Legislature(2001 - 2002)

02/19/2001 03:40 PM Senate RES

Audio Topic
* first hearing in first committee of referral
+ teleconferenced
= bill was previously heard/scheduled
                     ALASKA STATE LEGISLATURE                                                                                   
                    SENATE RESOURCES COMMITTEE                                                                                
                         February 19, 2001                                                                                      
                             3:40 p.m.                                                                                          
                                                                                                                                
                                                                                                                                
MEMBERS PRESENT                                                                                                               
                                                                                                                                
Senator John Torgerson, Chair                                                                                                   
Senator Kim Elton                                                                                                               
                                                                                                                                
MEMBERS ABSENT                                                                                                                
                                                                                                                                
Senator Drue Pearce, Vice Chair                                                                                                 
Senator Rick Halford                                                                                                            
Senator Pete Kelly                                                                                                              
Senator Robin Taylor                                                                                                            
Senator Georgianna Lincoln                                                                                                      
                                                                                                                              
OTHER MEMBERS PRESENT                                                                                                         
                                                                                                                              
Senator Gary  Wilken                                                                                                            
Senator Loren  Leman                                                                                                            
Senator Dave  Donley                                                                                                            
Senator Alan Austerman                                                                                                          
Representative Joe Green                                                                                                        
Representative Lesil McGuire                                                                                                    
                                                                                                                              
COMMITTEE CALENDAR                                                                                                            
                                                                                                                                
Comparison of Northern versus Southern Gas Pipeline Route by                                                                    
  Foothills Pipeline Ltd.:                                                                                                      
    Mr. John Ellwood, Vice President                                                                                            
    Engineering & Operations                                                                                                    
    Foothills Pipeline, Ltd.                                                                                                    
                                                                                                                                
    Mr. Brian Blair, Director                                                                                                   
    Engineering Northern Development                                                                                            
    TransCanada Pipelines Limited                                                                                               
                                                                                                                                
WITNESS REGISTER                                                                                                              
                                                                                                                                
None                                                                                                                            
                                                                                                                                
ACTION NARRATIVE                                                                                                              
                                                                                                                                
TAPE 01-14, SIDE A                                                                                                            
Number 001                                                                                                                      
                                                                                                                                
CHAIRMAN  JOHN  TORGERSON  called  the  Senate  Resources  Committee                                                          
meeting  to order  at 3:40  p.m.  and announced  they  would hear  a                                                            
presentation  from  Foothills  Ltd. concerning  the  differences  in                                                            
pricing of the Southern routes and the Northern routes.                                                                         
                                                                                                                                
MR. JOHN ELLWOOD,  Vice President,  Foothills Ltd., said  this study                                                            
is a joint undertaking  of TransCanada Pipe Lines and Foothills Pipe                                                            
Lines and it was a due diligence exercise for their companies.                                                                  
                                                                                                                                
MR. ELLWOOD  explained  that the figures  he was  using were  pulled                                                            
together by  Foothills Ltd. and its  shareholders, TransCanada  Pipe                                                            
Lines and  West Coast Transmission.  It represents  the thinking  of                                                            
their group  of companies of how best  to undertake the development                                                             
of northern gas  resources. He said some consultants  had input, but                                                            
none from other  parties who are proposing  one or the other  of the                                                            
routes for their own purposes.                                                                                                  
                                                                                                                                
MR. BRIAN BLAIR,  TransCanada Pipe  Lines, said that first  he would                                                            
review the merits of the  different options and then break that into                                                            
cost estimating portions.                                                                                                       
                                                                                                                                
They had  spent over 50,000  man-hours  investigating the  different                                                            
route  options.   The  objective   was  to  assess  the   technical,                                                            
commercial and  environmental merits of each route.    The companies                                                            
brought  their  experience  and information   into the  study.  They                                                            
engaged   AXYS    Environmental    Group   as   environmental    and                                                            
social/cultural   consultants  for  each  one  of  the  routes,  EBA                                                            
Engineering  Consultants  with  their  Beaufort  Sea  experience  in                                                            
designing  some  of the  off-shore  platforms  (they  designed  BP's                                                            
NorthStar  platform),   and  Pegasus  International   Inc.  (located                                                            
Houston) for the marine design portions of the plan.                                                                            
                                                                                                                                
MR. BLAIR  explained that  the alternatives  they examined  were the                                                            
Alaska  Highway gas  pipeline  as a  standalone  project;  Mackenzie                                                            
Valley  pipeline and  the combined  alternatives  of the  under-the-                                                            
top(UTT)  route  or the  over-the-top  (OTT)  route; and  an  Alaska                                                            
Highway plus  MacKenzie Valley pipeline.  The criteria they  used in                                                            
the valuation  were identifying  constraints  that would be  labeled                                                            
critical,  serious or minor  for all of the  routes. The  definition                                                            
they used for  critical was potential  showstopper, based  on either                                                            
known technology,  current environmental conditions,  socio-economic                                                            
or political  conditions.  A critical  constraint  on a route  could                                                            
make it  in part  or in  total not  viable. So  it's potentially  an                                                            
insurmountable issue.                                                                                                           
                                                                                                                                
