Proceedings of the Standing Senate Committee on
Energy, the Environment and Natural Resources
Issue 9 - Evidence - Morning meeting
CALGARY, Tuesday, March 8, 2005
The Standing Senate Committee on Energy, the Environment and Natural Resources met this day at 9:45 a.m. to
examine and report on emerging issues related to its mandate.
Senator Tommy Banks (Chairman) in the Chair.
The Chairman: Gentlemen, thank you all for being with us. I very much appreciate, we all do, appreciate you being
I would like to introduce you to Senator Willie Adams from Nunavut, Senator Lorna Milne from Ontario, Senator
Mira Spivak from Manitoba, and Senator and ex-Premier John Buchanan, of course, from Nova Scotia.
My name is Tommy Banks and I represent Alberta, and it is my honour to chair this committee, some of whose
members are here today, not all.
We are joined, for the record, by Mr. Harold Kvisle who is the President and Chief Executive Officer of
TransCanada Pipelines; by Mr. Brian Chambers who is the Executive Director of the Northern Gas Project
Secretariat; by Mr. Bob Reid who is the President of the Mackenzie Valley Aboriginal Pipelines; and by Mr. Bill
Klassen who is the Chair of the Environmental Impact Screening Committee.
I thank you very much for being with us this morning. We have until about 12:30. We would like, I suspect, to hear
from each of you, and I do not know if you have had a chance to talk amongst yourselves, but I suspect from our
standpoint the most efficient thing would be for us to hear from each of you and then open the discussion, into which
we invite you to jump with both feet when the time comes, if that is agreeable.
The only thing I would ask is that you keep your presentations to us, and what you want to tell us, as concise as you
can, being sure to tell us what you want to tell us in order that we can have more time for friendly discussion at the end.
Have you decided who should go first? If not, I will be arbitrary.
Mr. Kvisle, I will go from left to right, so you have the floor.
Mr. Harold Kvisle, President and Chief Executive Officer, TransCanada Pipelines: I have given a presentation to you.
Actually, I have given two things. One is a little glossy brochure, which I will come to later, but I would like to draw
your attention to the materials that you were given in advance. There is a presentation from TransCanada in there. I
will run through that quickly and touch on a few of the overheads.
I would like to spend a few minutes talking about Canada's place in the North American energy scene and Canada's
place in the world. Rather than read through the text of what is in my presentation, I would just like to draw your
attention to some of the different exhibits as we go through.
First of all, on page 3, there is a chart that looks like this, and that chart shows primary energy production by major
countries for the year 2002.
In this, there is a chart that shows primary energy production by country. It is interesting that in 2002, the largest
energy producer in the world is still the United States, followed by Russia and China, which are about equal. You will
notice in China that the source of energy is predominantly coal.
The key point I want to illustrate on this first chart is that Canada is the fifth largest primary producer of energy in
the world. That is not always recognized, but if you look at this chart, it is very significant.
We are about the same size as Saudi Arabia. The mix in Canada is a little bit different. Our oil production is less
than Saudi Arabia, but our gas production is much larger, and we are the third largest gas producer in the world, as
one quick bit of background.
The second chart that I take you to on the next page speaks more directly to the North American situation. I
appreciate you do not have it in colour, but I will hold mine up there.
That bottom band that peaked in about the year 1974-1973 is oil production from the United States.
There has been an enormous geologic effort; many more wells drilled in the United States alone than in the rest of
the world combined over time by an order of magnitude.
The Americans are that much further ahead of the rest of the world in terms of developing, exploiting and now
going into decline with their basic reserves.
We will see this same pattern of building to reach a peak, and then going into decline, occur in natural gas in North
America. We feel we are today at that top, and we are about to enter that declining phase.
This big band on the top of that second chart is the amount of oil that the United States imports every year. We feel
that the Canadian oil sands and the development of Fort McMurray, Cold Lake, Peace River and places like that, can
have a substantial impact on North American energy.
If I can take you forward two pages, there is a page with a map on the top. All of this shown on red is the gas
pipeline infrastructure of North America.
It is an enormous grid of infrastructure, and it serves very well to get gas from the producing basins in the U.S. Gulf
Coast and Western Canada to the big consuming regions in the Great Lakes region and the East Coast of the U.S.
It is a very integrated network, and one of my points here is that Canada is heavily integrated into the North
American gas grid, and we think that is beneficial for all parties.
If you look at the chart on the bottom, I am trying to illustrate the impact that power generation is having on gas
demand in North America.
Nowhere is this more significant than in Ontario today. The shutdown of the coal-fired generation and the
obsolescence of some of the nuclear plants, plus the vibrant, economic growth of Ontario and the demand for
electricity in the industrial and residential sectors, is putting on a lot of pressure. Where is this power generation going
to come from?
Currently in Ontario, they are proposing the construction of several thousand megawatts of gas-fired power gen.
Now I said to the government in Ontario that we can deliver the gas to make that happen, but it will not be cheap
gas. It will be expensive gas because today, if they want gas for power generation, they have to outbid the Chicago
market in order to get that gas.
If we can bring on additional northern supplies, it would significantly impact that equation, and would be a big
positive for places like the power gen sector in Ontario.
On page 7, a chart here illustrates North American gas demand, and the yellow band at the top shows how much of
an impact that power gen sector is going to have.
Now the single most important chart that I would like to share with you today is on the top of page 8, where it says
U.S. other, U.S. Gulf of Mexico and U.S. Rockies; in other words, the three bands at the bottom.
You can see how they look remarkably flat. In fact, if you go back through the history, Lower 48 gas production in
the United States has been flat since 1982. There has been no net growth, and almost all the incremental market
demand in North America since 1982 has been met by growing gas production out of Western Canada. We have met
the market for all that time.
What is happening today — you will see the bar just here, Western Canada Sedimentary Basin, WCSB — starting in
about the year 2000, we went into a flatline period.
We have managed to grow gas production in Western Canada from 4 billion cubic feet, BCF, a day to 8 BCF a day
to 12 BCF and to 16 1/2 BCF a day today, but we now have that flywheel running about as fast as it can run. The
annual decline in production is just offset by what we are able to generate by drilling 17,000 gas wells a year in Western
Canada. This is an amazing story of high levels of economic activity, but that is where we sit.
Senator Milne: Every year, 17,000 new gas wells are being drilled?
Mr. Kvisle: Yes. That might be plus or minus 1,000.
Senator Buchanan: Where are they located?
Mr. Kvisle: Mostly in Alberta.
Senator Buchanan: Saskatchewan?
Mr. Kvisle: Southwestern Saskatchewan is active for gas drilling in the shallow gas fields there.
The Chairman: And northeastern B.C.
Mr. Kvisle: There are wells located in Northeast B.C., but the big incremental volumes of gas come out of that strip
of Alberta that runs from Calgary to Grande Prairie. That part of Alberta is where the bulk of the incremental
production will come from.
TransCanada deals with a lot of gas price forecasters, but on the chart on page 11, the first point I would make is
these are all U.S. dollars. Sorry, it should have said that.
If you go back to 1995, you can see that the price of gas was about $2 per million British thermal units, MMBTU,
and that gas price has risen where it is averaging today $6 MMBTU.
We have had a tripling in gas prices, and this is due to the phenomenon I mentioned earlier where the power gen
sector needs the gas. They will bid up the price until they can take that gas away from the industrial sector, and when
the industrial sector stops using gas, it usually means a downturn in that economic activity, so that is not a good thing.
All these squiggly lines, the ones in the middle, are gas price forecasts by eminent experts on gas price forecasting.
We get around all this by saying if there is no northern gas and no new liquefied natural gas, LNG, imported into
North America, we are going to see the price move up to what we think will be north of $7. It is close to that today. If
the northern gas comes on and the LNG comes on, we can see the price go there, and the reality will be somewhere
between the two, but that is our range.
Finally, the last side I will touch on, and then I will conclude my remarks, is on page 12. The key point that I would
like to leave you with from page 12 is that there is an enormous gas infrastructure in Alberta today. As a pipeline
industry, we move 16 BCF a day of gas in Alberta, B.C., and southwest Saskatchewan.
Mr. Kvisle: We move 16 1/2 BCF per day, and of that, 70 per cent moves on the TransCanada system, and the other
30 per cent on a variety of other systems.
The Alberta system shown on this map is the single highest volume gas transmission system in North America,
moving today 10 1/2 BCF a day, with a capacity for 14 BCF a day.
It is the spare capacity on the Alberta system that makes the Mackenzie Valley project more economically attractive
than it otherwise would be.
Twenty-five years ago the Mackenzie Valley gas pipeline would have extended down through Alberta to an
interconnect point in the United States. Today we only have to build about half that much pipe, 1,220 kilometres,
because once it gets across the Alberta border, there is spare capacity and we can accommodate the gas from there.
I think for the Mackenzie, the existing infrastructure can be a big positive. On the Alaska Highway pipeline, the
volumes are four times as large, and we will need to make incremental additions to infrastructure but not as much as
we otherwise would have.
Mr. Chairman, those are my introductory remarks. I would be happy to take questions as you go ahead.
The Chairman: Thank you, Mr. Kvisle. I think, if you are agreeable, we will hear from everybody because we will
then be better informed to ask you questions.
Dr. Chambers, you have the floor.
Mr. Brian Chambers, Executive Director, Northern Gas Project Secretariat: Thank you, Mr. Chair. Thank you and
to members of the committee and staff for letting us present to you today.
I will go through a brief, which I believe was distributed to you prior to the meeting this morning. It has a cover like
this on it, just so you can follow along.
I will read through the presentation, not entirely but primarily following the text. As indicated, I will provide a
historical and statutory context for the regulatory regime that exists in the Northwest Territories and, in particular,
with reference to the review of the Mackenzie Gas Project which has been proposed by Imperial Oil Resources
Ventures Limited on behalf of its partners.
I will go through the coordinated approach that has been developed by the responsible regulatory bodies and
environmental assessment authorities in the north and in Canada. I will provide you with a brief update of the status of
the review of the project and provide a few comments on what the next steps are in the review of the project.
As I mentioned, I believe it is very important in understanding, or trying to come to an understanding, of the
regulatory regime as it exists in the Northwest Territories to understand how it was developed.
It is a very young and emergent regime that is characterized by a number of historical and contemporary
developments which collectively provide the foundation for the existing environmental assessment and regulatory
These include, and this is important to remember, the long-standing treaties between the Crown and First Nations
of the North, as well as more recently concluded land claim agreements with many of those First Nations.
Indeed, the settlement and implementation of northern land claim agreements in the 1980s and 1990s led to the
establishment of co-managed environmental impact assessment and regulatory bodies that give northern aboriginal
peoples a significant role in decisions concerning development in, and adjacent to, their traditional home lands.
Again, from a historical perspective, to put that in context, the hearings that were conducted in the 1970s in relation
to the first proposal for a gas pipeline up the Mackenzie Valley south into Alberta led, I believe, in a very direct way to
the establishment of co-managed regulatory bodies and environmental assessment authorities. These bodies and
authorities give First Nations people of the North, Aboriginal peoples of the North, a very important role to play and
a very significant voice in considering those reviews.
You will probably hear a little more detail in that regard from my friend and colleague Mr. Bill Klassen in regard to
his work with the Inuvialuit.
The northern regime includes the Environmental Impact Assessment and regulatory bodies that have been
established in the Inuvialuit Settlement Region and the Mackenzie Valley, which, of course, is the geographic area
across which the proposed Mackenzie Gas Project travels.
A coordinated approach has been taken and developed by various northern bodies, as well as bodies of the federal
and territorial nature that have a role to play in the review of the project.
Of course, this work and these discussions among those bodies and organizations began long before the actual
proposal was submitted by Imperial Oil, which I will refer to as the Mackenzie Gas Project because there are other
partners in that proposal.
Those discussions began long before the proposal was submitted last fall. Indeed, agencies responsible for
environmental assessment and regulatory review began discussing as early as 2000. They came together in 2001 to
establish a flexible framework to guide their examination of opportunities and options for coordination of the
development of a northern pipeline.
This resulted in the cooperation plan for the Environmental Impact Assessment and regulatory review of the
northern gas pipeline project through the Northwest Territories.
It is a document that was released in 2001. It did not make specific reference to the Mackenzie Gas Project because,
as I mentioned, there was no specific project before regulators at that point.
It identified at least two options for transporting natural gas from the Arctic, Beaufort Basin, and Mackenzie Delta
into southern markets. That included at that time what is commonly referred to as an over-the-top route which would
potentially bring natural gas from the north slope in Alaska over to the Mackenzie Delta area and then up the
Mackenzie Valley into Alberta.
A primary focus of the cooperation plan was enhancing efficiency and effectiveness in approving certainty and
clarity in the environmental impact assessment and regulatory processes.
While the cooperation plan focuses on working within the boundaries of the constitutional legal and policy
framework, it is committed to identifying, creating, and maximizing opportunities to achieve greater regulatory
efficiencies and effectiveness.
The next point I want to be very clear about because there is a perception in some areas and among some
organizations, and on the part of some people, that somehow the cooperation plan, in fact, created a regulatory regime
in the north.
