One pipeline’s pain is another’s gain

The Yukon government is starting to accept that the Alaska Highway Pipeline project is a dying dream.

The Yukon government is starting to accept that the Alaska Highway Pipeline project is a dying dream.

The option to ship natural gas from Alaska’s northern slope to tanker traffic at its southern coast, and then off to Asia, is simply more financially viable than a route through Yukon to Alberta.

That’s the plan Alaska, Exxon Mobil, BP and Conoco Phillips have all gotten behind.

The Yukon’s acting director for oil and gas resources with the Department of Energy, Mines and Resources asserts the territory has always had “open eyes” about the project.

“I wouldn’t say we were skeptical, nor would I say that we expected it to happen,” said Ron Sumanik. “What we’ve always said is this is a project that’s driven by markets, and when the project is economical it would go forward, and that’s really what drives it – the economics and commercial viability of it.

“We’ll continue to prepare. We remain optimistic that this project will come to pass, but it’s market driven.”

Preparations largely involve building an environmental and socio-economic assessment regime with the federal Northern Pipeline Agency. The agency announced earlier that the project will not be going through the Yukon’s own assessment board.

But that work has slowed, Sumanik admitted.

For example, the territory was expecting assessment documents from TransCanada, the company hoping to build the pipeline, by October.

“Those filings are not forthcoming now,” said Sumanik. “They’ve been delayed.”

The federal government remains more bullish about the pipeline’s prospects. It included $47 million to set up the assessment regime in this year’s budget.

One day later, Alaska and the companies announced they would focus on the liquefied natural gas option that stays within the northern state.

“Gives you a good idea of how plugged in the feds are,” Doug Matthews quipped in April. Matthews used to work for the Government of the Northwest Territories and now writes a column on oil and gas for Up Here Business.

He has few doubts that the Alaska Highway Pipeline project is dead.

Foreign LNG markets really are that much better, financially, for the producers.

“Traditionally there has been a link between the price of oil and the price of natural gas of roughly six or seven to one,” Matthews said. “So in other words, if a barrel of oil is selling for $42, gas was selling for six dollars, give or take.

“What we have now in North America is because we get world prices for oil – oil is selling at about $100 – but we get continental prices for natural gas – gas is selling for about two bucks – the ratio now is almost 50 to one.

“In the Far East, which is where Alaska is looking, they still go with longer-term contracts, which link the price of gas to the price of oil. You can probably sell it over there for about $14, which is a lot better than the two dollars you can get for it in North America, and that’s just the economics of it.”

But the death of the Alaska Highway project gives Matthews hope for the N.W.T.‘s Mackenzie Valley pipeline project.

Like the Alaska Highway project, the Mackenzie Valley pipeline has died and come back to life many times.

Shipping Arctic gas to southern markets is “economically challenged” by prices offered by the incredible volumes, and close proximity, of shale gas deposits in the “Lower 48,” said Matthews.

Arctic gas pipelines would have a better chance of succeeding if they weren’t fighting each other, he said.

“One of the competitive difficulties for the Mackenzie gas project always was if the Alaska Highway project went first,” said Matthews.

“Because it was bigger, it would effectively crowd the Mackenzie gas out of Alberta. Now that the Alaskan gas doesn’t appear to be heading to Alberta, you could have the Alberta market for Mackenzie gas.

“Rather than say sunset, I would say the Mackenzie gas project has just gone behind another cloud. If (the Alaska Highway Pipeline project) is right off the way, in an odd sense, it makes it a little bit better for the Mackenzie gas project.”

But that’s not a prediction, just a hope, said Matthews. He remains skeptical about either Arctic gas pipeline finding its way into reality.

But the Yukon’s pipe dream sure was a nice one.

The Alaska Highway Pipeline would produce $100 million a year in payments to the Yukon, to be divided among the territory and affected First Nations.

“If it doesn’t go ahead, it means we don’t get access to natural gas for our communities or industrial needs,” said Sumanik.

“It also means that our basins, which have gas, would not have a large-diameter pipeline to put our gas into and transport to southern markets,” said Sumanik. “This is a major, major industrial project without precedence, so employment, contracting, government revenues and access to gas for input and egress are lost opportunities if the project is not built.”

The Northwest Territories faces similar implications with the Mackenzie Valley project.

The Dehcho First Nations is the only N.W.T. First Nation that hasn’t joined the Aboriginal Pipeline Group, which has secured the right to own one-third of the pipeline, should it ever be built.

This not only means financial benefit for the aboriginal groups but also the ability to have a say in how the project is managed, Matthews added.