The next level  of category was serious which is either  a cost or a                                                            
schedule   ladder.  If   something  would   have  significant   cost                                                            
implications,  it would definitely  affect the routing of  the line,                                                            
the timing or the type of construction.                                                                                         
                                                                                                                                
The third category was  minor constraints that could be managed with                                                            
proper  research,  mitigation,  or advanced  timing  and would  have                                                            
minor cost  impacts. For  brevity, they left  the minor constraints                                                             
out and are dealing with critical and serious constraints only.                                                                 
                                                                                                                                
MR. BLAIR said  the OTT route is the  shortest geographic  distance,                                                            
but has very  serious risks. It is  2,900 kilometers long  with twin                                                            
42-inch pipelines under  Prudhoe Bay and a single 48-inch line going                                                            
down the  Mackenzie River  with an operating  pressure of 2050  psi,                                                            
initial volumes of 3.3 Bcf/d and ultimate volumes of 5.2 Bcf/d.                                                                 
                                                                                                                                
He said  they had  to make some  assumptions to  do comparisons  and                                                            
cost estimates. The information  they used was from producers in the                                                            
Prudhoe Bay area whose  initial volumes were 2.5 Bcf/d ramping up to                                                            
an ultimate  volume  of 4  Bcf/d. They  designed a  pipeline for  an                                                            
initial volume  of 2.5 Bcf/d,  which could  handle a 4 Bcf/d  system                                                            
with compression.  "Similarly,  for the Mackenzie  River Delta,  the                                                            
producers were  talking about a .8 Bcf/d pipeline  going up to a 1.2                                                            
Bcf/d."                                                                                                                         
                                                                                                                                
The  combined alternatives  used  initial  volumes of  2.5 Bcf/d  of                                                            
North  Slope  gas coming  across  and picking  up  .8  Bcf/d on  the                                                            
MacKenzie  Delta. This  would add  up to  3.3 Bcf/d  going down  the                                                            
line. Ultimately,  that would build  up to 5.2 Bcf/d. That  would be                                                            
4. Bcf/d coming from Prudhoe  Bay, picking up 1.2 from the Delta and                                                            
coming down as 5.2 Bcf/d.                                                                                                       
                                                                                                                                
     To  move  those  type  of  volumes,  particularly  on  the                                                                 
     offshore,  the options that we  had available to us  were,                                                                 
     if you  went with a 42-inch and  a high pressure, to  keep                                                                 
     the   gas  moving,   you'd  have  to   add  two  offshore                                                                  
     compressors  stations  or  you would  be looking  at  twin                                                                 
     lines  offshore. As we got into  the study, the technical                                                                  
     feasibility  of putting two offshore  compressor stations                                                                  
     really became almost an insurmountable option.                                                                             
                                                                                                                                
     So  then we opted  for the  two pipelines.  Two pipelines                                                                  
     also give you the added  flexibility that if something was                                                                 
     to happen to one pipeline,  you could continue to operate.                                                                 
     One of the  issues they have is, if you did have  an event                                                                 
     on one  of the pipelines, your  ability to do maintenance                                                                  
     on it, you could be anywhere  from six months to a year to                                                                 
     get  access into  a pair of  pipelines. If  you're out  of                                                                 
     service  that long, that's definitely  an economic impact                                                                  
     to the producers and the throughput.                                                                                       
                                                                                                                                
     Three  years construction  is what we  are looking at.  On                                                                 
     the main  line portion, you could  put a 48-inch pipeline                                                                  
     with   compressor  stations   spaced.   The  three   years                                                                 
     construction  is primarily for  the 48-inch pipeline  down                                                                 
     the MacKenzie Delta area  and then we matched in the three                                                                 
     years construction for the offshore.                                                                                       
                                                                                                                                
     When  we looked at  the marine portion,  it became pretty                                                                  
     evident  that  there's  kind  of  three main  distinctive                                                                  
     regions.  We  looked  at routing  for  each one  of  those                                                                 
     regions.  The first  one we  characterized  is foreshore,                                                                  
     where the ice in the wintertime  actually freezes right to                                                                 
     the  seabed. The  idea of  that was  we were  thinking  of                                                                 
     being  able to construct  that in the  wintertime off  the                                                                 
     ice. Extending  that to the next level would be  the near-                                                                 
     shore  where you would actually  be characterized by  land                                                                 
     fast ice.                                                                                                                  
                                                                                                                                
MR. BLAIR  explained that  pack ice is  continually rotating  around                                                            
the Arctic  Circle at about  one to five kilometers  a day.  When it                                                            
impacts on  the shore, it  starts bunching  up and starts trying  to                                                            
push the  pack ice  right up on  the shore. When  it bunches  up and                                                            
overlaps, it actually  starts becoming a rubble field  or a stamukhi                                                            
zone, about  four to six meters in  height and 47 - 50 meters  deep.                                                            
When it builds  up high enough, it drifts into the  shore and starts                                                            
creating gouges and scouring of the sea floor.                                                                                  
                                                                                                                                