It cannot be further from the truth. In fact, the cooperation plan lays out a framework or a general plan or approach
for the existing regulatory bodies, environmental assessment authorities, to work together in the review of a major
northern gas pipeline project.
The cooperation plan did not create anything, apart from a very clear approach for those bodies that have existed
for a number of years and, in some case, decades — I am referring to federal authorities as well, such as the Canadian
Environmental Assessment Agency and the National Energy Board, NEB — to work together in the review of a major
northern gas project.
In fact, the cooperation plan has been given full meaning and effect through three agreements that add specific
details to the cooperative framework, and further outline the roles and responsibilities of each of those agencies in the
environmental assessment and regulatory processes. The agreements are listed for your information.
The agreements, of course, led to the establishment of a Joint Review Panel, and the Joint Review Panel will
conduct the environmental assessment of the Mackenzie Gas Project. There are other bodies that will conduct the
Those bodies have a governing structure, which is referred to as the Northern Gas Project, Environmental Impact
Assessment, and Regulatory Chairs' Executive Committee. It is that committee to which the Northern Gas Project
Secretariat reports, from which we take direction.
Our role is to coordinate the public hearing processes and to encourage ongoing communication and cooperation
among the various regulatory bodies.
The four organizations or bodies that are represented here are those bodies that have public hearing mandates. The
Joint Review Panel, as I mentioned, will conduct the environmental assessment of the project; the National Energy
Board will conduct the main regulatory review of the project; and the National Energy Board, as you know, looks at
the tolls, rates, economic viability of the project, and market conditions to determine the need for the northern gas.
The other regulatory bodies that have public hearing mandates are the Northwest Territories Water Board and the
Mackenzie Valley Land and Water Board.
The Regulatory Chairs' Executive Committee, as I mentioned, is supported by the Northern Gas Project Secretariat,
and provides a forum through which all involved parties that have public hearing mandates implement cooperative,
efficient, and harmonized approaches that reduce duplication.
The Regulatory Chairs' Executive Committee meets regularly to exchange information on process-related matters. I
want to emphasize that as well because they are independent panels, and when they meet, exchange information and
plan out their public hearing processes, they do not get into the detailed substance of the evidence that has been
presented before them.
They meet to ensure that decisions within their control and mandate are made where appropriate and feasible, in a
There are other coordinating committees that have been established that I will not go into detail with you this
morning, but the information is included in the text with respect to the coordination of the federal and territorial
I will move on now to the status of the review of the Mackenzie Gas Project. It will be a good idea for you to follow
the chart on page 6 as I read through the text, over the next two pages.
The review of the Mackenzie Gas Project, of course, could not begin until there were real submissions and
applications filed before the bodies.
This began in 2003 with the submission of a preliminary information package. This package contained general
information with respect to the Mackenzie Gas Project, and it signalled the proponent's intention to file a more
Following consideration by the appropriate environmental assessment authorities — and those, for your
information, are the Canadian Environmental Assessment Agency; the Inuvialuit Environmental Impact Screening
Committee, which Mr. Klassen will be speaking to later; and the Mackenzie Valley Environmental Impact Review
Those three bodies subsequently referred that preliminary information package to a Joint Review Panel, which is
the highest and most rigorous level of environmental assessment in Canada. This is a process that was outlined and
contemplated in the cooperation plan.
In August 2004, the seven-member Joint Review Panel was appointed and given authority through one of the
agreements that was signed off pursuant to the cooperation plan. It was given authority to review the environmental
implication impacts of the Mackenzie Gas Project.
That agreement and that review meet the obligations as outlined in three documents: the Inuvialuit Final
Agreement, the Mackenzie Valley Resource Management Act, and the Canadian Environmental Assessment Act.
In October of last year, as I mentioned earlier, Imperial Oil Resources Ventures Limited filed National Energy
Board and Canadian Oil and Gas Operations Act, COGOA, applications to the National Energy Board.
The National Energy Board received three development plan applications, and I want to emphasize that I will not
get into the technical detail of the applications. It would be neither appropriate, nor am I qualified to do that.
In general terms, the three development plan applications were for gas fields. They are referred to as the anchor
fields for the Mackenzie Valley Gas Project. They are located north of Inuvik in the Mackenzie Delta. They are on
shore. They are not in the Beaufort Sea. An application for the gathering system will have to be constructed if the
project is approved to bring the gas from those fields to a main processing facility in the Inuvik region; an application
for a 30-inch natural gas pipeline from Inuvik into northwestern Alberta, which Mr. Kvisle mentioned in his
presentation, as well as a smaller 10-inch natural gas liquids line that would transport natural gas liquids which would
be processed and separated from the natural gas at the facility in Inuvik. That would be transported to Norman Wells,
where it would then be transported to Alberta through the existing Norman Wells pipeline.
At the same time, Imperial Oil Resources Ventures Limited submitted an environmental impact statement to the
Joint Review Panel. That document in and of itself is a little over 10,000 pages in length and is currently being reviewed
by the Joint Review Panel.
As identified in the cooperation plan, the Joint Review Panel and the National Energy Board panel are coordinating
their public hearing process. Over the last several months, my staff and I have facilitated information sessions in
various communities up and down the Mackenzie Valley and in the Mackenzie Delta to inform the general public and
people who live in the communities that would be most affected by the project, about the review and how they can
More specifically, looking at the chart on page 6, the Joint Review Panel and the National Energy Board have
completed phase 1 of the review that they are conducting, the initial review that is. They are both currently in phase 2
of their review processes.
Phase 2 is a written process that allows the proponent, the panels, and registered participants to exchange written
information and ask written questions within both the environmental review and the regulatory examination.
Both the Joint Review Panel and the National Energy Board panel are in the technical analysis stage of their review
of the project.
In phase 3, public hearings will provide an opportunity for the public and technical experts to comment more
directly to the panels on the information received by the panels.
The Joint Review Panel is currently gathering additional environmental, social, and economic information from the
proponents. They have requested that information through written correspondence that they have sent to them.
When the Joint Review Panel has enough information to proceed to public hearings, they will make an
announcement with respect to the scheduling of those hearings and the location.
Last fall, federal regulators convened technical experts from various government departments to share their
expertise and findings from their initial independent review of the environmental impact statement.
In December of last year, the federal regulators submitted a report to the Joint Review Panel, which summarized
what they considered to be information gaps in the environmental impact statement that was submitted by the
Mackenzie Gas Project.
Since that time, the Joint Review Panel has directed the Mackenzie Gas Project and the joint coordinating
committee, which represents the federal regulators, to determine how best that information gap can be filled so that the
Joint Review Panel can move on to the public hearing phase.
On the regulatory side, the National Energy Board and staff are currently reviewing the documents, as are the Joint
Review Panel staff, and are also engaged in a written information exchange process with the Mackenzie gas
The National Energy Board will issue a revised schedule after today, and that schedule will include revised timelines
that have been suggested by the National Energy Board for the conduct of their hearings.
Following the completion of the public hearings, and under the timeframes identified in the cooperation plan, there
is a block of six months for the Joint Review Panel to conduct their public hearings up and down the Mackenzie
Valley. While there is no firm schedule for the National Energy Board, I expect that they would conclude their initial
public hearings within that phase as well.
As I mentioned, following the public hearings, the National Energy Board will adjourn its hearing process to hear
and see what recommendations are going to be submitted by the Joint Review Panel in its report to government.
The NEB will remain adjourned until the government has responded to the Joint Review Panel report. After that,
the NEB will consider the recommendations in that report, as well as the government response, and make its regulatory
decision on whether to issue a permit, which, of course, is referred to as a Certificate of Public Convenience and
In rendering that decision, the National Energy Board will balance the various interests to decide whether the
project is, in fact, in the Canadian public interest.
There are other regulators in play, as there would be in provincial jurisdictions at the provincial level, but because a
lot of regulatory responsibility still remains with the federal government in the Northwest Territories, federal
departments have a role to play as regulators.
To date, they have not received any permit applications or authorizations that would be required by the proponent,
and that is understandable.
To be more specific, the proponents, if the project were to move forward, would require stream-crossing
authorizations, which are administered by Transport Canada. They would require fisheries permits from Fisheries and
Oceans Canada. They would require access permits from Environment Canada, for example, to gain access to the
Kendall Island Migratory Bird Sanctuary in the Mackenzie Delta.
Various federal departments would have a regulatory role to play, but to date they have yet to receive any of those
Similarly, if the project were to proceed, the proponents would require land use permits and water licenses from
northern boards that have public hearing mandates, and I referred to those earlier: the Northwest Territories Water
Board and the Mackenzie Valley Land and Water Board. Neither of those boards has received any applications from
the proponents to date.
In summary, and to provide an update on the most recent update provided by the Regulatory Chairs' Executive
Committee, of the four panels that have public hearing mandates, including the National Energy Board and the Joint
Review Panel, they most recently met in mid-February.
At that time, they restated their commitment to the objectives of the cooperation plan and to a timely and
transparent review of the Mackenzie Gas Project. As I mentioned earlier, the Joint Review Panel and the National
Energy Board are currently waiting for more information from the proponents before they can set down the matter for
In the meantime, they have agreed to support the scheduling of a prehearing planning conference, probably in June,
to set out in more detail how they will conduct their public hearings, which they expect to commence sometime in late
summer of this year.
That concludes my presentation and overview, Mr. Chair.
The Chairman: Thank you very much, doctor.
Mr. Reid, you have the floor.
Mr. Robert J. Reid, President, Mackenzie Valley Aboriginal Pipeline: Thank you very much and good morning. We
really appreciate the opportunity to introduce you to the Mackenzie Valley Aboriginal Pipeline Limited Partnership,
and because that is a mouthful, we shorten it to Aboriginal Pipeline Group, APG.
I am going to focus on the Aboriginal Pipeline Group, but to put things in context this morning, APG has
negotiated the right to secure a one-third interest in the Mackenzie Valley pipeline.
We are one of five owners, I guess. The others are Imperial Oil, ConocoPhillips Canada, Shell Canada and
ExxonMobil Canada, and TransCanada Pipelines is also a participant in the project.
I am going to focus on the APG and how the APG came into being, and how we happened to acquire a one-third
interest in this major project. I will also talk about the significant benefits that we will bring to the Aboriginal
communities of the Northwest Territories.
I will generally follow the comments that I have prepared, and I think each of you have a copy. It is the one with big
print, for those of us who require reading glasses.
APG is a unique alignment of three of the four Aboriginal groups in the Mackenzie Valley of the Northwest
Our mandate is to maximize the long-term financial returns to the Aboriginal groups through ownership in the
APG is a business deal that will provide a source of revenue to Aboriginal people in the long run. All too often in the
past, Aboriginal groups have been involved in projects but only during the construction phase. In the case of this
particular pipeline, that will be a two-year phase.
This revenue stream that will be provided through ownership in the pipeline will provide benefits to the Aboriginal
groups of the Northwest Territories for as long as the gas flows through this pipeline, so it is a long-term deal.
The genesis of APG took place in January 2000 when Harry Deneron, who was then Chief of the Fort Liard Band,
called a meeting of the Aboriginal leaders in the Northwest Territories. That meeting was held in Fort Liard.
At that meeting, they established a vision that they would acquire, or attempt to acquire, a one-third interest in the
Mackenzie Valley pipeline.
That meeting was followed by a meeting in Fort Simpson in June of the same year where APG was formally
established, pledging to maximize the long-term business opportunities to the Aboriginal groups through ownership in
Just a year later, in June of 2001, the group had negotiated a memorandum of understanding with the Mackenzie
Delta Producers Group, and those are the four producers I named earlier: Imperial Oil, ConocoPhillips, Shell and
They were planning, of course, to connect their natural gas reserves in the Mackenzie Delta to the pipeline network
in Alberta through construction of the Mackenzie Valley pipeline. That agreement with the producers established
APG's right to own a one-third interest in the Mackenzie Valley pipeline.
To exercise that right, however, required money, and APG, which was essentially an amalgamation of the three of
the four Aboriginal groups in the valley, did not have the assets to really make this deal work.
It took two full years to acquire the funding. We went to Ottawa and requested funding from the federal
government, and we were told, or encouraged I guess is the proper word, to seek funding in the private sector. We did
In June 2003, APG announced that it had obtained funding from TransCanada Pipelines for the predevelopment
phase of this project.
By predevelopment phase, I mean the phase through the filing of the application, which took place last October 7,
right through to approval of the application at the end of the regulatory process, which is currently forecast to be in the
fall of 2006.
TransCanada stepped up to the plate and is providing funding to APG so that we can meet our cash calls to the
project based on a one-third ownership interest during this very risky period. That funding is established as a loan, and
it will be repaid from our share of the earnings, once the pipeline goes into operation.
It is important to note, however, should the pipeline not be approved, or should the application not progress,
TransCanada has agreed to forgive that loan so that there is no risk to the Aboriginal Pipeline Group or to the people
of the Mackenzie Valley through this business deal.
One thing I would like to emphasize is this business deal was negotiated by Aboriginal people for Aboriginal people.
I cannot take any credit for it. I came on, basically, with APG after this deal had been done. I joined APG in the fall of
Our board of directors is 100 per cent Aboriginal. They are to be congratulated for undertaking these very
significant negotiations to acquire an interest in this significant project.
