In the late 1960s and early 1970s, vast reserves of oil and gas were discovered in Alaska and the Canadian Arctic. Prompted by the Arab oil embargo of 1973, Canada and the United States began contemplating major pipelines to transport Alaskan and northern Canadian gas to southern markets.
One of these routes ran up the Mackenzie Valley, with a possible connection (the “over the top” route) from Prudhoe Bay to the Mackenzie Delta. Canada appointed a Commission of Inquiry under Justice Thomas Berger to study the potential environmental and socio-economic impacts of a Mackenzie Valley pipeline.
The inquiry ran from 1975 to 1977. Justice Berger reported that no route through northern Yukon would be acceptable for environmental reasons, and that no Mackenzie Valley project should go ahead until Aboriginal land claims were settled in the region. He added that a route through southern Yukon would not face the same problems that led him to recommend against building a Mackenzie pipeline.
At this time, several companies were proposing different pipelines for Alaskan and northern Canadian gas, including an Alaska Highway route developed by Foothills Pipe Lines Ltd (Foothills) in 1976. In 1975-77, the National Energy Board held 214 days of hearings to consider the proposals, concluding in 1977 that while engineering design, environmental and socio-economic work remained to be done, the Foothills project (now wholly owned by TransCanada PipeLines Ltd.) offered the generally preferred route for transporting Alaskan natural gas. Also in 1977, an Inquiry led by Kenneth Lysyk into the socio-economic implications of a pipeline through Yukon concluded that such a project could proceed given appropriate regulatory oversight and a number of mitigative measures.
The Alaska Highway Pipeline route became the subject of the 1977 Canada-U.S Agreement on Principles Applicable to a Northern Natural Gas Pipeline (the Agreement). Canada’s Northern Pipeline Act (Act) of 1978 created the Northern Pipeline Agency (Agency) and gave effect to the Agreement in Canada. The Act deemed issued Certificates of Public Convenience and Necessity pursuant to the National Energy Board Act.
Between 1978 and 1982 the Agency oversaw the design and construction of over 800 kilometres (km) of pipeline, called the “Pre-Build” or Stage 1, from Caroline, Alberta to the Canada-U.S. border at two locations, and received extensive environmental and socio-economic information along all segments of the pipeline route. Both legs of the Pre-build were in operation and transporting natural gas by late 1982.
Foothills’ application for a right-of-way in Yukon in August 1976 triggered an Environmental Assessment and Review Panel under the Federal Environmental Assessment and Review Office. The Panel met intermittently between 1978 and 1982, issuing four reports in total and concluding in 1982 that the pipeline could be constructed and operated in an environmentally responsible manner. The Agency participated in the panel reviews from 1979 onwards.
Also in 1979, the Agency appointed Mr. Winston Mair to conduct an inquiry in northern B.C. Mr. Mair held hearings in 15 communities and issued a report recommending specific mitigation measures for potential environmental and socio-economic impacts.
In these early years the Agency consulted with governments, public interest groups, and communities along the pipeline route to develop extensive environmental and socio-economic terms and conditions for the design and construction of the pipeline. In total, 761 terms and conditions were ratified for all segments of the route except for the Yukon.
In early 1982, the project proponents indicated that due to unfavourable economic conditions, Stage 2 of the project would be deferred for at least two years, with a completion date of 1989.
Following the 1982 announcement on the unfavourable economics that put the completion of the northern segments of the pipeline on hold, the Agency was reduced to a small staff overseeing the administration of the Act and the regulation of expansions to the Pre-Build. Between 1988 and 1998 there were five such expansions, consisting of additional portions of pipeline sections, pipeline looping and additional compression facilities. The Pre-Build now transports 3.3 billion cubic feet per day (Bcf/d) from Western Canada to American markets.
In 2007, the State of Alaska passed the Alaska Gasline Inducement Act (AGIA) to encourage the development of natural gas reserves in Alaska’s North Slope and to promote further oil and gas exploration in the region. AGIA requested proposals for a project that would produce low tolls (transportation costs) and provide for regular expansions of the pipeline, local hire, in-state delivery and a firm schedule. AGIA provided for up to $500M in matching state funds to any proponent that met its terms.
In late 2008, TransCanada PipeLines Ltd. (TransCanada), which acquired full ownership of Foothills in 2004, received the license under AGIA to pursue a project to commercialize North Slope gas. Its Alaska Highway option would make use of Foothills’ Certificates of Public Convenience and Necessity in Canada, which were granted under the Act in 1978 and which remain valid.
In 2009, ExxonMobil, the gas producer with the largest natural gas holdings in the North Slope region, joined TransCanada to form the Alaska Pipeline Project (APP). The APP held its first “open season,” or solicitation for commercial bids from gas producers, in 2010. On July 30, 2010, the APP completed its initial open season and reported to have received multiple conditioned bids from potential shippers in support of the AHGP option. Since the close of the open season, APP engaged in negotiations to resolve conditions set out by the potential shippers, with the goal of turning the bids into signed precedent agreements. In early May 2012, APP notified the US regulator, the Federal Energy Regulatory Commission (FERC), that it was appropriate to conclude these negotiations and terminate its first binding open season.
On March 30, 2012, the three major gas producers in the North Slope region announced that they had reached alignment on a study of an all-Alaska liquefied natural gas (LNG) export option for commercializing Alaska's North Slope gas reserves. TransCanada sought and acquired an amendment to AGIA from the State of Alaska that would allow them to initiate a feasibility study on this potential alternative to the AHGP.
TransCanada held a non-binding “Solicitation of Interest” from August 31 to September 14, 2012, to assess the potential for shipping commitments on either the AHGP or the LNG route and to identify parties interested in future commercial discussions.