Alaska and Alberta Ink Gas Development Agreement

Alaska and Alberta have inked an agreement that leaders of the two North American states said could spur multi-billion-dollar commercial development of Arctic natural gas. Alaska's Gov. Tony Knowles and Canadian Alberta province's Premier Ralph Klein said they had common interests in ensuring that Arctic natural gas, long isolated from distant markets, is shipped southward through yet-to-be-built pipelines. "We're trying to articulate a new approach to the issue of developing not Alaska gas or Canadian gas but, really, an Arctic energy strategy," Knowles said after signing the pact at a meeting of an oil field support industry trade association. "The future is Alaska and it is Alberta, and together we can meet the demands of supplying the North American market," Klein said.

The two leaders said they viewed alternative pipeline proposals - one that would ship Canada's Mackenzie River Delta gas and another that would transport North Slope gas - as complementary, not competing. "I see a business environment where there are two pipelines, not one," Knowles said. The Alaska project alone is estimated to cost $17 billion to $20 billion and is expected to take over a decade to get started. Details of the Alberta project were not available. Klein said he was supportive of a pipeline that would follow the route of the Alaska Highway from Alaska into Canada - the project that Alaska leaders are pushing -- and also another line being promoted by Canadians that would run straight south from the Northwest Territories' Mackenzie Valley. "The reason we're supportive of all options is, no matter which pipeline is built, they will all converge in Alberta," he said.

Alberta's only requirement, he said, was that the province's petrochemicals plants be allowed to strip liquids from the natural gas as it passed through, Klein said. The North Slope has known natural gas supplies of about 35 trillion cubic feet, mostly at the Prudhoe Bay oil field. It is the largest known but untapped U.S. natural gas resource. Known natural gas reserves in the Mackenzie River Delta are less than a third the size of Alaska's reserves, but considered a huge resource nonetheless. Because Mackenzie gas would be shipped in a smaller, shorter pipeline than Alaska gas would need, that project is likely to be much less expensive and easier to build, experts say.

Alaska's major oil producers - BP, Phillips and ExxonMobil - have said the Alaska gas project is uneconomical. But Knowles and Klein suggested that such a conclusion is shortsighted. Knowles said producers must work 10 to 12 years in advance to get an Alaska gas pipeline going. Klein said Alaska and Alberta need to work collectively to convince the industry.