Now that our position in the project is firmly established, we are turning our attention to arranging the long-term
financing that will be required to pay for our share of construction costs.
As I mentioned, TransCanada's funding carries us through the commitment to construct, or regulatory approval, in
the fall of 2006. Beyond that, we are responsible for raising the remainder of the funding that will be required to pay
for our share.
The Chairman: Sorry, Bob, just before you go on, the bottom of the previous page says that by August of that year
we had arranged a complete funding package. That refers to the preparatory stage; am I right?
Mr. Reid: I will explain that, and that is a good question.
I am paraphrasing and not following this to the word. The document here is correct. In August of that year, which is
2003, we arranged a complete funding package from the Delta producers, the federal and territorial governments, and
of course TransCanada, thereby becoming a full one-third partner in the project.
The funding that we have arranged with the Delta producers is backstop funding that would provide us with a
means of moving forward, should we not be successful in arranging funding in the commercial investment field.
We have backstop funding in place that will carry us through the construction phase with the Delta producers. The
federal and territorial governments are paying our operating costs at this point, our salaries, travelling costs, legal fees
and so on.
However, the backstop funding is not at an interest rate that is particularly desirable. It is there, and we appreciate
the fact it is there, but we will attempt to obtain a better rate in the commercial market.
Now that our position in the project is firmly established, we are turning our attention to our long-term financing,
and that is the financing that would be, hopefully, at a significantly better rate than the backstop funding we have with
The deal itself is a quite simple. We go out and borrow funds in the commercial market to support our investment in
the pipeline. It will be 70-per-cent debt and 30-per-cent equity. The debt portion will be funded by a consortium of
We have had significant interest at this point from the banks in undertaking our financing. An obvious question is,
How can an organization like the APG, who have no assets, go out and borrow in excess of a billion dollars in the
The answer lies in the long-term shipping contracts that are signed by the producers with the pipeline to transport
their gas from the Delta south to Alberta.
Essentially, those long-term shipping contracts provide the security for the banks on which we will base our
The Chairman: For the 70 per cent.
Mr. Reid: For the 70 per cent.
The Chairman: Where are you going to get the equity?
Mr. Reid: The equity will come from one of two sources. We have two alternatives. The first is to borrow it, and that
would be a subordinated loan at a higher interest rate so, in fact, we would be double-leveraging our ownership
More likely, based on discussions last fall with investment bankers in Toronto, most notably Borealis Capital and
the Ontario Teachers' Pension Fund: Both those organizations have indicated they would be prepared to put up our
equity at a better rate than subordinated debt. They would essentially become equity owners, but they would not have
a majority share. At all times the Aboriginal groups will maintain control of the APG.
A possibility is to have a partner, essentially, such as Borealis Capital or the Ontario Teachers' Pension Fund, and
there may be others who would step forward to provide our equity portion.
The Chairman: I am sorry to stop you on that point, but I want to make sure. Is it you think that the investor, for
example, the teachers, will put up 30 per cent of the money to provide the equity, but the investor wants 49 per cent of
Mr. Reid: No, no, we will not entertain a deal like that. We have not gone too far down the pipe in these discussions,
but our understanding is that we would set up a separate class of shares for equity investors, such as these two
examples, and they would have a vote at the table. It will be more proportionate to their equity ownership in the 30 per
The Chairman: Thank you.
Senator Spivak: Could I just ask a question? What about the interest charges during all this time? Where is that
money coming from?
Mr. Reid: Interest, for example, on the loan with TransCanada is accruing on that loan and will be paid from the
share of our operating funding once the pipeline is up and running, so interest charges are accruing.
Senator Spivak: And all the other loans?
Mr. Reid: The other loans, which again have not been negotiated at this point, but will be required for the period
beyond the fall of 2006, those interest charges, again, will accrue during construction and will be repaid from our share
I should mention that the debt cost, the debt interest, is capitalized as allowance for funds used during construction,
AFUDC, and that is common practice in pipeline construction.
The Chairman: Thank you. Sorry to interrupt.
Mr. Reid: No, that is fine. Good questions.
The funds remaining after our loan repayment and administrative costs, the costs of operating APG, will be
distributed to our shareholders in the form of dividends.
Now just a word about that: In the Canadian regulatory environment, debt costs flow through to the toll payers or
the shippers. The cost of equity is not a flow through. That is a true cost to APG.
APG will essentially be earning on the spread between the approved or authorized return on equity and our cost of
equity. That is why your previous question was very pertinent.
We need to have options to acquire our equity, and we need to get the very best rate we can on the cost of our equity
to maximize the spread between the cost of equity and the approved return on equity.
As a result of enhancements that were negotiated to the original memorandum of understanding, APG's ownership
and dividends can grow as pipeline volumes increase. In fact, APG has ten years from the commencement of operation
of the pipeline to maximize our ownership.
I have examples here of what the dividends might look at. These are based on assumed return on equity, assumed
cost of equity, and a little slice for APG operations. At a throughput of 1 billion cubic feet a day, which is the most
likely throughput for this pipeline going into service, the annual dividends are estimated to be $12.5 million per year
each and every year for the first 20 years.
That number can increase to over $21 million per year at a throughput level of 1.5 billion cubic feet a day.
The dividends are quite significant, and this is why we are proud of this arrangement to provide the long-term
benefits to the Aboriginal communities.
Once our loans are repaid, similar to a mortgage on a house, the dividends to the shareholders increase dramatically,
potentially to as much as $100 million per year.
That will be from the 21st year on. These are structured as 20-year loans to be repaid from our share of earnings.
Once the loans are paid off, the dividends increase dramatically.
These are significant numbers. The dividends will be distributed to shareholders according to the pipeline distance
through each Aboriginal region, but only to those groups that have formally signed on as shareholders of APG.
Some of the numbers, for example, about 20 per cent of the pipeline is in Gwich'in territory, so they will get 20 per
cent of our dividend. The Deh Cho would potentially own the largest segment. Close to 40 per cent of the dividends
would flow back to the Deh Cho.
However, I mentioned earlier that three of the four Aboriginal groups in the Mackenzie Valley have now signed on:
the Gwich'in, Inuvialuit, and the Sahtu.
We have an open invitation to the Deh Cho, but they have indicated that their land claim and self-government
initiative, which is commonly known as the Deh Cho process, is number one priority for them, and we respect that.
Because of that, to date they have not been willing to cooperate with the pipeline project or join APG. In fact, they
are doing what is normal human nature, and that is using the pipeline as a lever in their negotiations with the federal
government for the Deh Cho process or land claim settlement.
I am not saying that negatively. I am saying that as a fact of life. That is something that is natural for them to do,
and they are doing that.
However, there are some concerns that we do have. Most notable of those is the fact that the Deh Cho have filed for
an injunction to stop the regulatory process that has already begun and is already underway.
We are concerned that the Deh Cho action and the lack of progress on the Deh Cho process have the potential to
significantly delay this important project, and it is a delay that could jeopardize the project itself and the significant
benefits, of course, that we would bring to the Aboriginal people of the Mackenzie Valley.
One thing I wanted to convey is that it is essential that the government of Canada continue to work with the Deh
Cho to resolve their differences to allow this project to move forward.
In that vein, I am happy to indicate that discussions are continuing, even though the lawsuits have been filed,
between the federal government and the Deh Cho; in fact, are continuing in Ottawa this week.
We strongly encourage those discussions to continue. This is a matter that needs to be resolved outside the
courtroom. This needs to be resolved through good old-fashioned negotiation.
APG's participation as an owner in the Mackenzie Gas Project is an opportunity to change the way things have
been done in the North. The Aboriginal groups in the Mackenzie Valley no longer have to stand by and watch resource
development take place. They can now play a meaningful role in being part of making it happen.
As a one-third owner, we have a seat at the board table of the Mackenzie Gas Project and a strong voice in
influencing how this project develops.
From the first day that gas flow commences, APG will deliver significant dividends to its Aboriginal shareholders,
dividends that will continue to flow as long as the gas flows.
That concludes my comments. Thank you very much.
The Chairman: Thank you, Mr. Reid. We will have some questions for you.
Mr. Klassen, you have the floor.
Mr. Bill Klassen, Chair, Environmental Impact Screening Committee: Thank you, Mr. Chair, and members of the
committee. Thank you for the opportunity to speak with you.
I think the sequence of presentation of information is advantageous in that we have gone from the international to
the national to the Mackenzie Gas Project. Now with your indulgence, I will talk about what is happening in one of the
areas that we will be supplying the gas to, and perhaps even make some parochial comments.
I will be generally following the text of the presentation that I had provided electronically about a week ago, but I
will depart from it in some instances.
The Environmental Impact Screening Committee for the Inuvialuit Settlement Region that I chair screened the
preliminary information package for the Mackenzie Gas Project in late 2003 and early 2004.
A panel of that screening committee determined that the project could have significant negative environmental
impact and referred it for that reason to the Joint Review Panel, which has already been mentioned, in January of 2004
for further environmental assessment and review.
Because the screening committee has largely discharged its responsibility with respect to the Mackenzie Gas Project,
I can speak only about one of the four topic areas that I understood you were interested. It has to do with the U.S.
Government incentives for an Alaska Highway gas project and what the impacts might be on the Mackenzie Gas
To do that, I would like to talk about the upstream effects, those having to do with exploration and development for
natural gas in the region.
To provide some context for my comments, I would like to tell you briefly about the role of the screening committee.
It was established under the Inuvialuit Final Agreement which was signed in 1984.
That agreement had three goals, which had to do with preserving Inuvialuit cultural identity and values within a
changing northern society, to enable the Inuvialuit to be equal and meaningful participants in the northern and
national economy and society, and to protect and preserve Arctic wildlife, the environment, and biological
The committee works to uphold those goals by screening all developmental activity within the region to determine if
that development might have a significant negative environmental impact, or a significant negative impact on
Inuvialuit harvesting practices.
The screening committee is made up of three Inuvialuit members who are appointed by the Inuvialuit Game
Council, and three members appointed by Canada who are designated by the governments of the Northwest
Territories, the Yukon, and Canada. The chair is appointed by Canada but with the consent of the Inuvialuit.
Determinations about the potential impact of a proposed development are made by a four-member panel: the
screening committee that is made up of two Inuvialuit members and two government appointees, as well as the chair.
The Chairman: Dr. Klassen, just before you go, for the record, will you tell us what is the subject of the harvesting to
which you referred?
Mr. Klassen: It has to do with wildlife harvesting. It has to do with gathering of medicinal plants and berries.
Recently, there was a project that would have had a winter road go over a place called Blueberry Hill, appropriately
named, and people were concerned that over-the-ground vehicles might damage that area for berry production.
Harvesting includes harvesting of caribou and beluga whale, trapping and harvesting of plant products.
The screening committee referred the Mackenzie Gas Project to the Joint Review Panel over a year ago, but it still
continues to screen projects that are related to that Mackenzie Gas Project for potential environmental effects.
There are, as has been mentioned, three substantial natural gas fields that have been discovered in the region. These
onshore fields called Taglu, Niglintgak, and Parsons Lake will be linked by a system of feeder pipelines to the gas
processing plant at Inuvik. Then the gas and other products will be shipped up the valley to Alberta by pipeline.
Exploration and development work continues to delineate those three gas fields and to facilitate the design and
construction of the gas extraction facilities at those fields in the pipeline system to connect them to the main line. Our
committee continues to screen this activity as separate from the review of the Joint Review Panel.
While these three known gas fields contain substantial volumes, more gas will be needed to sustain the flow once
these fields have been exhausted. To find those other resources of natural gas involves seismic activity, both onshore
and offshore. It involves drilling of exploratory wells, again both onshore and offshore. It will involve developing the
routes and designing more pipelines to connect them to the Mackenzie Valley pipeline.
These ongoing activities require significant support in the form of barging and storage of materials, equipment and
fuel, camps for workers, construction of winter roads, and airstrip and aircraft support. They also require advanced
field research, and all these activities, too, are subject to screening by our committee.
Significant environmental concern related to exploratory drilling has to do with the disposal of drilling waste. Drill
cuttings and drilling mud are currently disposed of in the region in sumps. Those are large pits that are blasted in the
permafrost. They are backfilled with the drilling waste, and then those drilling wastes are buried below the active layer.
That is the layer that thaws and refreezes in the course of a season. Then the sump is capped with material that was
removed from the pit and that cap is revegetated.
The expectation is that the salt-based drilling muds will freeze in place in the sump and will not migrate from the
sump into the surrounding area.
There are currently over 200 sumps in the Mackenzie Delta, some from current drilling activity and some going back
to the 1970s. A certain percentage of those sumps have deteriorated, and their contents are starting to leak. This results
in ponding of water and the dying off of some vegetation in the vicinity of those failed sumps.
Of increasing concern is what the effect of climate change may be on the permafrost that is supposed to contain
these sumps in perpetuity.
In the past several years, industry and government have been doing research on sumps, and they are monitoring
them. A technical advisory committee was established to look into the disposal of drilling wastes, and it issued its
report last year.
By contrast, on the north slope of Alaska, drilling waste is generally disposed of by means of downhole injection.
