December 2008 Update

In the news...

• Environmental Impact Statement Underway for Gas Pipeline Between Fairbanks, Beluga Gas Field ............ (12/14/2008) The Alaska National Gas Development Authority (ANDGA) has awarded a contract to prepare an environmental impact statement (EIS) to URS Corp. for a planned natural gas pipeline in Alaska. If built the 480-mile pipeline will run north from the Beluga gas field located west of Anchorage to Fairbanks, Alaska - with 90 percent following existing rights-of-way and easements. ANGDA's plan calls for 20-inch steel pipeline from the gas field to Delta Junction and an eight-inch plastic pipeline carrying gas from Delta Junction to Golden Valley Electric Association's North Pole power generation plant. If a large diameter gas pipeline is built from Alaska's North Slope the flow direction will be reversed to carry gas south and eventually feeder lines and take-off points will be added to meet Alaska's needs. ANGDA's plan comes after a request from Gov. Sarah Palin that the state authority find a way to get gas to Fairbanks before the North Slope pipeline is built, estimated at the earliest by 2018. [More here]

• Post-Hurricane Gas-Line Fixes Slow Return of US Gulf Oil (12/12/2008) Three months after Hurricanes Gustav and Ike, 14.9 percent of Gulf oil output and 21 percent of gas output were still shut as of December 3 awaiting repairs, according to the U.S. Minerals Management Service (MMS). "We had some major impacts to gas transmission lines. That's what we still see, at this point, being the holdup on the gas as well as associated oil," said Lars Herbst, the MMS Gulf Region director, adding, "If you can't get the gas flowing in those transmission lines, the oil associated with that platform is also curtailed or shut in." Burning off gas to facilitate oil production is forbidden by the MMS. Almost all pipeline damage was caused by the toppling of platforms by towering waves generated by the storms. This experience may cause relocation of pipelines and tighter standards on construction of pipeline junction platforms. Herbst said the pipeline breaks affecting TransCanada ANR Pipeline Co.'s Central Gulf Gathering System kept 66,000 barrels of oil per day off line. Natural gas transportation through Williams Transcontinental Gas Pipeline Corp and Southeast Louisiana Lateral pipelines kept an unspecified amount of gas out of production. Herbst did not indentify oil companies whose production is affected by the repairs. [More here]

• New Alaska Senator Doubtful on Natural Gas Loan Guarantees (12/11/2008) Alaskan Senator-elect, Mark Begich, said he doubts the U.S. Congress will give additional loan guarantees to TransCanada Corp. to back the company's plan to build a natural gas pipeline from Alaska's North Slope. Although he supports the $18 billion federal loan-guarantee provision that includes an inflation clause, he was "troubled" by reports TransCanada wants additional loan guarantees. Adding the inflation clause to the 2004 legislation "has already increased the loan guarantee by $2 billion over the last four years," Begich said. "In this economic condition the country's in, getting loan guarantees and these kinds of things is very difficult," he said. Last week TransCanada, Gov. Sarah Palin's choice as the project sponsor, was awarded a state license to construct and operate a 1,715-mile natural gas pipeline that will run from Prudhoe Bay to an existing pipeline hub in Alberta. The company estimates the pipeline will cost $26 billion....... [More here]

• Striker Oil & Gas Announced Completion of 4-Mile Gas Pipeline on Its Catfish Creek Prospect (12/11/2008) Striker Oil & Gas have finished installing a 4-mile pipeline connecting its gas production from its Catfish Creek Prospect. Pressure testing and final mechanical hook-up were expected to be done in 7-10 days allowing new gas production. Upon completion, the company will own a 25% working interest in the pipeline. [More here]

• Pipeline Companies Weather Darkest Hour; Executives Say Crisis Worst in Canada's Oil Patch History (12/9/2008) According to the leaders of Canada's oldest and largest oil pipeline companies, Calgary's energy sector is in the midst of its worse economic decline in its history - even worse than the devastating collapse of the 1980s. Enbridge CEO, Pat Daniel said emphatically, "I think -- no, I won't think -- this is the worst I've experienced in my entire career. When you go from$150 (US) crude to $50, that's the biggest absolute drop in history. This is the worst of the hard times we've ever had . . . I hope we've seen the worst of it, but it's really hard to know." The combination of falling commodity prices and the continuing financial crisis has lead to the oil patch's darkest hour. Hal Kvisle, TransCanada's president, said, "Clearly we're in a 12-to 24-month period of contraction--in everything," he said. "Financial markets are in as difficult shape as I've ever seen them." Even though pipeline companies are usually unaffected by the daily fluctuations of the financial markets, theirr customers are not. Large oilsands producers such as Shell Canada, Petro-Canada, Nexen Inc. and others have delayed major new projects and expansion of existing ones because of the economic uncertainty. Despite the economic turmoil, TransCanada easily sold a $1.16 billion share offering and Enbridge is one of the top performing stocks on the TSX, losing only 1.7 percent year-over-year vs. the TSX main board's 41 percent loss and the TSX's capped energy index loss of 56 percent since June. [More here]

