Annual Report for Fiscal Year Ended March 31, 2014

Table of Contents


Overview

The Northern Pipeline Agency (NPA or the Agency) was created by the Northern Pipeline Act (the Act) in 1978 to carry out federal responsibilities in respect of the planning and construction by Foothills Pipe Lines Ltd. (Foothills) of the Canadian portion of the Alaska Natural Gas Transportation System (ANGTS). Also referred to as the Alaska Highway Gas Pipeline project (AHGP), it is the subject of the 1977 Agreement between Canada and the United States of America on Principles Applicable to a Northern Natural Gas Pipeline (the Canada-U.S. Agreement). Figure 1 shows the proposed route of the entire pipeline system.

Phase I of the AHGP (the Prebuild) was constructed in 1981-82 for the initial purpose of transporting gas sourced from Western Canada to the United States (U.S.). The current flow capacity of the Prebuild is approximately 3.3 billion cubic feet per day (Bcf/d). Figure 2 shows the details of the existing Prebuild facilities in Canada.

Phase II of the AHGP would link the Prebuild with U.S. natural gas reserves at Prudhoe Bay in Alaska. Unfavourable economic conditions from 1982 to the beginning of the last decade led to indefinite delays in the completion of the ANGTS and a prolonged period of low activity for the Agency. In 2008, TransCanada PipeLines Limited (TransCanada), which now owns Foothills, was selected by the State of Alaska under the Alaska Gasline Inducement Act to receive up to $500 (USD) million in State assistance to pursue an Alaska gas pipeline. This large-scale project of 2,762 km, would transport 4.5 to 5.9 Bcf/d of natural gas in a buried 48-inch, high-pressure pipeline from Prudhoe Bay, Alaska, to markets in Canada and the lower 48 states. Project costs have been estimated at $32-41 billion (2009 USD) by TransCanada.

On March 30, 2012, ExxonMobil, ConocoPhillips, BP and TransCanada announced that they were working together on a work plan to assess liquefied natural gas (LNG) exports from south-central Alaska as an alternative to a natural gas pipeline through Canada. In February 2013, TransCanada notified the Agency that no further work is planned on the AHGP for now, and of their intentions to maintain the AHGP assets in Canada. On January 15, 2014, Alaskan Governor Parnell announced that the State had signed an agreement with the major North Slope gas producers and TransCanada outlining a roadmap for the proposed all-Alaska LNG export project studies to proceed. The State and TransCanada agreed to terminate the existing licensing and funding agreement they signed in 2008 and have signed a new memorandum of understanding setting out TransCanada’s role in the midstream portion of the LNG export project.

To align with the reduction in the AHGP project activities, the Agency scaled down its operations in 2013-14 while continuing to fulfill Canada’s obligations as set out in the Act. During this time of reduced activities for the foreseeable future, the Agency will remain prepared to meet the ongoing obligations and to respond to any incoming public inquiries. The future of the AHGP continues to rest with its proponents and the commercial marketplace.

Figure 1:
The Alaska Natural Gas Transportation System

The proposed pipeline route (dotted) and the connected pipeline infrastructure in North America.

[text version - figure 1]

Figure 2:
The Foothills Prebuild

The pre-build (portion already built) of the pipeline in Alberta.

[text version - figure 2]

Organizational Structure

The Agency’s organizational structure is defined by the Act. The Minister for Natural Resources, the Honourable Joe Oliver, was responsible for the management and direction of the NPA in 2013-14.

The Act provides for the NPA Deputy Head, called the Commissioner, to be appointed by Governor in Council. During 2013-14, this position was held by the Deputy Minister of Natural Resources Canada, Serge Dupont.

To obtain necessary staff resources to support the Agency activities, the NPA had entered into inter-agency agreements with the Departments of Justice, Natural Resources Canada, Fisheries and Oceans and Health Canada, as well as the National Energy Board. Most of these agreements expired by the end of the year. Through a Services Agreement, Natural Resources Canada provides internal services support, such as administrative, financial, and information technology assistance, to the NPA.

Key 2013-2014 Activities

The NPA continued to deliver on the responsibilities of the Government of Canada that are embodied in the Act and the 1977 Canada-U.S. Agreement by working with other federal departments, provincial and territorial governments, Aboriginal groups, the U.S. Federal Energy Regulatory Commission (FERC), the U.S. Office of the Federal Coordinator (OFC), and TransCanada.

The Agency maintained dialogue with key stakeholders and coordinated with the Yukon government, other federal departments, and Aboriginal communities on the decision of TransCanada to defer regulatory filings expected in late 2013. The Agency also continued to refine potential approaches for a modern environmental, socio-economic and technical update and review and worked with other departments on the process, should the project proceed in the near future.

To align with the reduction in the AHGP project activities, the Agency reduced its staff levels from 12 to 3 by the end of the 2013-14 fiscal year and reduced its overall activity level. The Agency undertook several steps to manage its records and project information to protect the progress that has been accomplished to date should TransCanada initiate the project at some point in the future.

Financial Matters

The NPA requested and received a reference level of $3,136,931 for 2013-2014 from the Government of Canada. During this period, the recoverable expenses for the Agency totaled only $1,171,745. This expenditure level reflected the reduced level of Agency activities required to be undertaken as a direct result of the project status and the ramp down of the Agency staff levels.

Under the Act, the Agency’s operating expenses are fully cost recovered from TransCanada. Payments made by TransCanada are deposited directly into the Consolidated Revenue Fund of Canada.

In 2012, the Northern Pipeline Act was amended to eliminate the requirement for the Agency to have an annual audit of the accounts and financial transactions by the Auditor General of Canada. For the 2013-14 fiscal year, the Agency carried out a review of its financial transactions in conjunction with the Office of the Comptroller General. The Northern Pipeline Agency unaudited Financial Statements for the year ended March 31st, 2014 is reproduced as an appendix to this report.

Background and Contact Information

For further background information on the AHGP and the NPA’s roles and responsibilities, reference may be made to the NPA’s Departmental Performance Report for the period ending March 31, 2014.

This report may be accessed through the Northern Pipeline Agency Web site at http://www.npa.gc.ca

The Agency can be contacted at:
615 Booth Street, Room 412
Ottawa, Ontario K1A 0E9

Telephone: 613-995-1150

Email: info@npa-apn.gc.ca