That has to do with injecting the drilling waste into an identified rock horizon at a depth where there is no danger of
that drilling waste contaminating groundwater or interfering with the production of oil and gas.
There was some downhole injection at Taglu in the 1970s, but the National Energy Board currently does not
authorize that means of disposal for a number of reasons. Understandably, one reason is that an appropriate geologic
rock layer has not yet been identified into which those wastes could be injected. Two of the companies that are
currently drilling up there have begun preliminary investigations into the feasibility of downhole injection of drilling
waste, but there is not any concerted effort at this time for that to be the accepted method of disposal.
It has frequently been stated, and I believe correctly, that there has not yet been enough drilling done to identify
what those layers might be, into which they could inject that material. The NEB does not have any mandate to engage
in that kind of research.
On the subject of how U.S. incentives might affect the Mackenzie Gas Project, there have been incentives, and it has
been widely reported, some in the form of an $18-billion loan guarantee for the Alaska project and other incentives.
There are other requirements, and I am sure the committee is aware of them, that need to be met before it can
proceed. One of those has to do with regulatory certainty in Canada.
At this point I will skip over some of the prepared text to say that at the Arctic Gas Symposium, which is happening
close by, we were informed yesterday that the Mackenzie Gas Project completion target is 2007. These gentlemen on
my right will have a better sense of that than I.
That may be optimistic, and the completion date for an Alaska Highway pipeline, if it were to happen, would be
about 2012. There should not be, from my layman's perspective, a lot of competition for material, financing and so on,
but like Will Rogers, I only know what I read in the paper. These people will be able to answer questions on that topic.
Having said that, if there is any delay in the Mackenzie Gas Project for whatever reasons, then I would expect the
pace of exploration for natural gas to slow down in the Delta and Beaufort Sea area.
Some of the companies currently have obligations to the landowners to drill a specified number of holes within a
specific period of time, and they will be doing that. Once those obligations have been met, if there is not the prospect of
shipping gas from that region through the Mackenzie gas pipeline, then the incentive to keep drilling would disappear.
The timely completion of the Mackenzie Gas Project is essential to the development of natural gas resources in the
Inuvialuit Settlement Region. Part of that development will include those already identified three fields. Exploration
and development for other natural gas fields in the region, both onshore and in the Beaufort Sea, will continue with the
expectation of getting any discovered gas to markets via the Mackenzie Valley pipeline.
Now for the purely parochial comment: The screening committee, as I have mentioned, is made up of a number of
appointees. The federal appointee on our committee, that seat has been vacant now for almost 15 months.
The committee can continue to function unless one of the other two government members falls ill, and then we do
not have a quorum and projects cannot be screened.
What is, perhaps, of greater concern is that the Environmental Impact Review Board to which we refer projects has
been non-functional since last July. We refer projects to the board if they pose significant negative environmental
impact, and the board then subjects that project to further assessment and review.
All three government appointees and the chair positions lapsed last July and June, and we are awaiting those
appointments. Should the committee screen a project which they felt required further assessment and review, they
would refer it to that review board and the project would sit, so I offer that for whatever it may be worth.
Thank you for listening to me.
The Chairman: Which ministry would normally make those appointments?
Mr. Klassen: It is the responsibility of the Minister of Indian Affairs and Northern Development.
Senator Buchanan: I have been designated to interrogate you, which I will not do, because I think too much of
TransCanada Pipelines to do that.
My involvement with TransCanada Pipelines goes back a long way. During my 13 years as the premier of the
greatest province in all of Canada, namely, Nova Scotia, TransCanada was part of that for many, many years, as you
people know, with your predecessors in the office and people like Neil Nichols, a great Nova Scotian from Digby
It is interesting when I look back on that the things that could have happened, that should have happened, Bob. The
Quebec and Maritime, Q & M, gas pipeline, the LNG terminal, the bringing of Alberta gas to the Maritimes through
the Q&M pipeline, backing out of that gas with LNG, and then ultimately Sable gas to a pipeline that would have gone
into Quebec and then down into the States. All that did not happen.
I attended meetings in Toronto, Halifax and Ottawa, but the Federal Government, in my opinion, killed the whole
project, of course, back then. Anyway, that is history. Unfortunately, it did not take place.
The thing that I always wondered about was, you may recall or somebody may recall, we incorporated a company
back in the mid-1980s where the Government of Nova Scotia was owner, and TransCanada, owner of most of it, to
build a pipeline for Sable Island gas. Under the 1982 agreement that we negotiated with the federal government and
1986 agreement, Nova Scotia had a right to own up to 50 per cent of pipelines through Nova Scotia from Sable Island.
We were going to take advantage of that with TransCanada Pipeline, but that is another story. I think you know all
about that story, and the thing never happened.
The thing I always wondered was why TransCanada did not get more involved in the Maritimes and Northeast
Pipeline, but I understand a lot of that, too. Anyway, that is history and it is most unfortunate.
The other reason I am interested in what is going on here is the Alaskan pipeline. I know a lot about the Alaskan
pipeline because of my personal friendship with Senator Frank Murkowski or, as he is now, Governor of Alaska. His
daughter is now the senator, of course, and I met her, too.
He has been a proponent of that pipeline for as long as I have known him. That goes back a long time. The politics
of the United States over the years is at a point where he could not do what he wanted to do; now he can.
He was in Ottawa a few weeks ago and we hosted a dinner for him and his wife Nancy, and we talked about the
Alaskan pipeline. His opinion, of course, has never changed. His opinion is unless this proceeds, now that he is
governor and his daughter is senator, and Governor Bush, as he was then, President Bush wants it to proceed, that if
the Government of Canada does not make some decisions rather soon to proceed with that Alaskan pipeline, is it
feasible that what Frank Murkowski and others are saying — they will damn well have LNG tankers built and they
will transport that natural gas down to the Lower 48 with LNG tankers?
Mr. Kvisle: Yes, I will do my best to comment on that.
First of all, there are many hurdles to overcome on the Alaska Highway project for that to proceed. One of the
major ones right now is an agreement between the producers in Alaska and the state of Alaska on the fiscal terms, the
royalty terms, all of the other things that would affect the production of gas at Prudhoe Bay. Prudhoe Bay has been in
production for many decades, but it has always been on the oil side. The gas has all been gathered, the liquid stripped,
and the gas reinjected.
There is a very major issue there that the state is involved in with the producers, and they are working hard to get
through that. I think both parties have from time to time been frustrated by the slow pace of progress on that front, but
they are working and engaged today, so we are optimistic about that.
As I go from north to south, you enter Alaska where agreements for the construction of the pipeline have yet to be
reached. The big issue here, in Alaska, is whether the pipeline should be controlled by the dominant producers who
own the field, or should it be an independent, open-access pipeline along the lines of the pipes that have enabled
Western Canada to develop over time.
TransCanada is obviously biased in this. We favour the model that has allowed us to do what we have done for
Western Canada, and we think that pipeline out of Alaska should be an independent pipeline, at least during the long-
term operating phases of it.
We understand that the producers want to have significant involvement during the construction and start-up period.
We understand why they do because if there is a huge cost overrun, it will translate into higher tolls which will come
out of their pockets, so we are certainly sympathetic to the producers on that.
It would be TransCanada's objective to try to work out a compromise between the state and the other Alaska
interests that would like to see an independent pipeline and the three big producers who would like to see a producer-
owned pipeline. If we can get over that hurdle, that will be the big resolution of issues within the state of Alaska.
Moving on to Canada, there are a couple of different areas. One, will the pipeline from the Yukon/Alaska border be
an independent pipeline, or will it be controlled by the producers? We have the same question as on the other side.
The second question is: Will the Canadian portion be built under the Northern Pipeline Act, or will it be built under
a new application under the NEB?
I have provided to you a colour brochure. There have been a number of documents circulated in Ottawa recently by
various parties that would have us pushed off our position. They would have TransCanada disenfranchised and would
ignore all the work, effort and $2 billion that we have invested on the Canadian side to keep this project moving
forward over the last 20 years.
We are obviously going to defend our interests. We do not think that getting pushed off our position to build the
Canadian part of the pipeline is in our interest. It is certainly not in our shareholders' interest, and we do not think it is
in the interests of the long-term development of gas at Prudhoe Bay to have a sole producer-controlled pipe, as
opposed to an open-access independent pipeline.
All that is going on. I simply wanted to provide that context, Senator, because the debate over the Northern Pipeline
Act, NPA, is really only one of three major issues. The other two are the fiscal terms at the wellhead at Prudhoe Bay
and what the pipelining arrangements will be within the state of Alaska.
We work very closely with the Murkowski government. We are deeply involved with them in helping them
understand the pipeline issues and moving forward. We agree with Governor Murkowski's comments on the need for
Canada to clarify the situation in Canada.
I guess I missed one point that is critically important to Canadian interests, and that is, at the point when the gas
reaches central Alberta, there are two options. The current producer proposal is for what they refer to as the bullet line
that would take that gas from central Alberta straight through to Chicago.
Imagine, if you could, a pipeline that came down out of Alaska, went right through Canada without connecting to
anything, and delivered all that gas and all the liquids into the Chicago marketplace. This is not in the best interests of
What is in the best interest is a larger integrated pipeline system where if Alberta petrochemical producers wished to
get access to the liquids, they pay the fair market price and they can get them. The combined flows of Alaska gas,
Mackenzie gas, and Western Canada gas flow to market through a common pipeline system where the unit costs for
everyone would be lower as a result of shared infrastructure, improving the economics of gas development in Western
That would be my quick summary of the issues. We are getting a good hearing in Ottawa these days on this. We
have prepared this glossy brochure to re-emphasize some of the messages that we have been conveying over the last
Senator Buchanan: Hal, you are very firm in your position that the NPA gives TransCanada the right to proceed
with the pipeline?
Mr. Kvisle: Yes, that is our view. In fact, what the NPA gives us is the right to build the first pipeline for the
transportation of Alaska gas through Canada, that if there are other later proposals for subsequent pipelines, we have
no exclusive right to that.
Senator Buchanan: Just the first?
Mr. Kvisle: We have the right to the first one. A little bit more history: back in the late 1970s, there were two
competing proposals, the producer proposal to build over the top and down over the Mackenzie Valley, and the
Foothills pipeline proposal to build down the Alaska Highway.
That was the subject of a full National Energy Board hearing in the late 1970s. The Foothills proposal to build
down the highway was identified as the best way to get the gas to market. It was approved by the NEB, and the NPA
was then created to make it happen.
Gas markets got in the way. The price of gas fell. The project did not proceed. The Prudhoe Bay producers decided
to reinject the gas for a long period of time to improve oil recovery rather than bringing it to market. Here we are
today. Gas prices are high and there is a real need for the pipeline.
Senator Buchanan: One other question: If the producers and pipeline situation in Alaska is resolved, if they are ready
to go, and the Canadian government has not, at that point, indicated what proposal they are accepting for the
Canadian section, are the comments Frank Murkowski made just a few weeks ago when we were in Ottawa with him,
realistic? He said if it does not happen soon — what soon means, God only knows — that they would be prepared to
have the U.S. Government proceed with new LNG tankers and terminals to bring it down to the Lower 48?
Mr. Kvisle: They are, I believe, prepared to explore that alternative. It is a reasonable alternative to take gas to
Valdez in southern Alaska, liquify it, and move it to markets either in the United States or Asia.
The negative is that the Pacific Basin is generally awash in LNG. There is a lot of LNG floating around, if you will,
in the Pacific looking for a market, looking for a home.
They would be putting more LNG into an oversupplied Pacific Basin market. That is why the pipeline, where the
gas would ultimately end up in eastern and midwest markets, is a better idea for everyone.
If the pipeline cannot go, the severity of the gas supply crisis in the United States today is such that they will do what
they have to do.
Senator Buchanan: I think you will agree that Frank Murkowski and the Alaskan government, and the U.S. federal
government would prefer the pipeline alternative?
Mr. Kvisle: They would absolutely prefer the pipeline.
The Chairman: Thank you, Senator Buchanan.
Before we go on, in response to Senator Buchanan's question, you said by virtue of the Northern Pipeline Act you
have the right to build the Alaska Highway?
Mr. Kvisle: The first pipeline for movement of Alaska gas to Canada.
The Chairman: Does the Act not say the government may grant you that right?
Mr. Kvisle: No. It is our view that we have already been granted that right.
The federal government, of course, always has the option of introducing new legislation to replace previous
legislation. That is the government's right to do that, certainly, but our legal view is that the Government of Canada
has granted under that legislation the right to build the first pipeline through Canada for the movement of Alaska gas.
I accept that our view may not be correct; these are complicated legal issues, and we pay lawyers a lot of money to
come to these conclusions.
Senator Buchanan: A strange question: You are well aware that other competing outfits out there want to build that
line, and if your position is right, that you do the first one, would they be satisfied that you do the first one and they be
involved in the others?
Mr. Kvisle: I would point out that the first pipeline for the movement of Alberta gas to eastern Canadian markets
was constructed in 1957. Subsequently, there were other proposals to build other pipelines, but in all cases it made
more sense to loop and parallel the TransCanada system.
We would be vigorous competitors for building a second pipeline, having built the first, but at that point a decision
would be made that would involve a lot of other parties. We would acknowledge we would not have any particular
unique right beyond that first line.
