle East and elsewhere is growing.

“Despite all that, there’s still a need for Arctic natural gas from both Mackenzie and Alaska, in our view, as long as the Mackenzie pipeline goes first,” McLeod said.

TransCanada itself faces competition in its plan for an Alaska pipeline, in the form of the Denali project proposed by North Slope Gas producers BP PLC and ConocoPhillips.

© Copyright (c) The Calgary Herald

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