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Demand spurs 'great pipeline race' in Canada

Soaring energy prices and profits have revived plans for two massive pipelines to bring natural gas hundreds of miles south from the frozen Arctic Ocean, through vast untouched forests and under wild rivers, to the United States.
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A wind prickly with ice bit at Jonas Antoine, the gray-haired native elder. The sting brought a broad grin to his face. "I feel like a wolf in this weather, ready to hunt," he said, leaning against the driving chill.

The cold thrill of sneaking toward a keen-eared moose or snaring a lynx calls him, but Antoine spends days in a stuffy gymnasium, debating with chiefs and elders the looming invader from the north: a huge pipeline from the Arctic that all agree would irrevocably change this land.

Soaring energy prices and profits have revived plans for two massive pipelines -- the biggest private construction projects in North America -- to bring natural gas hundreds of miles south from the frozen Arctic Ocean, through vast untouched forests and under wild rivers, to the United States.

The plans would flood isolated areas of Alaska and Canada with thousands of construction workers, pump billions of dollars into poor native economies, and bring the roar of heavy cranes and bulldozers to pristine areas where it is now quiet enough to hear the hoots of snowy owls and the rustle of pine boughs.

The projects are crucial to keep up with the growing thirst for energy in the United States, say oil company officials and energy analysts. Supporters and opponents agree that the projects would affect Canada's sparsely populated north on a scale larger than the Alaska oil pipeline in the 1970s, and unleash a rush of new exploration and drilling.

"Every square inch is going to be opened to diamonds, sapphires, gold, oil and gas," Michael Miltenberger, the Northwest Territories minister of natural resources, said in an interview in the territories' capital of Yellowknife. "There's an insatiable demand. And the critical first step is the pipeline."

There are daunting obstacles before any construction begins: The two pipeline projects are in competition for workers and capital -- only one can be built at a time. Native groups in Canada have not yet given access rights; environmentalists fret over caribou and the permafrost; and the pipeline companies face a mountain of regulatory red tape and promised lawsuits.

But the huge profits in the energy business, and the unquenchable demand for energy in the United States, have given the projects an impetus that may make one -- or both -- projects unstoppable.

"The time and events are right. It would be very hard to turn your back on this kind of supply," Miltenberger said.

Pipe dreams no more
Of the two lines, the Alaska Gas Pipeline is the behemoth. Its most likely route would stretch 1,700 miles from Alaska's Prudhoe Bay to Canada's Alberta province. The line would cost $20 billion and take a decade to build, but the project has picked up momentum under the whip of Alaska Gov. Frank H. Murkowski (R) and $18 billion in loan guarantees approved last year by Congress.

The second line, the Mackenzie Valley Pipeline, would start 250 miles east of the Alaska line, on Canada's portion of the Beaufort Sea. It would snake 800 miles through forests of spruce and pine along the Mackenzie River -- one of the world's longest with no bridge or dam. This all-Canada route would cost $6 billion and is predicted to take three years to complete once construction begins.

Both projects have been pipe dreams for three decades. Drillers who flocked to the cold deserts of Alaska's North Slope after oil was discovered in 1968 also found vast deposits of natural gas. But there has been no way to move the gas to markets; it cannot flow in the oil pipeline. Oil producers proposed both the Alaska and Mackenzie gas pipelines in the 1970s, but the plans died under the weight of rising construction costs, dropping natural gas prices and -- in Canada -- opposition from native groups.

That has changed. Natural gas prices are now at all-time highs, greatly enhancing the lure of profits. Every energy forecast shows a yawning gap between supply and the rising demand. More natives of the north now see economic opportunity in the pipelines, and their necessity is reluctantly being conceded by even environmental groups.

"The economics are right. Everyone needs this supply to come on line," said John Duncan, a member of the Canadian Parliament and the Conservative Party's expert on natural resources. "The real question is which is going to be built first."

Industry analysts say the projects would require so much capital, steel and skilled labor that it would be impractical to build both at the same time. The projects have been jostling for position, sparking what former Alberta energy minister Murray Smith has called "the great pipeline race." Oil company officials would prefer the shorter Mackenzie line to go through first, but delays have jeopardized that possibility.

Four reserves of Indians -- known as First Nations here -- are involved in negotiations to permit the Mackenzie line to cross their land. The four oil companies behind the project have agreed to give First Nations a one-third share of the line, and the federal government in July offered $425 million for native social programs as an incentive. But the bands are split over the proposal.