The Chairman: When you have a chance, would you ask your legal folks to get to our clerk an indication of the
section of the Act or the basis on which you would regard the right as already having been given? I know you have
made substantial investments in it, but just for our future reference.
Mr. Kvisle: Yes, we will do that.
The Chairman: Thank you, Mr. Kvisle. Senator Milne, you have the floor.
Senator Milne: Thank you, Mr. Chair. I have to ask you again, sir, how exactly I pronounce your name? I am sure it
is not Kvisle, is it?
Mr. Kvisle: That is a very good Norwegian rendition of my name. In Canada my father gave up on that, though, and
slurred the V into a W, and it becomes Kwisle.
Senator Milne: First, I have to declare, I suppose, a conflict of interest. My husband worked for many years for
TransCanada Pipelines and is currently getting a pension from you guys.
Senator Buchanan: I do not think that is a conflict.
Senator Milne: I am not dependent on his pension.
TCPL is primarily a transmission company. When I knew it, you took over at the Saskatchewan border. You did
not really own anything in Alberta at that time.
Is that still true? I see you have the Foothills Pipe Lines. You bought it 100 per cent.
Mr. Kvisle: If I was to draw your attention to the map on the front page of this chart —
Senator Milne: You have now taken over all the transmission inside Alberta as well?
Mr. Kvisle: The transmission inside Alberta was Nova Gas Transmission Ltd., NGTL. We merged with NOVA in
1998 to take over that. Through NOVA we acquired our interests in the Foothills companies, which own the northern
rights, and subsequently we bought the former Westcoast Transmission Company interest in Foothills.
Today we own 100 per cent of Foothills. In addition to that, there has been one other significant event. On your
map, you will see a line that curves down into California.
In the past six months, we completed the $2.2 billion dollar acquisition of that pipeline. It is known as Pacific Gas
Transmission, PGT, or they have changed the name now to GTM, but historically PGT. It is a very significant pipe
that moves over 2 BCF a day into California markets.
It was contemplated as one of the key delivery routes for northern gas to U.S. markets, and we would hope to
expand that today.
The last comment is the pipeline that you see going down through the Midwest and over to Chicago —
Senator Milne: Cutting through southern Saskatchewan or a corner of it.
Mr. Kvisle: That is right. On the Canadian side, shown in pink, it is Foothills Prebuild, which is the portion that we
prebuilt of the Alaska delivery system.
Once you cross the border, it is known as Northern Border Pipeline, and we own a 30 per cent interest in that
We are present in a large number, but today, in terms of volumes, move times and the distance we move them, we
are the largest gas transmission company in North America as a result of the merger with Nova and the acquisition of
these other pipes.
Senator Milne: How much do you still own of Bob Reid's —
Mr. Kvisle: We own more of it than we ever did before. We are in the low 40 per cent right now, 41, or 42 per cent.
Senator Milne: I even pronounced it the American way.
Mr. Kvisle: Could I add a comment to that though? You may or may not be aware that TransCanada, in
partnership with Royal Dutch/Shell, are pursuing what I would argue is the most prestigious LNG importation
terminal in North America. We are in the process to seek approval to build in Long Island Sound. It is out in the
middle of the sound. It is nine or ten miles offshore from both Long Island and Connecticut. It is a terrific project in
that it brings gas directly into the neediest market in North America — New York City — but obviously a very difficult
Senator Milne: The oyster farmers are not screaming?
Mr. Kvisle: Yes, they are.
Senator Milne: Yes, I would think so. You also own several gas-fired and power generation assets, and you have a
chunk of the Bruce Nuclear in Ontario as well.
Mr. Kvisle: Yes, we do. When TransCanada organized itself in 1999, we identified international businesses, and
other businesses in Canada that we should exit. We decided we needed one other major business focus in addition to
Gas transmission projects come along once in a while. Sometimes it is once every ten years, and in the interim we
need something to sustain the company. We made the strategic decision to focus our second business on power gen.
We are today the largest commercial provider of electricity in Alberta. We are the largest private sector power
company in Ontario. We are not as big as Ontario Power Gen, obviously, but we are a one-third owner of Bruce
Nuclear, and we own half a dozen other plants in Ontario. We also have several major proposals before the Ontario
In Quebec, we are constructing the largest non-hydro Quebec plant ever initiated in Quebec at Becancour near Trois
Riviere. We have been awarded the rights to build Canada's largest wind farm on the Gaspe Peninsula, which is more
than a billion dollar project that we are doing under long-term contract with Hydro-Québec.
Our entry into power is significant. We are one of the largest power gen companies in Canada today, and we expect
to grow that business two- or three-fold in the next five years.
Senator Milne: One of the major interests of this committee is not only energy and the transmission thereof but also
renewable sources of energy. You have talked about your plans to diversify and what you are actually doing. Does the
Government of Canada adequately support, through its regulatory process, the encouragement of renewable energy
Mr. Kvisle: Yes. In our view, the Government of Canada is quite supportive of renewables, but I have a couple of
One is that Canada has a superb technology for nuclear power generation. I know that is not normally considered
renewable, but it is very environmentally friendly. There are no emissions from a nuclear facility.
We need to make a decision in Canada as to whether we are going to stand behind the CANDU reactor and move it
to the next stage or whether it is going to wither and die and future nuclear power reactors, if any in Canada, would be
based on American or European.
Senator Milne: We have had some problems selling it.
Mr. Kvisle: Our view as a one-third owner of Bruce, and having dug quite deeply into Bruce, and I am a technically
oriented person myself, this is a superb technical design: good equipment that needs an updating, some work, and some
We are prepared to continue to invest in the CANDU reactor, and we would encourage the Canadian government
to work with Ontario to take the next step forward.
Senator Milne: That is interesting.
I have a few questions for Mr. Reid. Can I call you Bob, as I did for years?
Mr. Reid: Yes.
Senator Milne: The Aboriginal Pipeline Group that you are President of; you have the three different bands of the
Mackenzie Valley, three of them signed on.
How do you balance the competing needs of these various communities that are going to be grossly affected,
according to Mr. Klassen, by the pipeline? Money is one thing, but destruction of their environment is another.
Mr. Reid: Certainly a pipeline during construction causes some temporary disruption, but as time goes on, the
rights-of-way are restored and go back to their previous use, by and large.
However, to respond to your question, the APG is one aspect of an opportunity that will flow from this pipeline. It
is a business deal that basically allows dividends to be earned on an ownership interest.
There are a number of other opportunities that are available as a result of construction of this pipeline. Access,
benefits fees and agreements must be negotiated by the pipeline proponent; in this case, it is Imperial Oil on behalf of
the Mackenzie Gas Project. Imperial must negotiate access and benefits fee with each of the Aboriginal groups along
That is totally separate from the ownership or the business deal that the APG has with this project. The APG is
conflicted in terms of negotiating access and benefits agreements because we basically would have an owner's hat on
one hand, and a landowner's hat on the other.
For that reason, we step back, and we are not involved in those negotiations. Through those negotiations, the
landowner receives compensation in return for the right to construct and operate the pipeline on their property.
Under the land claim settlements up North, they receive benefits as well. Benefits is a loosely-defined word, but the
benefits portion of the access and benefits arrangement could include things like a requirement to use local contractors,
for example; a requirement to support certain social programs in the area.
It is through the access and benefits negotiations that compensation is provided to the communities to offset the
short-term inconvenience of construction.
Senator Milne: What about water? What sort of impact would pipeline construction have on the surface water of
these communities? Are they concerned at all about their drinking water supplies?
Mr. Reid: That has not been flagged as an issue at this point. Again, pipeline construction is relatively innocuous in
the long term.
Senator Milne: Except up in the permafrost where you have to bury the slurry.
Mr. Reid: That is correct. In this particular instance, natural gas flows as a gas, not as a liquid. The flowing
temperature of the gas will be kept somewhere between minus 3 degrees Celsius and minus 5 degrees Celsius, so there
will be no disruption of the permafrost. In fact, the pipeline would help maintain the stability of the permafrost.
That is something unique to this particular pipeline. Coolers have to be provided on the downstream side of the
compressor stations to offset the heat of compression and to make sure the flowing temperature at all times remains
below zero degrees Celsius.
Senator Milne: You said minus 3 degrees to minus 5 degrees?
Mr. Reid: Yes.
Mr. Kvisle: Just a supplementary answer on the comment about slurry: Most of the intrusive environmental issues
are in the production side, the drilling side; in other words, in this case, in the Mackenzie Delta region itself.
Down the pipeline there are none of these issues. The slurry issue and disposal of drilling mud has nothing to do
with the pipeline.
Senator Milne: Except for stream crossings.
Mr. Kvisle: Yes, although even in the case of stream crossings today, and in the case of smaller stream crossings, we
will bore many of those underneath the creek to prevent any disruption to fish or other things. We are doing such
crossings in the St. Lawrence River right now near Montreal for our power, to supply gas to the power plants, so this is
an advance that has recently occurred.
In the case of gas pipelines in Canada today, there are tens of thousands of kilometres of large-diameter gas pipeline
in Alberta, and the environmental consequences of it are not discernible anywhere. In many cases, you cannot tell there
is a pipeline there at all.
The Chairman: Except for the orange signs.
Mr. Kvisle: Except for the TransCanada sign. One way you can tell if they are there, of course, is that we clear the
bush and the trees do not necessarily grow back. It leaves an open patch through the trees. Apart from that, we
revegetate and there is grass and everything.
I just point out the difference between production and the pipe. On the Alaska project, if you go to Prudhoe Bay,
there is massive infrastructure and massive activity in the oilfield area itself. The oil pipeline that came down from
Prudhoe Bay was built above ground because, unlike gas, oil needs to be heated to flow so it had to be built up in the
Senator Milne: Of course, they guarantee it would not affect the caribou herd, but now there are two caribou herds
up there rather than one. It split them in half.
Mr. Kvisle: What I was going to say on the gas pipeline from Alaska, as with the Mackenzie, we would plan to bury
that pipeline for the entire distance. We think the environmental impact on both projects, but notably the Mackenzie,
will not be significant.
Mr. Chambers: If I may, as a further supplementary response in answer to your question about environmental
impacts, of course the Joint Review Panel that I mentioned earlier is responsible for looking at the environmental
impacts on the land, on the water, on the people, and on the environment in general along the project route and
including the development area in the Mackenzie Delta.
One of the responsibilities is to look at what mitigation measures should be put in place, if, in fact, the project were
to be approved, to mitigate those potential negative impacts, not only during construction but during the operation
and production phase of the project.
I want to mention that there are significant projects that have been completed in the Northwest Territories, although
not pipeline projects like this one, but significant projects like the diamond mines that are located northeast of
Yellowknife, both the Diavik Diamond Mine and BHP Diamond Mine, each of which have gone through the
negotiation of impact and benefit agreements that Bob Reid referred to.
Those were negotiated with the First Nations of those regions of the Northwest Territories, and also to address and
monitor those ongoing environmental impacts. Independent monitor advisory boards were established to monitor the
operations and impact of those operations of the diamond mines on the environment, on land, on water, and on
caribou migration patterns. The Aboriginal people of those regions have a very significant role to play on those
independent monitor advisory boards.
I am not prejudging what the Joint Review Panel may recommend, but all I want to indicate is there are existing
models of monitor advisory boards that have been established to monitor the environmental impacts of major resource
Senator Milne: That is all very well, but those mines are still ongoing, so there has been no chance to look at how
those rehabilitation projects occur, or if they ever do occur. Hopefully, they will because these agreements have been
signed, but once a mine pulls out and changes its name or something, you have really no way of coming back at them.
There is no history there to build on to say this is going to happen with this pipeline.
I have to say, Bob, you have a bit of history in the pipeline industry, and what guarantees are you going to give that
you are really going to abide by these agreements, by what the Joint Review Panel says that you should do to
rehabilitate this line, and not repeat some of that history?
Mr. Reid: First, let me make the point that the Aboriginal Pipeline Group is not the project proponent. It is Imperial
Oil. We are an owner in the project.
Senator Milne: Sir, you have to guarantee your shareholders that you are going to do this.
Mr. Reid: There is no question that, as an owner, we take responsibility for the project and for ensuring that it
adheres to the requirements.
You mentioned earlier the impact on water and stream crossings, and we had some discussion. There will be very
specific procedures established for crossing of streams. As Mr. Kvisle noted, the major river crossings are going to be
directionally drilled on this particular project.
As an owner, we will be there, and we are vigilant now. I sit on the board of the Mackenzie project. We are very
vigilant to ensure that they are adhering to what they said they would do. We take that very, very seriously.
Particularly in the north, in this sensitive environmental area, this will be even more important.
I expect the certificates that are received, if and when they are received, will be very specific as to the requirements to
be undertaken, and we, as an owner, will be sitting there to make sure that these requirements are adhered to.
Senator Milne: That is good. Mr. Kvisle, you talked about a wind farm that TCPL is investing in down in the Gaspe
Peninsula. Perhaps you can tell us a bit more about that and; how big it is and what kind of footprint is planned for it.
