Alaska gas pipeline plan moves forward

LOS ANGELES, Nov. 15 (UPI) -- A proposal first hatched in the 1970s to build a major natural gas pipeline stretching from Alaska to Alberta, Canada, moved forward Thursday with the signing of a memorandum of understanding by nine U.S. and Canadian energy companies.

The document, known as the MOU, commits the six U.S. and three Canadian firms to developing the Alaska Highway pipeline project that would link the Alaska North Slope gas fields to the growing consumer markets to the south by 2008.

"All the MOU signatories were involved in developing the Alaska Highway project at one point," said Dennis McConaghy, former chief executive officer of Foothills Pipe Lines Ltd. "Through this agreement, the companies are demonstrating their intent to renew their commitment to the commercialization of vital natural gas infrastructure from the Alaska North Slope to Canada and the lower 48 states."

While best known as an oil-producing region, the North Slope also has vast reserves of natural gas that have thus far not been commercially viable due to a lack of transportation to the more populated areas of southern Canada and the continental United States. With the demand for clean-burning gas expected to increase steadily, many energy majors with operations in Alaska consider building a pipeline to be a top priority.

The Alaska Highway project has been on the drawing board since the mid-1970s Arab oil boycott, but has been largely shelved. Although the project already holds the permits needed to begin construction, the economics of the North American gas market have been too uncertain to justify the $20 billion in private investment it would take to build the 1,700-mile line that bring an estimated 4 billion cubic feet of gas per day to Alberta where it would be transferred to pipelines serving the northern tier of states.

The U.S. Minerals Management Service said in a report this year that a price of around $3.50 per thousand cubic feet of gas delivered to Chicago was needed to make the pipeline economical. Although Chicago prices were hitting $8 in January 2001, prices recently have been bumping along under $3.

Nevertheless, a long-term upward trend in gas demand could make Alaska a vital player in the gas market, a sentiment held by the MOU signatories, which include the Canadian companies Foothills, TransCanada Pipelines and Westcoast Energy. The U.S. companies include subsidiaries of energy giants Enron; Williams; Duke; Sempra; El Paso Energy; Sempra Energy and PG&E Corp. The nine companies plan to present a more detailed proposal by the end of the year to Phillips, ExxonMobil and other North Slope gas producers.

Alaska Gov. Tony Knowles last month went before the Senate Energy Committee to urge that the project be moved forward as a matter of national interest with a number of tax breaks to be used as incentives to get private investors aboard.

"The United States and Canada already consume about 24 trillion cubic feet of natural gas a year, with that projected to soar to 30 trillion cubic feet by the decade's end," Knowles said. "Alaska can help meet this demand, while giving our sagging national economy a sorely needed shot in the arm."

Alaska stands to gain not only a new source of natural gas for home heating, but there is also the promise of new revenues and hundreds of construction jobs.