The United States should look to Arctic oil and gas to meet its energy security needs and to protect the environment, said Minister Robert McLeod, Government of the Northwest Territories, at an event hosted by the Canada Institute. McLeod discussed new developments that could affect Arctic oil and gas production, as well as how shifting U.S. energy policy could influence resource development in Canada's Arctic region. He was joined on the panel by Drue Pearce, the U.S. federal coordinator of Alaska's Natural Gas Transportation Projects, who provided an overview of the implementation plan for the Denali pipeline project and the coming implementation plan for the TransCanada project.

The Outlook for Arctic Oil and Gas Development

Developing an affordable supply of natural gas is in the economic, security, and environmental interests of both Canada and the United States, said McLeod. He said that the United States would remain the primary destination for energy exports from the Northwest Territories (NWT), noting that Canada is already the United States' largest supplier of oil and natural gas. Efforts to mitigate carbon emissions in the United States will likely lead Canada's neighbor to increase its demand for cleaner sources of energy. McLeod cited the Waxman-Markey climate change bill as evidence of a coming shift of the energy mix used in the United States. He remained hopeful that if such legislation is passed, the United States' demand for natural gas from the NWT will increase in an effort to replace environmentally unfriendly sources of energy currently used in the United States, particularly coal.

Problems remain, however, in getting natural gas from the NWT to the U.S. market. McLeod said he continues to be frustrated by the slow regulatory process for approving construction of the Mackenzie gas project—a proposed natural gas pipeline system through the Mackenzie Valley intended to connect the NWT's gas fields to the North American market. He also maintained that it was imperative to the NWT's economic security to ensure that the Mackenzie gas project be completed ahead of Alaska's Denali pipeline. Should Denali be completed first, explained McLeod, the Alaska pipeline will be able to largely fill U.S. demand for natural gas on its own.

The current outlook for Arctic oil is more promising, said McLeod, noting that the NWT is moving forward with plans to develop areas such as the Beaufort Sea, which is believed to possess vast oil reserves. Development of Arctic oil has the potential to usher in hundreds of millions of dollars in wages, and billions of dollars in capital expenditures. In short, said McLeod, Arctic gas revenue is the key to a brighter economic future for Canada's North.

A Progress Report on the Alaska Project

Whereas McLeod feared the Alaska natural gas pipeline project might negatively impact the NWT economic prospects, Pearce maintained that the project will benefit both Canadians and Americans. She said that two companies, Denali and TransCanada (in partnership with ExxonMobil), are competing to build the pipeline. The pipeline will enable Alaska's 35 trillion cubic feet of proven natural gas reserves to become a part of United States' energy supply. According to Pearce, the pipeline will cross 1, 715 miles of Alaska, the Yukon, British Columbia, and Alberta. It will also create thousands of job opportunities in both Canada and the United States, and provide North America with a secure and clean source of energy.

Despite these benefits, several challenges remain to advance to the project's construction phase. For instance, climate change may drastically reduce the amount of permafrost in the Arctic, which must be factored into how the pipeline is constructed. In addition, said Peace, the necessary infrastructure must be in place before construction can begin on the pipeline. This would mean the construction or upgrading of bridges, highways, airports, and maintenance camps for workers in both Canada and the United States. She noted that infrastructure projects totaling 1 billion dollars are needed in Alaska alone, before construction can begin. Finally, said Pearce, training and retaining qualified labor to construct the pipeline will be another significant challenge to overcome, noting that the Alaska project will require more than 50 million person-hours of skilled labor.

Drafted by Ken Crist, Program Associate, Canada Institute
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