Mr. Kvisle: First of all, the wind farm came about as a result of a request for proposals from Hydro-Québec, and
Hydro-Québec was looking to purchase significant amounts of electricity from wind sources. They went out in a public
request for proposals, and we responded to that.
I think that our consortium was awarded approximately two thirds of all the wind farm development projects under
that request for proposals. Other companies got the rest.
Our focus is on the Gaspe Peninsula near the utter easternmost end of it where our partner in the project, a company
by the name of Energex from Quebec, had invested substantial money, measuring the wind and determining the
appropriateness of that area for wind farms.
There are, I think, seven different wind farms in total that are part of our program. They will be constructed
sequentially. We will make sure they work. We will make sure there are not any negative side effects that we were not
aware of, and then we will move on to the next one.
It is a multi-year program. This will take seven or eight years in round figures — I do not know the exact number of
years — for us to get through it all. It will be developed very closely with Hydro-Québec as the buyer of the power, and
it will be decisions by TransCanada and Energex on the exact facility configurations and how we will do it. General
Electric is very much involved as the turbine supplier.
As part of the overall undertaking, there will be major wind-farm manufacturing facilities established in Quebec that
are one of the regional benefits of this. Companies within the St. Lawrence region will be involved in manufacturing
the towers themselves and a lot of the other nonrotating equipment. The rotating turbines themselves are very
sophisticated and will be built by General Electric.
The Chairman: In Brazil?
Mr. Kvisle: No. I think they are built in the U.S. Interestingly, I believe it is the business that used to be Enron Wind.
As Enron went into their tailspin, General Electric acquired it and they have made a really credible business of it.
Senator Milne: Thank you, Mr. Chair.
The Chairman: Thank you, Senator. Senator Spivak has the floor.
Gentlemen, Senator Spivak has a temporary hearing problem and will be reading your responses on the device in
front of her.
Senator Spivak, you have the floor.
Senator Spivak: Thank you. First of all, when I look at this map, Mr. Kvisle, obviously if it were feasible to go over
the top, and you mentioned that it was a project that had been thought of, is that totally out of the picture?
Mr. Kvisle: The debate about building down the Alaska Highway versus building over the top has been ongoing for
nearly 30 years now. There were two reasons why the National Energy Board rejected the producer proposal to build
over the top and down the valley. This is based on my reading of the history.
First, the situation in the Mackenzie Valley was uncertain at the time. There were many issues of Aboriginal land
settlement and other things that have not yet been dealt with. Justice Thomas Berger recommended against proceeding
for these reasons, and most of those issues have now been dealt with, although not entirely.
There was also the matter of the environmental impact of building over the top and particularly through northern
Yukon and through the Mackenzie Delta region to the west of Inuvik.
In that particular case, a national park now exists in the northern Yukon, and on the U.S. side there is a prohibition
on building pipelines through the Arctic National Wildlife Refuge, ANWR, in that part of Alaska.
If you look at the map, other people have proposed building a subsea pipeline offshore starting at Prudhoe Bay,
over to Inuvik and then following the Mackenzie Valley down.
That is a fanciful project, in our view, that is incredibly technically complicated and highly uncertain. People would
observe that much offshore pipeline is installed around the world; in the Gulf of Mexico, the North Sea and in other
The big issue in the Beaufort Sea is you never know whether or not there will be open water for the purpose of
construction. I enjoyed a 13-year career at Dome Petroleum, and while I was never a leader of their Beaufort Sea
programs, I was involved. We were counting on 75 days of open water per year. Two years in a row we had 15 or 16
days. It is not that it gets cold. It is that the water direction changes and the ice flows blow in on the shore.
When we merged with NOVA, TransCanada was a proponent with Exxon and other companies of building over the
top and down the valley back in the 1970s. NOVA was the proponent with Foothills of building on the highway.
We weighed the merits of both projects and concluded that for Alaska gas the highway was the one we would put
our efforts behind.
The last point I would make is you cannot build a pipeline large enough to move both the Mackenzie gas and the
Alaska gas in a single pipe. By our calculations, you would need two pipes from Inuvik down anyway.
If you need two pipes anyway, why not build them on the two easiest routes?
Senator Spivak: Let me ask you another question. In the competition for building the Alaska Highway, if you are
not successful, is it a legal issue?
Are you going to take legal action, or will there be a compromise? Legal action could take years, so that would
throw the timeline off considerably. What is your thinking is on this point.
Mr. Kvisle: First, we regard our rights under the Northern Pipeline Act to be property rights and to be rights of
value to the TransCanada shareholder.
From that perspective we cannot treat them lightly. We cannot concede much to anyone from that perspective, and
we are not going to.
In our view, the right answer in this whole situation is a collaborative project between TransCanada on the
Canadian side, the producers — and we would welcome their involvement in the overall project — and the state of
Alaska. We think those are the key parties that will come together to make this project happen.
Regardless of outcome in the current debate around the Northern Pipeline Act, and I would point out that
TransCanada has not triggered that debate, it is other companies that I might describe as Johnny-come-lately that
suddenly show up and want to get a piece of our project that have triggered this.
Notwithstanding this current debate, we continue to work closely with the state. I have had three discussions this
week already with Alaska producers about how we might work out a collaborative process.
Those are not easy discussions to have, and those arrangements do not come together quickly, but we are more
committed to working this out than to immediately reverting to some kind of legal response.
Senator Spivak: When you say ``the producers,'' that is the involvement of Enbridge, right?
Mr. Kvisle: No, Enbridge is not involved with the producers at all. Enbridge is a long-standing Canadian oil pipeline
company that has recently made a small entry into the gas transmission business. It owns 50 per cent of a pipeline that
moves less than 10 per cent of the gas out of Alberta. We own 100 per cent of the company that moves 70 per cent of
Senator Spivak: Right, but they are interested as well?
Mr. Kvisle: They have suddenly developed an interest in northern gas pipelining.
Senator Spivak: I get the picture.
Senator Buchanan: Enbridge is involved in New Brunswick right now, too, are they not?
Mr. Kvisle: To some extent, yes. I am not sure how.
Senator Spivak: One more question on the environmental side: The pipeline through Alaska and Alberta, the Alaska
Highway, is environmentally a better proposition than tankers off the Pacific coast. Is that correct, or is that incorrect?
Environmentally, are double-haul tankers equally as risky or not as risky as a pipeline? What is your view on that?
Mr. Kvisle: First of all, we are talking about the movement of gas here. The movement of gas offshore, and the
question of single-haul and double-haul tankers relates mostly to oil, not to gas.
Senator Spivak: That is right.
Mr. Kvisle: Just for the record, it would be our view that gas transportation by pipeline is very safe and the track
record is excellent.
Similarly, the transportation of LNG by LNG tanker has a long and unblemished record into markets such as
Korea and Japan. We think both technologies are useful in that the environmental issue of one versus the other would
not really be a factor.
Senator Spivak: I want to get into the question of the oil sands and gas to the oil sands because, as many people say,
it does not make sense to take vast quantities of natural gas to extract oil.
What about nuclear? You are now in the nuclear business. Is it feasible to build nuclear power plants in Alberta to
supply the energy needs of oil sands producers?
Mr. Kvisle: First, two things are needed at the oil sands that we get from natural gas. One is a source of energy; in
other words, we burn the natural gas to generate steam and things like that, which are used in upgrading the oil.
The other is natural gas, CH4, which is the source of the hydrogen atoms that are used to upgrade heavy crude oil
into light crude oil.
Senator Spivak: These are different quantities?
Mr. Kvisle: No, it is actually about half and half between the two. I do not want to be too precise but the order of
magnitude would be approximately half, or equal amounts.
Senator Spivak: Do you still need the same amount of gas to get the hydrogen?
Mr. Kvisle: No, we are examining a couple of different ways to do this. One is that the nuclear project could generate
significant electricity, most of which would be exported from the Fort McMurray region. They do not need that much
electricity, but the waste heat would be useful in the process of converting heavy oil to light oil, or of separating it from
As for the hydrogen supply, you could have a large nuclear facility that produced electricity that then used an
electrolysis process to generate hydrogen. All of that is very elegant and would work very well. Even today, though,
with $6 gas, it is not competitive with just using gas.
We are working on all of this. The major producers in Fort McMurray are very interested in this - companies like
Suncor, Shell at the Athabasca Project, and the Syncrude partners. Some very sophisticated technologies are available,
and they are examining all of those.
The Chairman: When you say they are interested in this, do you mean nuclear energy, or the gas pipeline?
Mr. Kvisle: I should have mentioned there is a third technology available, and that is to take the heavy molecules out
of the bottom of the oil sands barrel and convert them through a process that would release — it is like coal
gasification, but let me call it heavy ends gasification — gas out of the oil sands barrel.
That is the third process, and probably the one getting most attention today. It would allow them to generate the
hydrogen out of the barrel itself to upgrade the rest of the barrel.
Senator Spivak: I just want to comment, before I go on, that there are very prominent environmentalists such as
Lester Brown of the Worldwatch Institute, who now are coming on board to the nuclear, for many reasons. They are
not opposed because they think it as a lesser evil in terms of the environment.
There are lots of other questions, but I wanted to ask Mr. Klassen: The dividends from the pipelines are distributed
on the basis of the amount of pipeline that goes through the Aboriginals, but they all share the debt equally; is that
The Chairman: Sorry, for the record, are you asking that question of Mr. Reid?
Senator Spivak: I am sorry, yes, I guess it is Mr. Reid.
The Chairman: Thank you.
Mr. Reid: Yes, the loans will be incurred by the Aboriginal Pipeline Group. Each of the Aboriginal groups in the
valley are equal participants in the ownership of the APG, so they will share basically equally in liabilities as well.
However, I hasten to point out that the loans we negotiate with banks and other financial institutions will be
negotiated on what is known as a nonrecourse basis.
That means that should something go wrong, should the pipeline no longer be economically viable or something like
that, then the bank's recourse is only to the assets: the pipeline assets, the pipe, the compressors and so on. They can
never go back beyond that to either the APG or, more particularly, to the Aboriginal communities.
Senator Spivak: I forget which one of you was talking about the sumps.
Senator Milne: Mr. Klassen.
Senator Spivak: Are you concerned that the climate change is going to render that technology really risky? I am sure
Senator Adams will get into that. What is happening up north is drastically more in terms of climate change than we
experience in the south. What is your thinking about that?
Mr. Klassen: The screening committee has expressed concern about the use of that technology. At the moment, it
appears to be the best available option. Some of the sumps that have failed, and there is some disagreement about
when to apply the word ``failed,'' were sumps that were put in place in the 1970s, and some of those even during the
Sumps are now used only in the wintertime, and there is a best-management-practices document available for the
companies to follow. The screening committee recommends the use of those best management practices. They provide
for the drilling waste material to be frozen in place, and most often frozen before the covering is put back on.
There has been long-term research on permafrost temperatures in the region, and permafrost temperatures are
rising. When we think of something as frozen, it is frozen. Permafrost has varying degrees of temperatures, and in some
areas it has risen from minus 8 to minus 4, so there is cause for concern.
In Alaska where they have a fairly elaborate and substantial downhole injection facility at Prudhoe Bay, they have
gone back to former sumps. There I think they call them reserve pits. They have dug those up and ground them up and
While that is a remote possibility at the present time in the delta, I am sure that if we get to the point where the
sumps start to thaw, then that is an option to consider.
Senator Milne: Mr. Klassen, do you know if any of the drilling companies up there have looked into the type of
technology that they are using at Diavik Diamond Mines where they are putting things down that keep the permafrost
frozen around slurry ponds and disposal pits?
Mr. Klassen: I do not know specifically. I know some of the companies have put in place monitors around some of
the sumps to monitor both the temperatures and to determine whether any of the material that was intended to be
contained by the sump is migrating out of it. I do not know specifically that they are looking at those kinds of
thermistors and so on.
The Chairman: On the matter of sumps and liability, and perhaps you can let us know this later, but I think we
would have much problem with the long-term accessibility in terms of recourse for environmental problems of the
partners in either of the pipelines that we are talking about.
As to the folks who do the kind of drilling that you are talking about, seismic drilling and the like, and exploratory
drilling, that is likely contracted out to somebody who is not TransCanada Pipelines or the Aboriginal Pipeline Group.
There are, particularly in the north, examples of ponds of mining residuals for the cleanup of which the Government
of Canada has had to assume the responsibility because the companies who originally undertook those, most of them
are mining companies but some of them are seismic companies, no longer exist.
With respect to the drilling residual that you are talking about, is there any recourse back to the commissioners of
that undertaking that exists in the regulatory framework?
Mr. Klassen: As I said, there is something in the neighbourhood of 200 sumps in the Inuvialuit Settlement Region.
Because of the concern that has been expressed by a number of parties, the ownership, and therefore responsibility, for
all those sumps has been assumed by the companies that either put them in place originally, or have acquired the assets
of the companies that put them in place originally.
We thought for a time collectively that there were orphan sumps out there. When it came down to it, each one of
those sumps has now been tagged to a company.
To the extent that when the federal Department of Indian Affairs and Northern Development wanted to monitor
some sumps, I suppose as a control, they had to go to companies and obtain authority from the companies to do that
with certain sumps so they would have some.
The record is quite good in that regard.
The Chairman: Thank you very much, Mr. Klassen.
