US may help build Alaska gas pipeline through Canada
Los Angeles — Once it seemed unthinkable, but senior American natural-gas industry executives privately adimit US government participation in the Canada-Alaska gas pipeline is a distinct possibility. The executives recently met here to mark the receipt of Canadian natural gas through a transmission network that will eventually be part of the alaska pipeline.
The subject has already been broached with Reagan administration personnel, who are said to have been sympathetic to the idea of extending US assistance to the troubled multibillion dollar project.
US help could either be temporary or permanent, in gov! ernment guarantees or actual cash, to secure completion no later than 1987. The original schedule called for construction to start next year and operation by 1985-86.
But most industry executives acknowledge that enabling legislation will not be passed by the House of Representatives before year's end.
Also, construction materials, including prefabricated modules required at Alaska's North Slope, the starting point of the 3,500-mile system, have to be readied this coming winter to be delivered in the short navigation season next summer.
According to leading utility and pipeline executives, some sort of a US government guarantee is needed now that the project has passed the point of "prudent and conventional banking support."
At first estimated to cost around $8 billion, the latest price tag is said to range between $30 billion and $40 billion. According to the same sources, another year's delay -- whether on the legislation or the construction schedule -- would add another $4 billion to $5 billion to completion costs. Canadians responsible for the sections of the Alaska pipeline through the Yukon, northeastern British Columbia, Alberta, and Saskatchewan still say no government support of any kind will be necessary on their side of the international border. But they also are anxious that the American dilemma over the financing of the pipeline be resolve soon.
On Oct. 1 West Coast utilities began receiving Alberta fuel -- about 240 million cubic feet a day -- through the western leg of the Prebuild pipeline system whose twin facility is now under construction to reach the Midwest late next year. The gas deliveries come from a domestic surplus estimated at up to 14 trillion cubic feet.
That surplus weighs heavily on producers' minds. Many of them are in financial stratis because of continuing soft markets and Ottawa's reluctance to authorize more exports. Canadian gas executives at the same time are alarmed by what they consider increasingly hostile polical attitudes in Washington compounded by the apparent domestic gas "bubble" prrempting export prospects.
Producers in Canada also face stiff new taxes at the wellheads under the Sept. 1 intergovernmental energy agreement. Canadian gas now comes across the border at nearly $5 per thousand cubic feet and this price, st by Ottawa, is year. Some contracts are said to be off by as much as 60 percent while, on average, Canadian shippers reduced volumes by about 30 percent. Canada has authorized a total of 1 trillion cubic feet of gas exports to the US annually.
According to US executives, who asked not to be identified, the Reagan administration "is warming" toward the arguments put forward by pipeline interests that the delivery of Alaska gas supplies is a "matter of national security." Therefore if the private sector is either unable or unwilling to do the job, Washington might come to the rescue, they reasoned.
Canadians worked for almost seven years just to get the 1 trillion cubic feet of additional gas into the US distribution network. And even this Prebuild volume will be declining toward 70 percent of the volumes that began flowing at the start-up. At the same time, the Canadian government remains open to political attacks. Should the rest of the Alaska pipeline be ditched, critics may argue the Prebuild merely served as a pretext to syphon off surplus gas that eventually could have found applications at home.
Sponsors of the Prebuild and the Alaska Gas Transportation System, as the project now is known officially, urged their US counterparts here to push for faster congressional deliberations to "save face as well as money," as one Canadian executive put it.
The legislation is supposed to allow Prudhoe Bay producers to hold equity in the pipeline, to ensure a minimum rate of return on the pipeline's operations, and to begin billing customers (wholesalers) of gas prior to the completion of the entire system to ease financing woes.