Pipeline competitors face off
Competing pipeline builders Alaska-based Yukon Pacific Corp. and Foothills Pipe Lines Ltd. of Calgary, Alberta, squared off in Juneau earlier this month.
Yukon Pacific has permits and rights of way for a natural gas pipeline from the North Slope to Valdez and for a liquefied natural gas plant near Valdez.
Foothills holds rights of way and permits for a gas pipeline from the North Slope through Interior Alaska and Yukon Territory along the Alaska Highway.
In several legislative hearings, Jeff Lowenfels, president of Yukon, said that U.S. and Canadian laws enacted in the 1970s, as well as a U.S.-Canada energy treaty from that period, are specific in their requirements for an Alaska Highway pipeline.
Costs of building a pipeline to those specifications make it uneconomic, he said. In addition, pipelines from Alberta to the U.S. border are full.
"There is no room for Alaska gas," Lowenfels said. That means new pipelines will have to be built, adding to costs.
Yukon Pacific has, meanwhile, updated its cost estimates and feels it can land Alaska gas in Japan for $3.50 per million British thermal units, well below the $5 per million Btu now being paid for LNG from the Phillips-Marathon plant near Kenai, and the $5.50 per million Btu being paid for LNG from Indonesia.
Lowenfels also said Yukon Pacific’s new cost estimates show it can deliver gas to Southcentral Alaska through a 16-inch spur pipeline from the main pipeline near Glennallen for the same price Enstar Natural Gas Co. pays to buy gas from Cook Inlet producers.
Enstar is the regional gas utility for Southcentral Alaska.
Rebutting Lowenfels, John Ellwood, vice president of engineering and operations for Foothills, said the existing permits and regulatory approvals for the Alaska Highway route provide considerable flexibility.
This has been demonstrated in Canada where southern sections of the pipeline intended to go all the way to Alaska were built and are now in use. These have been modified and expanded over the years, he said.
The permits allow for the use of new technologies, which will be incorporated into a new Alaska Highway pipeline, Ellwood said.
As for the existing Canadian pipeline being unable to carry Alaska gas, "this is nonsense," Ellwood said.
It’s standard practice in the gas pipeline industry to add compression to accommodate additional supplies, he said. When the system reaches the point where additional compression costs rise sharply, additional sections of pipe are installed at certain points along the system.
Then the cycle starts over again, he said, with additional compressors added and eventually new lengths of pipe, until what is essentially a new pipeline has been built.
Ellwood cited an example of a single pipeline built originally from Alberta to the U.S. Midwest being gradually expanded until it is now six pipelines.