Mr. Kvisle: The issue of sumps is, again, one related to the oil and gas production companies, not the pipeline
The players that have been drilling in the Beaufort Sea, Mackenzie Delta region are very large and substantial
companies such as Imperial Oil, ConocoPhillips, British Petroleum and the like, so there is good corporate credit
standing behind those sumps.
The Chairman: We are very glad to hear that.
Senator Adams: Thanks Mr. Chairman. I am going to start off with Mr. Chambers. I remember Norman Wells built
the pipeline up to Alberta about 20 years ago.
Is that still operating?
Mr. Chambers: Yes, I think what Senator Adams is referring to is commonly called the Norman Wells Pipeline. It
was constructed in the early 1980s. Hal or Bob can help me out with respect to the diameter. I think it is a 12-inch
diameter oil pipeline, and it takes oil from fields in the vicinity of the town of Norman Wells located on the Mackenzie
There are artificial islands that have been constructed in the last few years to assist with the pumping of oil from
If you have the map in my presentation, it is essentially the line, or that portion of the proposed route of the
Mackenzie line, that is indicated in yellow. It runs from Norman Wells down into northwestern Alberta. It is presently
operated by Enbridge Pipelines.
As I mentioned in my presentation, part of the proposal of the Mackenzie Gas Project is to use that existing 12-inch
oil pipeline to transport the natural gas liquids that will be produced as a result of processing the gas at the Inuvik area
The natural gas liquids at the Inuvik area facility will be transported in a separate new line, if the project is
approved, from Inuvik to Norman Wells, at which point it would then be transferred to the existing oil pipeline and
transported to northwestern Alberta.
Senator Adams: In the meantime, that Norman Wells oil was no longer processed anymore for the oil, as they are
running out of oil.
Mr. Chambers: I cannot comment because I do not know the answer to that question — what the proposed life span
is of the Norman Wells production — but it is still running today, perhaps at a lesser volume than it was previously.
Certainly there is still oil currently flowing down that line from Norman Wells into Alberta.
Senator Adams: Did you wish to add something?
Mr. Kvisle: I was going to add on the question of the longevity of Norman Wells oil. That reservoir was discovered
by Imperial Oil around 1920, a very high quality reservoir. It was produced under what we would call primary
production; relatively few wells not pumping very hard.
In the 1980s, I believe, Imperial Oil instituted a water flood there and intensively developed the field. The project has
worked extremely well. Oil recovery is projected to be much, much higher than was originally the case, and I believe the
forecasts today would be that that field will produce for more than 20 years from today.
It has quite a good life ahead of it, and it has been a real success story.
Senator Adams: In the meantime, if you build a future for the Mackenzie pipeline, say you need two pipelines, would
there be another gas pipeline through the same area from the Beaufort Sea? What size of pipe are you talking about in
the future when you go ahead? Are you talking about 48-inch, or less than that?
Mr. Chambers: Again, I cannot really speak on behalf of the proponents because I am on the regulatory
environmental assessment side, but I know from the documents that have been submitted by the proponents that they
are proposing a 30-inch diameter, single gas pipeline to run from Inuvik into northwestern Alberta.
The portion of the natural gas liquids line to be constructed that would run parallel to that natural gas line would be
10 inches in diameter, I believe, and would run from Inuvik to Norman Wells.
Senator Adams: Do you have anything to do with the organization or construction of the Mackenzie pipeline? Right
now, say we are talking about Enbridge — if the Mackenzie pipeline goes ahead, it would be a different section would
be contracted. Have you something to do with that?
Mr. Chambers: I do not personally because I work for those bodies and organizations that are reviewing the project,
but perhaps Bob might comment.
Mr. Reid: Yes. Perhaps I could add some clarification to that.
The Enbridge oil line at this point in time is operating at less than full capacity, and there is sufficient spare capacity
in the Enbridge oil line to carry the natural liquids from Norman Wells down to Alberta.
With respect to the 30-inch dry gas line, that will be constructed from the Inuvik area facility, the processing plant
near Inuvik, down to the Alberta border, a distance of about 1,220 kilometres. There will be five construction spreads
for that particular section of the line, or from Inuvik down to Alberta.
A construction spread is a geographic segment that is normally constructed by one contractor. You can have
multiple contractors working on separate geographic segments.
Senator Adams: You were talking about the signing between Mackenzie Valley and Gwich'in, Inuvialuit, and Sahtu.
I was in Inuvialuit with a land claim in 1982, and our constitution, we do not know what is going to happen. At that
time, I worked quite a bit with John Monroe, the Minister of Indian Affairs in Ottawa.
My question first is with Inuvialuit. At that time, with the land claim agreement between the Gwich'in and Sahtu,
quite a bit related to the percentage between Inuvialuit and Gwich'in. I asked one time if we had an agreement between
the Gwich'in and Sahtu — the boundary goes together — and I was told that part of the Inuvialuit between family had
about 35 per cent. Is that true?
Mr. Reid: I am not familiar with an agreement between Inuvialuit and Gwich'in per se. The Inuvialuit had the
original land claim settlement. I believe it dates back to 1984. Gwich'in and the Sahtu came along in the early 1990s.
All three groups have land claim settlements in place, but I am not aware of any sharing agreement between them. That
is not to say there is not one. I am not aware of any.
The Chairman: Mr. Klassen, do you have something to add?
Mr. Klassen: I can help a little. There are overlap agreements in place between the Inuvialuit and for certain
Gwich'in. I am not sure about the Sahtu, and I am only familiar with that aspect of it that deals with environmental
The Gwich'in, for instance, some of whom live in Aklavik, which is within the Inuvialuit Settlement Region, when
they propose a project, it is subject to the environmental assessment and review process under the Inuvialuit Final
Agreement, IFA. I expect the overlap agreement has a lot more to do than environmental assessment, but I do not
know the details.
Senator Adams: My question, right now, with the Inuvialuit area is mostly about natural gas. Is there nothing
between the Gwich'in and Sahtu area for the natural gas right now and the Mackenzie Delta?
Mr. Klassen: There is exploration in the Gwich'in region not far from Fort McPherson. I believe that drilling is for
oil. At the moment, of course, the focus in the Inuvialuit Settlement Region is on natural gas.
Senator Adams: The only thing I have a little difficulty with is, how are they going to divide the percentage? I know
you do not really have an agreement.
The Chairman: Senator Adams, are you talking about the percentage of ownership of the pipeline or the resources of
Senator Adams: Both. In Inuvialuit right now we have quite a bit of natural gas between Imperial Oil and Shell.
Mr. Reid: Yes, all the gas reserves in the Mackenzie Delta fall within the Inuvialuit Settlement Region. There is an
agreement in place whereby, under the land claim settlement, the Inuvialuit do retain ownership for subsurface rights
to certain of the gas reserves.
South of Inuvik there are gas reserves being discovered in the Sahtu region, in the region of Coleville Lake. Once
again, in the land claim settlement that the Sahtu have, they have subsurface rights to certain of those reserves, so they
will benefit from the production of gas in those particular regions.
With respect to the pipeline itself, pipeline ownership, as I mentioned earlier, the dividends will be divided based on
the distance of the pipe through each of the Aboriginal regions, so that formula would be used for that.
Senator Adams: The Sahtu just passed a land claim agreement about a month ago in Ottawa, members of the
territorial government, on how it shares royalties, in either oil and gas. I am not sure.
Mr. Reid: I am not familiar with that particular sharing agreement, but I understand it is in place.
Senator Adams: One more thing maybe, Brian: We know we have natural gas in the High Arctic that was discovered
by Petro-Canada and Panarctic in the 1980s. Is there any interest up there in the future if you are running out of
I talked to Nellie about four or five years ago. It was kind of interesting — in case in the future they run out of
natural gas around the Mackenzie area.
They have a percentage. I do not know how many cubic metres up there in the High Arctic that have been found in
Are you familiar with that?
Mr. Chambers: Yes, I am familiar with it, but probably it is more appropriate for Hal to provide information.
All I can say with respect to those reserves is that if there were an interest in developing them and bringing them to
market, they would fall under an environmental assessment and regulatory regime. That regime would take into
account those co-management bodies that have been established in Inuvik to conduct those kinds of reviews, similar to
what are taking place with respect to the Mackenzie Gas Project.
Senator Adams: You are not interested in that gas up there?
Mr. Kvisle: TransCanada is, in fact, interested in the gas in the Arctic islands. However, today the most logical
development sequence would be to build the pipeline for the Mackenzie Delta to develop the gas reserves in the
Mackenzie, get some better sense of the longevity of the Mackenzie reserves, and then consider our options, one of
which would be to build a pipeline from Melville Island to Inuvik.
Another would be the LNG option that was explored 20 years ago where the LNG was going to come down to the
St. Lawrence and New Brunswick.
A third technology that has been looked at recently is called compressed natural gas where you hold the gas at very
high pressure but in a gas stage or a gas phase, in a tanker, and move it down to Inuvik that way and put it into a
These are all long-term issues that I do not think will get a lot of attention until after the Mackenzie pipeline is in
The Chairman: Mr. Chambers, we heard from Mr. Klassen about a disturbing lack of action in respect of putting
people in place to move all these questions ahead.
I am presuming, by the way, and you can all just nod, that we are talking about both pipelines? It is not either/or.
We need both pipelines in whatever sequence they occur. I hope that is true, and we are hopeful, I think, that the
Mackenzie one will precede the Alaska one.
Do you have, in respect of the regulatory things that you talk about, any of the absences that Mr. Klassen has
referred to that are causing you difficulty?
Mr. Chambers: Not directly, Mr. Chair, but I can say the Mackenzie Valley Environmental Impact Review Board,
which has jurisdiction in the Mackenzie Valley from the border with the Inuvialuit Settlement Region down to Alberta,
has been without a chair for a few months now.
Similarly, the Mackenzie Valley Land and Water Board, which has jurisdiction and responsibility for considering
and issuing water licenses and land use permits with respect to this project, is currently without a chair.
I know that yesterday it was reported in the media there had been a short list developed, and it was actively being
considered by the minister, but those vacancies have been in place for at least a couple of months now.
Having said that, I would like to add that there were other vacancies, not the position of chair, but there were other
vacancies, both on the Mackenzie Valley Environmental Impact Review Board and the Mackenzie Valley Land and
Water Board that took some time to be filled over the last year.
It is a challenge and it is a problem that is, and has been, faced by northern boards for some time now.
The Chairman: Are those appointments made by the same minister as Mr. Klassen referred to?
Mr. Chambers: Yes, they are.
The Chairman: I am going to ask a layman's question, Mr. Chambers. Imagining myself as a business proprietor or
a representative of these companies, the description you gave and the processes you described would be enough to send
me home, and would frustrate me in the extreme.
Is that only my naiveté? The people going through the process that you talked about, the creators, the people
putting these businesses together, are they, in your view, happy with the process? Are they contented that it is being
dealt with expeditiously?
Mr. Chambers: The last question you will have to ask the proponents. I cannot answer on their behalf, but I would
like to comment. It is a good question and a very relevant one in relation to the review of the project.
The Chairman: It looks like a bowl of spaghetti, and what do we do now?
Senator Angus: On a point of clarification, when you refer, Mr. Chambers, in your document and again just now to
the proponents, is it always Imperial Resource Group? In the Alaskan one, Mr. Kvisle, is that a different one or
Mr. Chambers: In regard to your question with respect to my presentation, I am referring to the Mackenzie Gas
Project which is composed of several partners, including the Aboriginal Pipeline Group, but also ConocoPhillips and
other partners, ExxonMobil and the Imperial Oil Resources Ventures who have submitted the project on behalf of
those various partners.
Senator Angus: It is like a joint venture?
Mr. Chambers: That is right, because there are three oil and gas companies that own the three anchor fields in the
Senator Angus: What about in the case of the Alaska Highway?
Mr. Kvisle: First, just a bit of additional information on the Mackenzie. The Aboriginal Pipeline Group has a one-
third interest in the project and is paying one-third of the cost of preparing applications and going through the
Just for clarity, I should point out that the cost of going through the regulatory process will be in excess of $300
Senator Angus: They would be paying $100 million?
Mr. Kvisle: They would be paying $100 million; that founding $100 million is being provided by TransCanada. That
is our role in it. We are standing behind the Aboriginal Pipeline Group.
At this point, and Bob Reid may have a better number, my sense is that we are approaching $200 million in
aggregate costs to date. Our share is about one-third of that or about $60 or $70 million that we have provided on
behalf of the Aboriginal Pipeline Group.
The proponents in the Mackenzie Valley are as described by Mr. Chambers, but behind the Aboriginal Pipeline
Group is TransCanada, and that is why you do not see us out front. We are behind them.
Senator Angus: Proponents is a term of art, really, in your business, is it? It is really the sponsors of these enterprises?
Mr. Kvisle: Yes, there are a variety of proponents in different roles.
On the Alaska project, the proponents are many and varied. Certainly, the three producers in Prudhoe Bay,
ExxonMobil, ConocoPhillips and British Petroleum, are active in the Mackenzie Delta as well.
