worlds slowest race starts again

The race is on. Again. Global energy giant Exxon Mobil announced recently that it would support TransCanada's proposed 1,700-mile (2,735-kilometre) Alaska Highway pipeline from Alaska's gas fields to Alberta.

The race is on. Again.

Global energy giant Exxon Mobil announced recently that it would support TransCanada’s proposed 1,700-mile (2,735-kilometre) Alaska Highway pipeline from Alaska’s gas fields to Alberta.

Exxon’s support is a major boost to TransCanada, which is competing with both the proposed Denali pipeline – led by Exxon’s Alaska rivals BP and ConocoPhillips – but also the Northwest Territories’ Mackenzie line.

All three pipeline teams are trying to get vast amounts of gas to North American consumers, who burn about 70 billion cubic feet (bcf) of it per day. Alaska alone is estimated to have 36 trillion cubic feet (tcf) worth, about $150 billion at today’s prices if it could be delivered to market. The NWT has about six tcf already discovered in its three main fields, with perhaps ten times as much still to be found.

The pipe race began in the 1970s, but a combination of environmental, First Nation and economic issues put the projects on hold. Around 2000, the projects were resuscitated, but the Mackenzie soon emerged as the leader.

The Mackenzie is expected to cost only half as much, $16 billion versus about $30 billion for the Alaska route (although it will deliver only 1.2 bcf per day compared to 4 bcf for the Alaska Highway version). It also has guaranteed customers in the Alberta tarsands, who plan to use the (clean) gas to heat the sludge they need to extract (dirty) heavy oil. It also has the support of the Aboriginal Pipeline Group and the Canadian government.

In a calculated snub to the Yukon and its Alaska Highway route, the federal Conservative government “would like to see the Mackenzie project built first,” said Jim Prentice, the minister responsible, in a recent media interview.

But now the Mackenzie pipeline has stumbled, due to lethargy and bungling by a baffling array of federal, Northwest Territories and First Nation agencies. The project has been bogged down for four years, and counting, in the Mackenzie’s Joint Review Panel, which was created to involve the various stakeholders but never given clear deadlines. TransCanada’s boss, Hal Kvisle, said recently that the Mackenzie environmental review has grown into the biggest ever undertaken by “mankind.” Another oilpatch leader called it a “national embarrassment.” Aboriginal Pipeline Group supremo Bob Reid called it “dismal, and very disappointing to our aboriginal shareholders.”

It reflects poorly on Ottawa, Yellowknife and First Nation leaders that they allowed a decision on such an important project to be delayed for so long. This columnist is not saying that the project should be rubber-stamped, but that our governments ought to be able to gather the facts to make a yes-or-no decision on a pipeline in less than five years.

And while we Canadians stakeholdered ourselves into a knot along the banks of the Mackenzie, neither the Alaskans nor the rest of the industry were sitting still.

Sarah Palin managed to drive a law with $500 million in pipeline subsidies through the Alaskan legislature. Washington has chipped in another $18 billion in loan guarantees.

And worryingly for both Canadian and Alaskan gas boosters, recent technological developments may be undermining the business case for shipping northern gas in multi-billion-dollar pipelines 5,000 miles (8,046 kilometres) to the barbecues of Chicago. Australian and Saudi gas is starting to arrive in increasing amounts in liquefied natural gas tankers. And shale deposits of gas, previously uneconomic, are looking increasingly promising. Geologists estimate there may be enough shale gas in the Lower 48 for over 50 years of consumption, rendering Arctic pipelines unnecessary.

What does all this mean for the Yukon? Let’s admit it. The Alaska Highway pipeline would be a major benefit for us.

On the downside, even if we didn’t use any of the gas, its compressor stations would blow our carbon dioxide targets into the stratosphere. To mitigate this, we could build some more hydro power sites to power the compressor stations and possibly supplement our own strained electrical grid.

In terms of local environmental impacts, a pipe along the Alaska Highway is unlikely to be much more damaging than the highway already is.

Most critically, however, a pipeline would lessen our dependence on the federal government. There likely wouldn’t be large numbers of jobs maintaining a pipeline in the long run, but TransCanada estimates a pipeline would pay about $100 million per year in property taxes. It’s about $3,300 per Yukoner per year and would go on for decades.

So we have an interest in getting the Alaska Highway pipeline built. And while the decision between the two pipelines will ultimately be made in Houston and Washington (and maybe in Ottawa), the Yukon needs to support the project.

And while Yukon government officials have been working diligently on the technical aspects, there are two areas where the Yukon government needs to do more. Both are the responsibility of Premier Dennis Fentie.

Firstly, he needs to rebuild relations with Yukon First Nation leaders. The pipeline route is protected under the Umbrella Final Agreement, but in the end First Nations must be fully involved in the project and must benefit from it.

Secondly, he should not meekly accept (as he has so far) the federal position that the Mackenzie should be built before a pipeline through the Yukon. He should tell the federal government that it is not right for Ottawa to hold the Yukon’s economic development hostage because it wants the royalties from Mackenzie gas first. If, for whatever reason, the Alaska Highway project is ready to go before the Mackenzie, then the Canadian government should support the Yukon route.

Keith Halliday is a Yukon economist and author of the Aurore of the Yukon series of historical children’s adventure novels. His latest book is Game On Yukon!

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