• The Alaskan Pipeline - A Wolf in Sheep's Clothing? (12/10/2008) The recent Alaskan gas pipeline license awarded to TransCanada Corp. may have a negative long-term impact on Canada's natural gas industry according to a firm that specializes in evaluating the economic impact of oil and gas reserves. According to Ralph Glass, VP Operations of AJM Petroleum Consultants, said, "While construction of the Alaskan pipeline will likely have a positive impact on Canada's economy in the shorter term, once it is up and running it will make Alaska into a direct and effective competitor for Alberta and British Columbia's natural gas industry. Looking ahead we have to consider the fact that the Alaskan pipeline will increase natural gas volumes in the US market. That could keep natural gas prices low in future years; low natural gas prices will have a significant impact on future drilling here in Canada." Glass recommends Canada reduce its dependency on the US market and aggressively pursue an LNG and oil export terminal on British Columbia's coast to gain access to world markets. [More here]

• Palin to Sign State Pipeline License, Giving $500 Million to TransCanada (12/7/2008) Calgary based company TransCanada Corp. has been awarded the Alaska Gasline Inducement Act license (AGIA) to build a more than $30 billion natural gas pipeline to Alaska's North Slope. The license includes up to $500 million in state grants that will pay for up to half the company's costs in preparing for a 2010 open season. Because of the limited time in preparing for the open season, TransCanada's vice president, Tony Palmer, said the company has already started preliminary environment and engineering work as well as taken aerial photographs along two possible routes. He also said the project has not been affected by current difficulties in the financial markets. A rival project - the Denali pipeline - led by BP and ConocoPhillips also plans to have an open season in 2010 to solicit customers. The 1,715-mile pipeline from the North Slope to Alberta, is "huge, but not unprecedented for TransCanada," said Palmer adding the company's legacy pipeline system built across Canada 50 years ago was larger and technically more challenging. The company's Keystone project, currently being built in the continental U.S., will have 4,000 miles of new pipe when completed in 2010. If completed the Alaska project will represent on approximately 5 percent of TransCanada's exiting pipelines. [More here]

• Mackenzie Pipeline Going Ahead: Prentice (12/4/2008) Construction of the proposed $16.2 billion Mackenzie Valley Pipeline in the Arctic has faced numerous regulatory delays, negotiations with aboriginal groups and prolonged discussion over fiscal breaks for the lines backers. Despite these setbacks, Canada's Minister of the Environment, Jim Prentice said he is "actually very optimistic because a lot of the work that needed to be done has now been done." Prentice expects to receive a report on the environmental and social impacts of the pipeline between March and May of 2009 and felt the Mackenzie project was now most likely five to six years ahead of the proposed Alaska gas pipeline. The 1,200-kilometer Mackenzie pipeline will transport 1.9 billion cubic feet of gas a day along the Mackenzie River Valley in the Northwest Territories to Alberta, where it will link to existing lines serving U.S. and Canadian markets. It is expected to be in operation by the middle of the next decade. [More here]

• U.S. Supreme Court Rejects Pipeline (12/2/2008) ... The U.S. Supreme Court ruled in favor of a decision by the Connecticut Department of Environmental Protection to deny environmental permits necessary for the construction of a 50-mile pipeline crossing Long Island Sound. The court rejected an appeal by Islander East, an interstate natural gas pipeline company, thus forcing the company build the pipeline without crossing the Sound. Connecticut Gov. M. Jodi Rell said in a press release it was and environmental victory not only against this pipeline but also the 2007 Broadwater proposal to build an LNG storage and re-gasification facility in the Sound. “First Broadwater — now Islander East: With today’s Supreme Court announcement, we have succeeded in turning back two ill-conceived energy projects,” she said in a press release. [More here]

• Enbridge Gets Go Ahead for Pipeline (11/25/2008) Despite environmental concerns by the Minnesota Center for Environmental Advocacy (MCEA), the Minnesota Public Utilities Commission voted unanimously to approve Enbridge Energy's request to build nearly 1,000 miles of oil pipeline between Alberta, Canada and Superior, Wisconsin. MCEA opposes the project arguing it contradicts Minnesota's goals to reduce green house gas emissions and increase energy efficiency. Enbridge Energy spokesperson, Denise Hamsher, countered that the company had already taken environmental issues into account. "Think about tens of thousands of trucks on Highway 2, the government would have to expand the highway,' she said. "This is a much safer alternative for transporting oil underground. It is not without risk, we wish it would be absolutely risk free, but we do everything we can to reduce that risk and have shown again year after year that pipeline transportation is by far the safest mode of transportation." MCEA representatives said they are investigating other options to stop construction of the pipeline, including taking their case to the court of appeals. [More here]