BUSINESS

THE GREAT GAS SELLOFF

ARCTIC RESIDENTS' DREAMS OF ENERGY RICHES HAVE BEEN REVIVED BY NEW NATURAL GAS EXPORT PROPOSALS

JOHN DeMONT April 3 1989
BUSINESS

THE GREAT GAS SELLOFF

ARCTIC RESIDENTS' DREAMS OF ENERGY RICHES HAVE BEEN REVIVED BY NEW NATURAL GAS EXPORT PROPOSALS

JOHN DeMONT April 3 1989

THE GREAT GAS SELLOFF

BUSINESS

ARCTIC RESIDENTS' DREAMS OF ENERGY RICHES HAVE BEEN REVIVED BY NEW NATURAL GAS EXPORT PROPOSALS

Walter Willkomm says that he has not felt as optimistic since 1976. At that time, the push to find oil and natural gas in the western Canadian Arctic was in full swing. And Willkomm’s thriving Inuvik, N.W.T.-based roofing company employed 50 people who worked on construction projects across the North. But a year later, the boom ended when former B.C. chief justice Thomas Berger successfully urged Ottawa to place a moratorium on building a natural-gas pipeline from Alaska to the Mackenzie River Delta. When the oil companies pulled out, Willkomm had to lay off all but five employees, and he turned to fixing screen doors and windows to make ends meet. But now, there are fresh plans afoot to export almost a third of Canada’s known natural-gas reserves to the United States, including massive amounts from the Canadian Arctic. And Willkomm, 58, who paid $1.8 million in 1984 to buy and renovate a bankrupt Inuvik hotel, says that he believes prosperity could again be just around the corner. Said Willkomm: ‘Tm thinking of adding a third storey on the hotel.”

Even some of the most pessimistic northerners are again behaving bullishly about their economic futures following an application in February by Gulf Canada Resources Ltd. to cooperate with earlier applications by Shell Canada Ltd. and Esso Resources Canada Ltd. to export massive—and some critics say dangerously high—amounts of natural gas to the United States. And two weeks ago, Calgary-

based Foothills Pipe Lines (Yukon) Ltd. unveiled a proposal to build a $4.4-billion naturalgas pipeline from the mouth of the Mackenzie River to central Alberta, which would bring thousands of jobs to the western Arctic. As well, Maclean ’s has learned that another pipeline company, Edmonton-based Interprovincial Pipe Line Co., which is 41-per-cent owned by a firm controlled by Toronto’s billionaire Reichmann family—who also control Gulf Canada Resources Ltd.—is considering plans for its own northern pipeline proposal.

But some native groups, political nationalists—particularly opponents of free trade— and environmentalists still have strong reservations about development of Canada’s northern energy resources. At the same time, many industry insiders say that the National Energy Board hearing into the export proposals, which is scheduled to begin on April 10 in Ottawa, will be the first real test of the federal govem-

ment’s three-year-old resolve to totally deregulate the oil-and-gas industry. Even so, the companies that own the Mackenzie Delta natural gas will have an easier time now than during the 1977 Arctic pipeline battle. Since then, Interprovincial Pipe Lines’ 1,000-km oil pipeline from Norman Wells, 500 km from the

_ mouth of the Mackenzie, to

Zama in Alberta has been completed. The current export application already has the support of some native people of the upper Mackenzie, but others oppose the plan. Prime Minister Brian Mulroney signed an agreement with Dene Nation president William Erasmus last September promising to settle the native land claim to most of the western Arctic by 1991. Erasmus said that his people are opposed to the pipeline because they want their claim to be settled first.

But firmly behind the plan is the government of the Northwest Territories, which signed an agreement with Ottawa last fall that could give it increased control over oil-and-gas develop| ment. Even more important, I the oil companies have a symu pathetic government in Otta0 wa this time around. While 1 Pierre Trudeau’s Liberals kept the oil-and-gas industry under tight rein, the Mulroney government has chosen to let energy flow freely into the United States and to let market forces set oil and natural-gas prices. But some observers say that the application by Gulf, Esso and Shell to ship 9.2 trillion cubic feet of Arctic gas to the United States over 20 years is unprecedented and will test Ottawa’s commitment to its market-based policy. The companies say that demand for Canadian natural gas in the United States will become stronger than it has ever been by the mid-1990s, because of rising U.S. consumption and depletion of old reserves.

But concern is growing that Canadian natural gas sales to the United States may already be getting out of control. Exports of Canadian gas to the United States increased by 36 per cent during 1987-1988 from 920 billion cubic feet the previous contract year. However, the National Energy Board, which controls the flow of energy in and out of Canada, now faces applications to export a total of more than 30 trillion cubic feet of natural gas—or nearly one-third of the nation’s proven reserves. By comparison, Ontario’s industrial and residential con-

sumers use about 775 billion cubic feet, or

close to one trillion cubic feet of natural gas annually.

Not all of the licence applications are likely to win approval. Even so, critics say that such large exports could hamper the ability of Canadians to meet their own energy requirements in the decades to come. Said Maude Barlow, chairman of the Council of Canadians, a nationalist lobby group that is strongly opposed to free trade: “It’s a red-tag day on Canada’s natural gas.” And Ian Doig, editor of the Calgary-based Doig’s Digest, a highly regarded energy newsletter, points out that replacing 25 trillion cubic feet of natural gas means that Canada would have to move quickly to increase its natural-gas reserves or face a declining supply. “With rigs working, this should not be a national distemper,” Doig said. But he added, “If they g remain idle, it is a concern.” I And at the same time, Doig § and others have expressed > concern that the Canada-U.S. k Free Trade Agreement may worsen Canada’s potential natural-gas supply problem. Under the FTA, Canada can restrict exports to the United States only by the same proportion that it reduces total production. The result, critics say, is that Canada could be edging toward a point where it cannot cut back sales to the United States, because to do so would require a drastic reduction in its own domestic supplies.

A lot of the answers to those concerns will come with the decision on the Arctic export applications. Esso, Shell and Gulf are said to be under pressure to show that they can generate revenues from the Mackenzie Delta. But harnessing northern natural gas is even more impor| tant to the people who live in g the area and who have alÍ ready watched their dreams g of energy riches evaporate ^ once before. As Thomas Det§■ lor, Inuvik’s planning co-ordiz nator, put it, “We’re already planning for the population to double by the time the natu-

ral gas starts to flow.” As the

newest battle over northern energy development heats up, Detlor and other pro-pipeline northerners are already marshalling their forces.

JOHN DeMONT with JOHN HOWSE in Calgary and JOHN DALY in Toronto

JOHN HOWSE

JOHN DALY