Native claims
Antoine, 64, is a member of the Deh Cho, a band of about 4,000 members on land centered at Fort Simpson, a quiet town on an island accessible by ferry in the summer and by a road carved on the river ice in the winter.

He grew up hunting caribou and moose, snaring rabbits and cutting holes in the ice to fish in the winter. He remembers a hard life, remembers being hungry when the game disappeared. But he is wary of the coming pipeline, and the change it will bring.

"You can still have freedom to roam here. You can travel for 100 miles without running into any other tracks, camping wherever you want, drinking out of any stream," he said of the Deh Cho lands.

Herb Norwegian, the blunt chief of the Deh Cho, said his people see no reason why they should not get what they want from oil companies making huge profits. He has asked for fees, royalties and jobs, but his fundamental demand is of the government, which has yet to settle Deh Cho land claims.

"If the pipeline is going to pass through our land, the government has to treat us like the landlords," Norwegian said.

Not all agree with him. Harry Deneron, 63, a member of the Deh Cho group of chiefs, said change already has come, and the First Nations people should benefit.

"Our people will be the first to complain if their hot-water heater goes up," he said with a laugh. "We should accept the pipeline, with conditions. We have to compromise. This has gone on too long."

Either project would march a small army of construction workers into the north for several years. They would carve roads, haul steel, dig a trench through the permafrost and bury the pipeline before departing. The Alaska Pipeline project alone would be more than double the size of the 800-mile-long trans-Alaska oil pipeline finished in 1977, which took 21,000 construction workers three years to build.

Towns along the pipeline routes grimly expect the construction to bring inflation, drugs and crime along with the economic boost for their rural economies. In Yellowknife, two new diamond mines have sent rents soaring and brought cocaine to the streets. Last month, the town experienced its first drive-by shooting.

"We know things are not going to work perfectly. They never do," said Bill Braden, a member of the territorial assembly in Yellowknife. "But the pipeline would give the communities and people of the Mackenzie Valley and Delta hope for the future. Right now, if I was a teenager, I wouldn't see a whole lot of reason to stay in the area."

Making a choice
The bigger footprint, after the construction crews have left, will be in opening the mineral-rich area to further exploration and development.

Mostly for that reason, some environmentalists favor the Alaska Pipeline, which follows the route of the existing oil pipeline and Alaska Highway.

"We think it's the lesser environmental evil," said Stephen Hazell, a director of the Sierra Club of Canada. Environmental groups have largely bowed to the inevitability of at least one of the projects.

"Natural gas is clearly better than coal or oil," said Peter Ewins, a director of the World Wildlife Fund of Canada. "In principle, we are not opposed, if the development is done in a properly planned and well-balanced way."

The natural gas from either line would be fed into a grid of pipelines in Alberta that connects the United States and Canada into a largely seamless single market. Oil company officials say the soaring demand is in the United States, and that is where the gas would go.

But some environmentalists suspect that the Mackenzie pipeline, in particular, would feed the huge oil-sands project in Alberta. There, natural gas is used to cook strip-mined tar sludge into recoverable oil, a process environmentalists say is energy-inefficient and increases global warming.

"If we were convinced the gas was going to be used in people's homes to replace coal-fired energy, we would be much more sanguine about it," said Hazell.

Despite its much larger size, the Alaska Gas Pipeline could move more quickly. The oil pipeline and highway along the proposed route already have cleared the way with access rights, aboriginal land claims and environmental reviews. Since the 1970s, the TransCanada pipeline company has held rights to one route in Canada, and has laid groundwork on the Alaskan side as well.

"The gas market in North America really quite desperately needs this gas," TransCanada Chief Executive Hal Kvisle, said by phone from Calgary. "We think it would be quite foolish not to use" the company's access rights to speed up the project.

Speed is what Alaska's Gov. Murkowski wants. He has made it a personal goal to find a way to get Alaska natural gas to market, foreseeing a second wave of the riches that poured into the state with the oil pipeline. All Alaskans still receive a yearly dividend check from the oil pipeline royalties.

"We are approaching an historic moment -- moving from 30 years of trying, to the reality of a gas line," the governor told reporters recently. He has proposed a novel sharing of ownership in which Alaska would have a 20 percent stake in the line.

"We're going to do it right this time," the governor said by phone from Anchorage after emerging from negotiations with the Prudhoe Bay producers Exxon-Mobil and BP. He already agreed to terms in October with a third company, ConocoPhillips. "The country needs the gas," he said. "This is the time."