ExxonMobil and ConocoPhillips are proponents of the Mackenzie Valley pipeline. BP is not actively involved in the
Mackenzie Valley pipeline, but they are an explorer and driller in the Mackenzie Delta, and they would like to be a
producer of gas there in future years.
Let me take you back to Alaska now. You have those three big producers: ExxonMobil, ConocoPhillips, and BP.
You also have the state of Alaska, which is actively engaged in the project and has a powerful interest in seeing it
The state of Alaska is probably entitled to roughly a one-third economic share of the cashflow that would come
from the production of gas, partly through their royalty interest, partly through production taxes, and partly through
property taxes and other income taxes on that production.
The state is a major beneficiary of production at Prudhoe Bay, and I would regard them as a key proponent.
Senator Angus: I read something about them in the paper this morning. They sound like they are attacking the
spaghetti problem that the chairman is trying to get at.
Mr. Kvisle: Yes. As far as the Canadian side of the project, TransCanada today is the sole owner of Foothills
pipeline, which we have acquired in a variety of transactions over the past seven or eight years.
We are now today the proponent on the Canadian side of this product. However, other parties would like to
propose alternatives, and the producers will consider whether they should work with us, or build their own pipeline
either to Alberta or Chicago.
On the Alaska project, this is where we need clarification from the Government of Canada. Will the Northern
Pipeline Act remain the mechanism that we will use to build the Canadian section, in which case TransCanada is the
proponent, or will it be thrown open to all manner of other proposals, in which case we do not know who is the
proponent, or when they will be.
The Chairman: Spaghetti, the regulatory spaghetti.
I am hopeful that you will reassure us that everything is okay, that this is not out of whack with what competitive
places in the world would offer, and that comfort can be taken that this is a workable and not too daunting process.
Senator Milne: The environmental assessment has been halted, has it not, by the joint panel?
Mr. Chambers: If I may respond to this question, I think it would be incorrect to say that the environmental
assessment process has been halted, but you are correct in that the Joint Review Panel, at the beginning of February,
requested additional information from the proponents. They have asked for it by the end of March, particularly in the
area of socioeconomic potential impacts of the project in the area of traditional knowledge.
The chair of the Joint Review Panel, who issued that letter, said that until that additional information is provided by
the proponents, they would not be able to set the matter down for hearing.
Senator Milne: They want to minimize harm?
Mr. Chambers: Yes, the Joint Review Panel is continuing with its assessment of the documents it has received and is
doing substantial work in that regard. They are not prepared to set the matter down for hearing until they have this
additional information that they have requested.
The Chairman: Let me ask a slightly more specific question to my earlier spaghetti bowl one.
We agree, I think, that we would all rather see the Mackenzie Valley pipeline project proceed first, and the Alaska
Highway project proceed second.
The logic of that rests, I think, on the fact that the Mackenzie pipeline has a bit of a jump or is seen to have a bit of a
jump by a couple of years, maybe four years, and the number we heard before was 2008 and 2012.
If we lose that jump, if we regulate the project to death and the Mackenzie Valley pipeline is unable to proceed, we
have heard that fact would place it literally in jeopardy. Is that so?
Mr. Reid: Perhaps I might comment on that. It is important that the Mackenzie Valley pipeline proceed before the
Alaska line. The reason for that is that the Alaska line would be about four times the capacity of the Mackenzie line.
If the Alaska line were to go first, you could expand. Once in place, you could expand that particular line by the
equivalent volume of the Mackenzie line, which is, let's say, roughly 1 billion cubic feet a day, for significantly less than
the cost of building the Mackenzie line.
For that reason, it is pretty easy to understand that if the Alaska line were to go first, it would then be expanded for
as long as there is sufficient reserves in Alaska to support expansions, and the Mackenzie line would be delayed
The Chairman: Mr. Kvisle?
Mr. Kvisle: The first point I would like to make is that the Mackenzie Valley pipeline is approximately 1,220
kilometres of 30-inch diameter pipe that would be constructed through relatively level, relatively constructible
territory. It would, of course, be built in the winter, but it is a straightforward thing.
By comparison, TransCanada today operates more than 41,000 kilometres of pipe, and the 1,200-kilometre
equivalent length is something that we have routinely constructed in a single construction season.
There are no particular engineering challenges or project management difficulties in building something like the
The Alaska project is testing the limits on all fronts. It is going through the Brooks Range. It is using diameters of
pipe and wall thicknesses that have never been attempted before — four times the volume and four times the distance.
There are a lot of political complications involved.
We see that the Mackenzie very definitely has a jump on the Alaska project. However, I want to emphasize that I am
speaking and providing observations from TransCanada's perspective, and I am not speaking for Imperial Oil or the
proponents of the project.
From TransCanada's perspective, we see three things that give us concern with respect to the Mackenzie project.
The first is the whole regulatory process that you have referred to as a bowl of spaghetti.
If we were seeking approval for this project in Alberta or in Ontario, the regulatory process would proceed quite
clearly and expeditiously. We would have to present our projects to the National Energy Board or, in the case of
Alberta, to the Alberta Energy and Utilities Board, EUB.
The start of the process and the end of the process would be fairly well defined, and we would go into that with a
high degree of certainty as to what the outcome would be. It is almost an order of magnitude more complicated in the
Mackenzie Valley because of this proliferation of multiple regulatory land and water boards and environmental review
boards. It is quite complicated.
I would be remiss if I did not point out that from TransCanada's perspective, this is incredibly more complicated
than anything that we do in Alberta, Ontario or anywhere in between.
My second point is that there remains a significant challenge in negotiating the benefit and access agreements with
the four Aboriginal groups in the pipeline.
This is separate and distinct from the Aboriginal Pipeline Group ownership in the line, but as custodians of the line,
if you will, and having certain rights and entitlements, those Aboriginal groups — the Inuvialuit, the Gwich'in, the
Sahtu, and the Deh Cho — are entitled to certain benefits in return for granting access.
Those negotiations are lengthy and protracted, and the mechanisms are a little different than they are in the rest of
Canada, but so be it. That is a lengthy process, but it is one that the project needs to go through.
Senator Angus: It is not done yet?
Mr. Kvisle: That is not done yet, no, not done at all.
The third major factor that I would draw your attention to is the Deh Cho land claim issue in the southernmost part
of the project.
In all three cases, these are areas of federal jurisdiction and federal involvement, and the Department of Indian
Affairs and Northern Development is involved, to some extent, in all three.
Energy Canada, EnerCan, is involved in the regulatory process, but there is very clearly a role for the federal
government to play in examining the process and saying what can be done to ensure that some unexpected event does
not derail this project before we get to the end of it.
We think, again, emphasizing from TransCanada's perspective, that this is quite important.
Mr. Chambers: As I mentioned during my presentation, I want to emphasize and I will say it again, the cooperation
plan did not create the regulatory regime in the Northwest Territories.
I would like to add that industry and, more specifically, Imperial Oil Resources Ventures Limited, has consistently
publicly stated their support for the cooperation plan as a means to navigate the existing environmental and regulatory
regime in the Northwest Territories.
Acknowledging that there are northern boards in place in the Mackenzie Valley, both from an environmental
perspective and a regulatory perspective, I think it is very important to remember, and it has been mentioned earlier
today, that there have been land claim settlements that have been negotiated between Canada and the First Nations
peoples of the Mackenzie Valley and the Beaufort Sea region.
To a large extent, those land claim agreements were a product, and began their initial negotiation phase during the
conduct, of the Berger inquiry of the 1970s.
While the Inuvialuit final agreement was concluded in 1984, in fact there was an agreement in principle in place in
1978, which very much provided the basis for the final agreement when it was signed in 1984.
The original approach and intention of the Government of Canada in negotiating land claims in the Mackenzie
Valley was to negotiate a single land claim for the entire Mackenzie Valley, following the conclusion of the Inuvialuit
That was in the context of, you may have heard, the Dene and Metis land claim negotiations, which essentially
occurred from the late 1970s until 1990 when that land claim agreement, which would have covered the entire
Mackenzie Valley from Inuvialuit Settlement Region down to Alberta, reached the agreement-in-principle stage but
then for various reasons was not concluded.
Having said that, that comprehensive land claim was used as the basis for the subsequent settlement of the Gwich'in
land claim in 1992 and the Sahtu land claim in 1993.
The reason I mention all this is because the land claims, as you know, are constitutionally protected agreements.
Provisions within those land claim agreements call for the establishment of co-management, environmental assessment,
and regulatory bodies.
As a result, the Mackenzie Valley Environmental Impact Review Board was created, which now has jurisdiction
within the Mackenzie Valley for environmental assessment, similar to the jurisdiction that Mr. Klassen referred to and
spoke about that his committee has in the Inuvialuit Settlement Region.
Similarly, from a regulatory perspective, the Mackenzie Valley Land and Water Board was established, again,
pursuant to those land claims, and the subsequent enabling legislation called the Mackenzie Valley Resources
While these northern boards are new and emerging, they are constitutionally protected and have a vital role to play.
They involve equal participation of the First Nations people of the Mackenzie Valley, which, after all, is something
that was very eloquently articulated during the Berger commission of the 1970s. First Nations people very much had
the view that they had no say whatsoever, and I think they were right, in the decisions that were being made, or
contemplated, with respect to development within and adjacent to their traditional territory.
To a large extent these northern boards that do not exist in southern jurisdictions have been created as a result of the
settlement of land claims and provide a meaningful role for First Nations to participate in the review of these major
The Chairman: Thank you, Dr. Chambers. There is no one here who wants either ecological, environmental, social
or economic considerations to fail to be taken fully into account in all these processes. There is no one here who is more
interested than we are in the interests of the Aboriginal folks and in the constitutional protection of their rights.
It does seem in the process that you have described that the layers are an impediment. I think we also all agree that
we hope these layers would not be an impediment to the forward progress of these undertakings, which are going to be
to everyone's benefit if they can be put into the ground. It is just that layman's frustration that I was expressing rather
than anything else.
The danger there, of course, is that leverage: Shall we make bad law over here in order to make good law over there?
It is a very dangerous trick.
Senator Buchanan: You mentioned the Arctic National Wildlife Refuge, ANWF. Let me ask you this. I know a lot
about ANWF because I have listened to it in the States for years and listened to it with Frank Murkowski and others.
Now that Frank Murkowski is governor of Alaska, his daughter is one of the senators and the other senator is very
favourable to ANWF, George W. Bush is in the White House, the republicans are majority in the Senate and the
House, and John Kerry is not in the White House, what do you think? Do you think that ANWF is now going to
proceed because Frank Murkowski is a real proponent of ANWF proceeding with drilling?
Mr. Kvisle: First, senator, I would say that I have no particular inside knowledge of what is going to happen there,
but I would share my opinion, which is that very well designed, carefully controlled drilling in certain parts of ANWF
will, in my view, occur.
I believe the U.S. Government will move in that direction, and it will be from very small paths in that part of
ANWF where the environmental impact will be, in my view, diminished.
I do not believe that they will allow wholesale industrial development throughout ANWF, and they will be
particularly careful to avoid those areas which are easy to differentiate from the accessible areas. They will continue to
protect the important areas of ANWF.
From TransCanada's perspective, we do not believe that the construction of a large diameter continental pipeline
through ANWF would be approved. We are not even sure it would be a good idea.
We are not a proponent of that. We have made our decision and decided to support the construction of the Alaska
Highway pipeline rather than a pipeline through ANWF and particularly recognizing the environmental sensitivity of
the northern Yukon which is, from my perspective, much more interesting terrain and more valuable to us than the
land within the coastal region of ANWF.
The Chairman: Senator Milne, very briefly.
Senator Milne: Just very briefly. Most of ANWF, of course, is mountainous, and where they are going to be doing
their drilling and all their exploration work is on that coastal plain which is where the caribou move back and forth,
where everything moves back and forth — people, animals, everything. They do not move back and forth in the
So that is where it is going to happen. It is going to happen in a very small proportion of the ANWF. I do not think
they can avoid having an environmental impact.
Senator Spivak: Do you have any idea of the extent of the oil there? Some of the literature says that if they raise the
energy efficiencies in SUVs by two miles a gallon, they would have the equivalent of the oil in ANWF, which they think
is only six months for the United States. What is your view on that, six months' availability?
The Chairman: I have to point out, members, that the panel is here to talk to us about gas, and I am going to ask
them to restrict their answers to gas.
Mr. Kvisle: I would simply say there is a wide range of opinion of the geologic potential of ANWF and also of the
natural petroleum reserve which exists to the west side of Prudhoe Bay.
Most industry experts that I talk to see greater potential to the west than they do in ANWF, but there are certainly a
number of world scale prospects that have been identified in ANWF that industry would like to drill. As to what the
outcome of that drilling would be, I have no idea.
The Chairman: Just before we adjourn, I have to say that when we were in Washington protesting loudly about
drilling in ANWF, Senator Spivak, because of the sensitivity of the place, the Americans said to us very nicely, You
guys already drilled on your side of the border and you did not find anything, so see you later. It was hard to come
back from that.
Gentlemen, thank you very much for your generous time and your generous answers to our questions. As you can
tell, we could have gone on for a great deal longer. I hope you will permit us, we know where you live, to write you with
further questions. If you can, we would be very grateful for the answers, and we may ask to see you again, too.