Canada

Stepping on the gas

IAN URQUHART August 22 1977
Canada

Stepping on the gas

IAN URQUHART August 22 1977

Stepping on the gas

Canada

OTTAWA

It was time to call the President. After nearly a decade of studies, more than 2,000 pages of reports, a parliamentary debate and a rare summer weekend cabinet meeting, the government had reached a tentative decision to support a natural gas pipeline from the North. In his Ottawa office. Prime Minister Pierre Trudeau picked up the telephone to talk to President Jimmy Carter, who was expecting the call in the White House. Trudeau wanted to know if the U.S. government was still interested in a joint Canadian-American pipeline along the Alaska Highway. In the course of a 25minute conversation, Carter assured Trudeau of his interest.

The brief conversation early in August set in motion a giant poker game between the U.S. and Canadian governments that is continuing through most of this month as the two countries move toward the deadline of September 1, set by the U.S. Congress, for a decision on how to move Alaskan gas south. The United States wants the gas; Canada, Trudeau made clear, wants the pipeline. There the bargaining begins.

Even before the Canadian decision was reached, observers were comparing the pipeline talks to the negotiations that led up to the Columbia River Treaty between the two countries in 1961. That treaty, which provided for the construction of dams in Canada for the production of power for the United States, has always been regarded by Canadian nationalists as a sellout. But there is still some bitterness in the United States over it as well. Just this

month Idaho Senator James McClure said in the U.S. Senate. “I suggest that anyone who believes we are going to get a pipeline for Alaska gas without some kind of very favorable concessionary status to the Canadians is not familiar with the background of the negotiations for that (Columbia River) treaty.” And Trudeau remarked at a press conference in Ottawa: “It should be clear that these are going to be tough negotiations.”

Trudeau said that, while the government favors a pipeline along the Alaska Highway—through the Yukon and British Columbia into Alberta—“we’re obviously not going to build it if it’s not of significant

benefit to Canada.” To ensure some benefit to Canada beyond the temporary boom in construction jobs and spin-off employment in the steel industry, Trudeau said the government will insist upon provisions for a future linkup with the Mackenzie Delta, so Canadian gas could be carried south by the Alaska Highway pipeline. And to offset the negative social impact of a pipeline as it crosses the Yukon, the government will stipulate that “adequate compensation” be paid. Finally, he said, the government will oppose financing or guaranteeing the pipeline with money from the Canadian taxpayer.

Saying that he did not want to give away

his negotiating position, Trudeau refused to be any more specific in listing the concessions the government will seek in return for allowing Alaskan gas to be transported across Canada to the “lower 4.8” states. But the National Energy Board (NEB) in recommending approval of the Alaska Highway pipeline last month, set out a series of conditions that the government will at least use as a starting point. They include:

• Diversion of the Yukon leg through Dawson to bring it within 500 miles of Canadian gas in the Mackenzie Valley;

• Payment of up to $200 million by the pipeline consortium to offset social costs in the Yukon, a surcharge that would eventually be passed on to American consumers in higher prices for Alaskan gas;

• Provision for an “all-events tariff” for the gas, which would allow the pipeline companies to pass on all the costs of construction to U.S. consumers.

The NEB report was augmented this month by a study by a special panel of inquiry, heatied by Kenneth Lysyk, dean of law at the University of British Columbia, into the social impact of a pipeline through the Yukon Territory. The Lysyk study concluded that a fund of “at least” $200 million was needed to offset social costs and also called for a delay in construction until 1981 to allow more time to study alternate routes through Dawson and settle native land claims. Even so, native and environmental groups in the Yukon were disappointed with the outcome of the Lysyk study and made plans to fight the Alaska Highway pipeline in the courts.

In Ottawa the pipeline issue, once so hotly contested, has become depoliticized by the combination of the NEB and Lysyk reports. The House of Commons pipeline debate, which The Toronto Star billed as “one of the most crucial and momentous debates in the history of this country,” turned out to be a dud as all parties agreed the pipeline should be built, with condi-

tions. The major concern was over whether the government would cave in to U.S. pressure and drop the conditions. In a preliminary meeting in Washington in late July between the chief negotiators for each country (see box), the United States made clear its fundamental objection to the three main conditions proposed by the NEB for the routing and financing of the pipeline. Les Goldman, the leading U.S. negotiator, reportedly even referred to the Alaska Highway project as “your pipeline” and said it was in a “dead heat” with the rival “all-American” proposal by the El Paso Alaska Co. of Houston that bypasses Canada altogether. The El Paso project would o involve liquefying the gas for shipment to the lower 48 states by tanker and had been written off by most Canadian officials as a jingoist proposal ranking far behind a pipeline, whether along the Alaska Highway or through the Mackenzie Valley. But here was a qualified U.S. official trumpeting its merits.

Trudeau and the Canadian cabinet were taken aback. Was El Paso just a bargaining position, or was it to be taken seriously? After the weekend cabinet meeting, which lasted five hours. Trudeau sought Carter’s assurances that the pipeline was still preferred over the El Paso tanker project. The Prime Minister reported later that “obviously we have a preference and they have a preference [for an Alaska Highway pipeline]. And it’s on this basis that we’re going to try and agree. And I think we’ll succeed.”

But the government remains on the spot. It could be blamed for killing the pipeline project if it pushes the Americans too hard and they opt for El Paso. But on the other hand, it could face parliamentary and public censure for selling out to the Americans if it does net push hard enough for the guarantees it wants. As one U.S. official remarked with a note of satisfaction: “Your government has a narrow margin to bargain in.”

IAN URQUHART