The task of balancing traditional lifestyle with economic development is one he doesn’t envy, but as stewards of the land, it is something northern aboriginal groups in the territories have to figure out, said Matthews.

“But there are some advantages to having some cash in the bank,” he said. “The beauty of pipelines is that they’re money generators because they get a regulated return. There’s no risk here. Once I have my clients signed up to ship, I got to the National Energy Board, they say, ‘OK, here’s how much you can charge based on your costs,’ and the companies have to pay me.

“It’s just beautiful. Just beautiful. Real simple. No risk. Nice, easy money.”

And now that the dreams for the Yukon appears to be fizzling out for good, it sounds like a great opportunity for the N.W.T. to grab.

Contact Roxanne Stasyszyn at

roxannes@yukon-news.com

Get local stories you won't find anywhere else right to your inbox.
Sign up here

Just Posted

Benjamin Poudou, Mount MacIntyre’s ski club manager, poses for a photo in the club’s ski rental area on Nov. 16. The club has sold around 1,850 passes already this year, compared to 1067 passes on Oct. 31 last year. (Crystal Schick/Yukon News)
Early season ski pass sales up as Yukoners prepare for pandemic winter

Season passe sales at Mount McIntyre for cross-country skiing are up by around 60 per cent this year

The City of Whitehorse will be spending $655,000 to upgrade the waste heat recovery system at the Canada Games Centre. (Crystal Schick/Yukon News file)
New waste heat recovery system coming to the CGC

Council approves $655,000 project

Yukon First Nation Education Directorate education advocates and volunteers help to sort and distribute Christmas hamper grocery boxes outside Elijah Smith Elementary School on Feb. 23. (Rebecca Bradford Andrew/Submitted)
First Nation Education Directorate begins Christmas hamper program

Pick-ups for hampers are scheduled at local schools

Cyrine Candido, cashier, right, wipes down the new plexi-glass dividers at Superstore on March 28, before it was commonplace for them to wear masks. The Yukon government is relaunching the Yukon Essential Workers Income Support Program as the second wave of COVID-19 begins to take place in the territory. (Crystal Schick/Yukon News file)
Yukon Essential Workers Income Support Program extended to 32 weeks

More than 100 businesses in the territory applied for the first phase of the program

Cody Pederson of the CA Storm walks around LJ’s Sabres player Clay Plume during the ‘A’ division final of the 2019 Yukon Native Hockey Tournament. The 2021 Yukon Native Hockey Tournament, scheduled for March 25 to 28 in Whitehorse next year, was officially cancelled on Nov. 24 in a press release from organizers. (John Hopkins-Hill/Yukon News file)
2021 Yukon Native Hockey Tournament cancelled

The 2021 Yukon Native Hockey Tournament, scheduled for March 25 to 28… Continue reading

Lev Dolgachov/123rf
The Yukon’s Information and Privacy Commissioner stressed the need to safeguard personal information while shopping this holiday season in a press release on Nov. 24.
Information and Privacy Commissioner issues reminder about shopping

The Yukon’s Information and Privacy Commissioner Diane McLeod-McKay stressed the need to… Continue reading

Keith Lay speaks at a city council meeting on Dec. 4, 2017. Lay provided the lone submission to council on the city’s proposed $33 million capital spending plan for 2021 on Nov. 23, taking issue with a number of projects outlined. (Crystal Schick/Yukon News file)
Resident raises issues with city’s capital budget

Council to vote on budget in December

Beatrice Lorne was always remembered by gold rush veterans as the ‘Klondike Nightingale’. (Yukon Archives/Maggies Museum Collection)
History Hunter: Beatrice Lorne — The ‘Klondike Nightingale’

In June of 1929, 11 years after the end of the First… Continue reading

Samson Hartland is the executive director of the Yukon Chamber of Mines. The Yukon Chamber of Mines elected a new board of directors during its annual general meeting held virtually on Nov. 17. (Joel Krahn/Yukon News file)
Yukon Chamber of Mines elects new board

The Yukon Chamber of Mines elected a new board of directors during… Continue reading

The Yukon Hospital Corporation has released its annual report for 2019-20, and — unsurprisingly — hospital visitations were down. (Crystal Schick/Yukon News file)
Annual report says COVID-19 had a large impact visitation numbers at Whitehorse General

The Yukon Hospital Corporation has released its annual report for 2019-20, and… Continue reading

Whitehorse City Hall. (Joel Krahn/Yukon News file)
City hall, briefly

A look at decisions made by Whitehorse city council this week

Most Read