CANADA ACTS TO THWART US PLAN TO KILL PIPELINE

CANADA ACTS TO THWART US PLAN TO KILL PIPELINE

The Canadian government is trying to head off a move within the White House to formally abandon plans to build a massive natural gas pipeline from Alaska to central Alberta.

A recommendation to President Bush from one of his key energy advisers calls for killing the Alaska Natural Gas Transportation System, even after Canada completed the "pre-build" leg from Alberta to California and the U.S. Midwest 10 years ago."We have an agreement that is to last 35 years and there is no provision for termination," said Bruce MacDonald, a spokesman for Canada's Northern Pipeline Agency. Mr. MacDonald said in an interview that Canadian companies, led by Calgary-based Nova Corp., spent US$2.5 billion ($3 billion Canadian) in 1982 on the Foothills pipeline that was to act as a landbridge connecting Prudhoe Bay, Alaska, to American gas consumers.

Mr. MacDonald said a formal treaty was signed between President Carter and Canadian Prime Minister Pierre Trudeau.

"We expect the Americans to live up to their obligations," he said, adding that Canada has sent a diplomatic note to Mr. Bush, protesting the recommendation.

The recommendation to abandon the Alaska Highway gas pipeline was contained in an 18-page paper from Inspector Michael Bayer in the Office of the Federal Inspector of the ANGTS pipeline and given earlier this year to Mr. Bush.

In his report, Mr. Bayer said the pipeline project, the largest private construction project ever planned for North America, today is nothing more than "legal fiction" and hampering proper planning of Arctic resources.

"This project is perhaps an object lesson in the dangers of government choices that become engraved in stone, impervious to market developments and a changing world," he said.

Mr. Bush already has canceled any further funding for the ANGTS office as of Oct. 1. A spokesman for the Department of Energy said no final decision has been taken yet.

Mr. Bayer said the pipeline was based on the belief in the mid 1970s that oil prices would soar to US$200 a barrel and natural gas prices would hit US$13 for a thousand cubic feet. Instead, oil prices are less than US$20 a barrel with little prospect of increasing sharply before the end of the decade, and natural gas prices are at a 14-year low.

What's more, there are still natural gas surpluses in the lower 48 states and plenty of available reserves in Western Canada. Mr. Bayer said the Alaska pipeline couldn't be profitable before 2010 at the earliest.

The United States also is considering a proposal to build a gas pipeline beside the Alaska oil pipeline to Valdez. Called the Trans-Alaska Gas System, the proposal calls for construction of compressing plants designed to liquefy the gas for shipments to Pacific Rim countries such as Korea.

Mr. Bayer also said a Canadian proposal to build a C$3.4 billion gas pipeline from the Mackenzie Delta in the Canadian Arctic would likely be built before the Alaska line if demand improves.