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Two heads are better than one. Don’t put all your eggs in one basket. Don’t play favourites…. When it comes to the proposed Alaska Highway and Mackenzie Valley natural gas pipelines, the Yukon position may suggest a few clichés, but it also makes a lot of sense.
The Yukon government’s Oil and Gas Business Development and Pipeline Branch is responsible for ensuring that activity related to northern hydrocarbon production provides economic opportunities for Yukon residents and businesses. Its view that the two pipeline projects are complementary rather than competing reflects a long-term strategy based on the assumption that market demand can support both projects, thereby maximizing spin-off benefits.
“We see both projects as being good for the North, good for the Yukon, good for the N.W.T., good for Canada and, in fact, good for the North American gas market,” says branch director Brian Love. “Business opportunities, employment, opening up other basins in the North, including Yukon basins—all those things are reasons why we would want to support both projects. We believe that both projects will happen.”
Many Yukoners tend to focus on the benefits of the Alaska Highway pipeline, which will carry up to 5.6 billion cubic feet per day (Bcf/day) from massive natural gas fields on Alaska’s North Slope to southern markets. About 30 per cent or 760 kilometres of its total length will cross Yukon land. By contrast, the shorter Mackenzie Valley pipeline will transport up to 1.9 Bcf/day from the Mackenzie Delta to southern markets without traversing any Yukon soil.
“Of course, because the Alaska project is bigger and because it runs through our jurisdiction, it’s going to have much more impact in terms of employment and business opportunities, as well as environmental and socio-economic effects” Love explains. “It’s also going to generate property taxes, which is an ongoing source of revenue.”
Furthermore, this pipeline could supply affordable, efficient energy to the Yukon’s residential, commercial and industrial sectors, advancing the territory’s economic development. As Love points out, it could also stimulate the development of Yukon oil and gas basins located along the line, including the Whitehorse Trough which has an estimated 2.5 trillion cubic feet (Tcf) of natural gas potential. “That will result in direct royalty revenue for us,” he says.
This kind of payoff could be even bigger in North Yukon where the Eagle Plain, Peel Plateau, North Coast and Old Crow basins have a median natural gas potential of almost 11 Tcf. Once explored and developed, the region’s natural gas resources could eventually generate more than $40 million plus a year in royalties for the Yukon and First Nation governments. However, future development here similarly depends on pipeline access. |
George Sutherland, an industry expert with the Calgary-based Canadian Petroleum Training Institute, offers an interesting analogy.
“If you had a candy store, and you made all this candy, but the kids couldn’t cross the street to get to the store, you’ve got a problem,” he observes. “Until there’s a pipeline— a transportation system—then the potential investors are saying ‘Well, yes, we think there’s a lot of future potential, but….’ If there’s a pipeline, that goes hand-in-hand with companies wanting to carry out further exploration.”
The tantalizing possibility of a connection or lateral pipeline from North Yukon to the Mackenzie Valley pipeline explains why the Yukon government is so eager to see this project move forward as well.
“In terms of getting North Yukon gas to market, the Mackenzie Valley project is really important for us,” Love says.
Stakeholders certainly agree. Devon Canada recently drilled a natural gas well in Eagle Plain—one of only two drilled in the Yukon in the last 20 years—but will bide its time before resuming the search for large accumulations.
“One of the things about the Yukon and Eagle Plain in particular is that, even if you do find these accumulations, you have to have a Mackenzie Valley pipeline out there if you’re going to have any hope of getting the gas to market,” says Michel Scott, Devon Canada’s Vice President of Government and Public Affairs.
With these considerations in mind, the Yukon government strongly supports the Mackenzie Gas Project moving ahead, and is intervening in public hearings to ensure that policies related to extensions, laterals, and tolls and tariffs won’t restrict the eventual flow of Yukon gas.
As for the progress and timing of the Mackenzie Valley and Alaska Highway projects, it seems like a horserace that no one is willing to bet on.
“I think it doesn’t matter which project goes ahead first,” Sutherland says. “The truth is, if either one of those is built, I think it will be a general catalyst to encourage investment and development of the hydrocarbon resources of the North.”
So, by sticking to its strategy, the Yukon may just have its cake and eat it, too.
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Last Updated 30-01-2006
