Editorial Comment: Your author served as director of public affairs for the Arctic Gas Project in the 1970s, a  component of which was a Mackenzie Delta gas transportation project.

Canada’s National Energy Board killed that project and your author then served as advisor to the Foothills (i.e. Alaska highway route) pipeline project which separated itself from the Mackenzie project.  That project proved to be infeasible in the 1980s as did a Dempster Highway alternative for Mackenzie Delta gas (i.e. Maple Leaf project).

During the 80s your author served as government relations director for Atlantic Richfield Company (ARCO).  The company had operated America’s only LNG export project (i.e. from the Kenai Peninsula to Japan since the 1960s), with gas produced locally.  ARCO studied LNG to Asia alternatives in the 80s and found them infeasible due to lack of LNG demand in Asia at that time for the huge Prudhoe Bay volumes.  The company was also concerned about costs to move Alaska North Slope gas 800 miles south to tidewater.

When North American gas prices strengthened at the turn of the century, Canadians again pursued the Mackenzie project with a very large Aboriginal equity component and Alaska producers worked with Governor Frank Murkowski to forward the Alaska gas project.  Both of those efforts failed as shale oil and gas technology began producing abundant supplies of new gas, causing a reduction in gas prices.

With low North American gas prices in the first decade of the new century Alaskans looked to an LNG export project as an answer to marketing North Slope gas.   By then, Asia had developed a much greater demand for LNG imports and prices were high.  The state of Alaska and its major producers created various schemes designed to meet the Asian demand.

Your author served as external affairs director for the government owned, Alaska Gasline Development Corporation (AGDC) — designed for export and to provide for local gas needs — until he determined that the government sponsored LNG project was a dangerously risky socialist activity that doesn’t serve the public interest.  When an Alaska North Slope LNG project becomes competitive someday, the state should use its prestige and economic policies to support efficient, private sector execution of the project.  It should never, foolishly try to emulate a private sector activity that government cannot efficiently emulate.

Scores of other LNG export projects and proposals around the world are poised to outpace Alaska.  Why?  Because virtually all of those projects originated at tidewater; Alaska’s project would have the additional burden of paying for an 800 mile Arctic pipeline to move the gas from the North Slope to tidewater on the Kenai Peninsula.  With greater worldwide supply of LNG — greater competition — export projects in British Columbia became infeasible burdened as they were with pipeline costs and the uncertainty and high costs of pursuing Canada’s ‘duty to consult’ processes with Aboriginal special interests–not to mention local environmental and legal obstruction.

So we now learn in December of 2017 that the Mackenzie Delta gas transportation project in northern Canada has fizzled.  As we have recently observed, it is a good thing when a project is found to be infeasible before being built.  If any of these past projects had been built they would likely have disappointed various state, provincial and federal governments and likely bankrupted many companies.

In the story below, we appreciate the frustration of Mackenzie Valley residents in Inuvik and elsewhere who had made investment decisions based on the possibility of a gas project being built.  But we observe with some degree of thanksgiving that had that project been built, its demise in a low, North American gas price environment would also have badly wounded the companies and communities involved with it.

Defying logic and economics the uncompetitive Alaska LNG project lingers on, propped up with government subsidies and seeking solace and gas import commitments from China which, on a national level, has demonstrated again and again its lack of respect for UN resolutions and agreements.  We would remind Alaska leaders that the United States and United Nations have been living since 1953 in a suspended state of war with both North Korea and its ally, China.  That fragile peace is only protected by a Truman/MacArthur-era Armistice agreement that becomes more fragile by the day as North Korea, with support from China, develops nuclear weapon delivery systems that directly threaten Alaska and the Lower 48.

Other Asian markets (i.e. Japan and the Republic of Korea) have expressed no more than polite interest in Alaska’s expensive LNG potential.

We join our readers in longing for a feasible northern gas pipeline project whose risks are borne by the private sector and whose management makes agile, logical and profitable decisions.  We have equal distrust for Alaska’s current, government LNG project, owned and managed by temporarily elected and appointed politicians and bureaucrats.  AGDC is a socialist scheme which can only fail when measured by objective economic metrics and can only succeed with massive political trading and public subsidies.  It also offers enticing opportunity for corruption.

We once cried for Argentina.  We now weep for Venezuela.  Yet Alaska’s leadership continues to support — in defiance of historical lessons — a socialist solution for an energy project whose time has not yet come.  -dh

Mackenzie Valley pipeline project officially one for the history books

‘This pipeline was really just a pipe dream. We gambled on it and a lot of people lost’

By Walter Strong, CBC News

Mackenzie Valley Pipeline project map, by CBC.

The much-anticipated but long-doubted Mackenzie Valley pipeline project has gone out with a sigh.

