Legal Principles Surrounding the New Canadian and American Arctic Energy Debate

Arctic trails have their secret tales That would make your blood run cold1 I. INTRODUCTION Almost a quarter century ago, great plans were made by Canada and the United States to build a natural gas pipeline from Alaska to the contiguous forty-eight states. However, the project stalled and has only been reinvigorated recently. This article identifies some of the unresolved legal issues surrounding the Alaska Highway gas pipeline project and competing proposals concerning connection to Canada's Mackenzie Delta. My underlying theme is security of supply, a concern that has increased in importance following the act of war by terrorists in New York City on September 11, 2001. These legal issues and business proposals should be reconciled quickly in order to ensure security of supply between Canada and the United States. Both countries share strategic mutual interests. Thus, this article presents a synthesis of the legal issues in an attempt to advance the longstanding comity between our countries through informed and timely decision making. Ultimately, a decision has to be made about the 1977 bilateral international agreement, aimed at transporting natural gas from Prudhoe Bay, Alaska through Canada to the contiguous forty-eight states. The original project was called the Foothills (or Alaska Highway) project by Canadians, while Americans often called it the Alaska Natural Gas Transportation System (ANGTS). That acronym, ANGTS, sounds like 'angst', suggesting that some anxiety might exist about the outcome of this complicated project. Indeed this project has caused its share of angst over the past twenty-five years. Nevertheless, there are signs that regulators in both countries are gearing up to coordinate the decision-making process IMAGE FORMULA14 one more time. An important aspect of this coordinated review will be the effectiveness of complementary legislation. The Northern Pipeline Act in Canada and the U.S. Alaska Natural Gas Transportation Act were enacted in the 1970s. Both Acts were spawned from the bilateral US-Canada Northern Natural Gas Pipeline Treaty and the subsequent Agreement on Principles. Both pieces of legislation were enacted following the first global energy crisis in 1973. Although the Alaska Highway gas pipeline has not been completed, a portion or first stage, called the `pre-build,' was constructed in the early 1980's and transports gas from the Western Canadian sedimentary basin to the United States. Unfortunately, financing of the complete system has never been certain nor easy to attain. Since that time, fundamental market restructuring has taken place, including the processes of natural gas deregulation in both countries. Both countries have increasingly integrated their energy markets to such an extent that we are now dealing with an effective North American energy market. Consequently, the decision to transport gas from the Arctic to the lower forty-eight states will not rest simply on completing the original Alaska Highway project but will depend upon many new factors. The choice between an Alaska Highway gas pipeline and a Mackenzie Delta pipeline will ultimately have an extraterritorial effect on supply and transportation arrangements, especially on transportation rates and the cost of gas. This choice will require conscious and detailed deliberation in both countries, and hopefully will involve a consistent and harmonized application of public utilities law and policy. II. INITIAL PROPOSALS In 1968, an enormous deposit of oil and gas was found in and around Alaska's Prudhoe Bay. Oil seeps had initially been discovered in Alaska in 1837. In 1923, the North Slope petroleum reserve was created for the United States Navy. The Prudhoe Bay discovery was followed by exploration activity in the Canadian Northwest. Petroleum was first discovered in 1789 by the Scottish explorer Alexander Mackenzie, along the river that bears his name. …

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