By Doug Matthews -- ExxonMobil, TransCanada alliance bad for the MGP? There are still obstacles of Biblical proportions in the way

And it shall come to pass, in Alaska at least, that the Biblical prophecy shall be altered and the lion will lie down with the lion.

ExxonMobil, the biggest privately-owned oil company in the world, and TransCanada Pipelines, one of the largest natural gas pipeline companies in the world, jointly announced in June that they have reached an agreement to work together on an Alaska gas pipeline.

And the two shall do as their press release says and they shall work “ with the support of the State of Alaska, the U.S. and Canadian governments, and other interested parties” towards the timely completion of the project. And it shall be good for the Alaska lions, but maybe not so good for the Mackenzie lamb.

It has always been an article of faith that the North American natural gas market could use all the new gas it could get. After all, conventional supplies were drying up in the south. But the order in which it got that gas would have a big impact on when, indeed if, certain projects would proceed.

So while everyone agreed that there is room in the market for both the one billion cubic feet per day of Mackenzie Delta gas and the four billion cubic feet of Alaskan gas, if the Alaskan project gets built first, well, the likelihood of Delta gas getting to market via a Mackenzie Valley pipeline suffers.

That’s because it’s simply cheaper to add compression to an existing Alaska Highway pipeline, and ship along another billion cubic feet per day from Prudhoe Bay or Point Thomson, than it is to build a new pipeline through the Mackenzie Valley.

And so, the news of the two lions agreeing to work together on the Alaskan project threw a mid-summer chill into the northern Canadian air and at June’s Inuvik Petroleum Show.

But, wait, lamb lovers, there is yet hope, hope that the lions will stumble, that they will come up against all manner of challenges, and the Alaska project will not proceed to its hoped-for in service date of 2018.

First, some long-term perspective. The dream of Northern natural gas has been with us for some 40 years. No gas is flowing to market. The Alaska Natural Gas Transportation Act, the act setting out the highway route, became American federal law in 1976. And still no gas.

But there is gas. In fact, if the American Gas Potential Committee is to be believed, there is more than was thought possible just two short years ago. The committee’s recent report says that the U.S. has an estimated 1,836 trillion cubic feet of natural gas reserves, up some 39 per cent from its 2007 estimate of 1,321 trillion cubic feet. About one quarter of that is shale gas, stuff that is often located about as close to market as you could wish if you were a gas producer. No 1,700 kilometres of expensive pipeline needed here.

Of course, expense is of no matter to ExxonMobil and TransCanada when it can be shoved off onto the American taxpayers. And so, the original loan guarantee for the Alaska highway pipeline, some $18-billion (U.S.), is now being upped to $30-billion. Adjusted for inflation, that could come to some $40- billion by the time the pipe is built.

This loan guarantee, provided by the U.S. Senate, will apply to the construction of the pipeline segments in each of Alaska, the Yukon and B.C. But that raises the question of where the steel to build the pipe will come from. If the loan guarantee is funded by the American taxpayer and if TransCanada has already caught some bad press in the U.S. for using steel from India in one of its American projects, what are the odds that there might be some heated discussions around the use of American-made pipe throughout the route?

And the route provides yet another possible obstacle to ExxonMobil and TransCanada. The Mackenzie Gas Project has suffered some delays owing to unsettled land claims. Well, there will be no land claims delays for the Alaska project, says Tony Palmer, the man in charge. Speaking recently in Whitehorse, he said that “If there are land claims issues between an individual first nation and the Government of Canada, that’s between those parties.”

Mr. Palmer went on to say that TransCanada refuses to get involved in land claim negotiations and that if the company is unable to reach an agreement with any of the first nations along the route, it “ would fall back on the terms and conditions that are established and that have been public for some 30 years.” Yup, that’s likely to happen.

And so, lamb lovers, don’t be too concerned, for while lions have come together in Alaska, prides goeth before the fall.