On Friday, Imperial Oil posted a press release to its website announcing the project’s proponents had dissolved the joint-venture partnership driving the Mackenzie Valley Gas Project. The joint venture included Imperial Oil Resources Limited, ConocoPhillips Canada, ExxonMobil Canada and the Aboriginal Pipeline Group.

By 2016, when the National Energy Board approved an extension of the project’s deadline to begin construction in 2022, the estimated cost of the project had grown to more than $16 billion. According to Friday’s press release, current natural gas prices do not justify the project, originally approved by the NEB at the end of 2010 after six years of review.

Merven Gruben, mayor-elect of Tuktoyaktuk, the small N.W.T. coastal community with much to gain had the 1,200-kilometre pipeline stretching from the Mackenzie River Delta to northern Alberta had been built, said he only learned of the project’s demise on Wednesday. He took the news in stride — “We all knew that was coming” — but said it was a sad day for many.

“We had a lot of high hopes, we even built a new hotel in Inuvik, the Mackenzie Hotel, in the hopes [the pipeline] was going to take off,” Gruben said.

The hotel struggled in the beginning but had since found its legs, unlike others who invested in the hopes of a pipeline, he said. “So many other businesses didn’t succeed.”

“This pipeline was really just a pipe dream,” Gruben said. “We gambled on it and a lot of people lost.”

​He said he remembers when the project really began to take shape in 2000, adding that the project’s review panel took too long approve the work.

“It was just a farce the way they wasted their time doing all these studies and all these meetings all over the North,” Gruben said. “They wasted so much money and time. By the time they said it was a go, it was too late … all the [natural gas] prices had gone down.”

Delayed by who?

Imperial Oil spokesperson Gordon Wong told CBC he could not immediately say what natural gas price point would have made the project viable. But he said the joint venture partners had not anticipated the length of time it took for the project to receive approval from the NEB, and then final approval from the federal government.

“Our initial estimate for the timing for the regulatory process was somewhere between 22 and 24 months,” Wong said.

“We filed for regulatory approval in October 2004 and we received final regulatory approval in 2011. I’ll leave it up to you to decide if that is a reasonable amount of time for a significant capital investment project.”

N.W.T. MLA Kevin O’Reilly says the end of the project may have been a godsend. (Alex Brockman/CBC)

Process was not the problem, according to Kevin O’Reilly, the MLA for Frame Lake. He followed the project closely in his previous work for Alternatives North, an N.W.T. social justice group.

“I’d blame the poor planning that the proponents themselves had undertaken and the amount of time they had taken to respond to information requests from governments, from Indigenous governments, from NGOs and so on.”

The delay — if it meant the failure of the project — may have been a godsend, he added.

O’Reilly says the growth in ready supply of gas from other, cheaper, North American sources means the Northwest Territories could have been left with a half-completed project stalled in the face of a market that no longer justified it.

“Thank goodness this project did not go ahead. The companies [involved] would be looking to the taxpayers, no doubt, to bail them out,” he said.

‘Disappointing day’

Some in the region remain hopeful the six trillion cubic feet of onshore natural gas resources in the Mackenzie Delta will someday benefit the region’s economy.

Duane Smith, chair of the Inuvialuit Regional Corporation, points out the project certificate remains in effect until 2022.

“I mean I have to remain optimistic,” Smith said.

“I just hope that Canada as a government recognizes the valuable resources that we are sitting on in this region and the potential it provides for the economy of this country as well as to the people of the region.”

Theresa Redburn, Imperial Oil senior vice-president of commercial and corporate development, acknowledged the sense of defeat some in the North may feel.

“We recognize this is a disappointing day for the people of the North. This is a disappointment to Imperial and the other members of the joint venture, as well,” Redburn said in the company’s press release.

Gruben’s construction company was a large part of the recently completed $300 million Inuvik Tuktoyaktuk Highway, which was partly conceived to bolster the viability of petroleum resources in the Beaufort Delta region.

Gruben said he expects his and neighbouring communities will now turn their attention to what he said are proven petroleum assets in the region, including a natural gas well drilled just off the new highway that could fuel Mackenzie River Delta communities for “100 years.”

He said the possibility of a deep water port in the region could unlock oil and gas potential, especially once a moratorium on offshore drilling ends.

“This isn’t going to stop us,” he said. “We’re still going forward.”

‘Important future source of energy’

Wong could not immediately say what the joint venture partners had invested into the project so far. He also could not say what would come of any project-related leases in the region.

“Imperial believes that the North remains an important source of future energy, given the right economic and regulatory conditions,” Wong said.

“As conditions change, we’ll remain engaged with local communities where appropriate and we’ll try to maintain the positive relationships we’ve built with those communities.”

Imperial Oil is also a joint venture partner i…