Throughout the whole winter,  the ice pack is continually moving and                                                            
building-up  on to  the shore.  In some  places  it actually  scours                                                            
straight  up the  shoreline 0.5  to 2  meters deep  creating  rubble                                                            
fields five  to 10 meters  high. The area  characterized across  the                                                            
whole route  has bottom fast ice for  the foreshore 0 to  2.0 meters                                                            
deep and ranges  from 0 to 2 kilometers offshore.  The stamukhi zone                                                            
is generally  in the 10 to 30 meter  depth, which is the  high scour                                                            
area and  typically  ranges from 5  to 25 kilometers  offshore.  The                                                            
pack ice zone  continually moves and there isn't any  way they could                                                            
build off of that. "You  can't build off the stamukhi because of the                                                            
rubble pile  and as  you get into  the floating  land fast ice,  you                                                            
have a potential to build.  But if you're trying to put ice roads in                                                            
and have  been stable for  any length of  time, you continually  get                                                            
cracking, which is an issue  of stability and safety for ice roads."                                                            
                                                                                                                                
MR. BLAIR said  the pack ice zone  is typically 25 to 50  kilometers                                                            
offshore. They  made the last zone  greater than 60 meters,  because                                                            
historically  most of the scours start  dropping off at that  depth.                                                            
The size of the rubble ranges down to about 50 to 70 meters.                                                                    
                                                                                                                                
Number 1170                                                                                                                     
                                                                                                                                
MR. BLAIR explained  that the green  part of the graph is  where the                                                            
ice actually freezes to  the sea floor, the foreshore area. The blue                                                            
is  land fast  ice  and this  is  where building  could  occur.  The                                                            
stamukhi  zone  is  pink  and  the pack  ice  is  outside  that  and                                                            
continually  pushes  in. He  pointed out  that the  Barrier  Islands                                                            
provide a  protective break  for the pack  ice that is pushing  down                                                            
into the bay area. That  is where the producers are looking to drill                                                            
offshore.                                                                                                                       
                                                                                                                                
MR. BLAIR said  in pack ice without  a sheltered bay, you  can drill                                                            
where  the ice  doesn't come  right up  against the  shoreline  on a                                                            
protected  west side.  He pointed  to the  chart  showing where  the                                                            
stamukhi  zone is  actually impinging  almost  to the  shore for  25                                                            
percent of the route, precluding  winter construction. He pointed to                                                            
an area where  producers were exploring  on the lee side  where some                                                            
winter construction could occur.                                                                                                
                                                                                                                                
MR. BLAIR said  they looked at two  compression stations.  The first                                                            
was about  one third of the  way, at Camden  Bay, an active  seismic                                                            
area of  recently as much  as 5.6 on the  Richter scale, a  point at                                                            
which buildings  start falling down.  Any compression station  built                                                            
in that area would  have to withstand 6 on the Richter  scale and be                                                            
on an island in  the 30 to 60 meter depth range, like  Hibernia with                                                            
a floating compressor  station. The site would have  to be breakable                                                            
in case  a large ice  mass came in  and you would  have to float  it                                                            
away. He said  they had looked at  studies of these situations;  the                                                            
Air Force had tried to  bomb them, the Army tried to drill and blast                                                            
them, and they couldn't  break them apart. The only thing you can do                                                            
is get out of  the way. This is one of the challenges  with offshore                                                            
compressor stations he said.                                                                                                    
                                                                                                                                
MR.  BLAIR  said dual  pipelines  would  be  spaced  a considerable                                                             
distance  apart in case a  major ice feature  came in. If it  looked                                                            
like the first pipe would  be impacted, that line could be evacuated                                                            
and  the  second  one could  be  kept  operating  -  providing  some                                                            
flexibility and reliability.  Hopefully, the first one would slow it                                                            
down. He explained  that the pipes  would be at different  depths to                                                            
further balance risks.                                                                                                          
                                                                                                                                
Number 1200                                                                                                                     
                                                                                                                                
SENATOR AUSTERMAN  asked how  they monitored  the depth of  icebergs                                                            
coming in along the length of the pipeline.                                                                                     
                                                                                                                                
MR. BLAIR answered  that icebergs move at 1 to 5 kilometers  per day                                                            
and would have  to be continually monitored, probably  by satellite.                                                            
So  you  would try  to  identify  which  feature  would  impact  the                                                            
pipeline.  Once it  was  coming in,  you would  be  stuck with  just                                                            
reacting.                                                                                                                       
                                                                                                                                
For winter  construction,  they  would have  to put  an ice road  in                                                            
along the route  about 350 miles long to maintain  support for camps                                                            
and all  the transportation  for manpower  and equipment.  "Ideally,                                                            
you would  have  staging areas  on land,  but currently  that's  not                                                            
allowed in  ANWR or Ivvavik. So everything  would have to  be on ice                                                            
in those areas.  The unstable ice mass pretty well  precludes winter                                                            
construction and pushes them into the summer construction areas.                                                                
                                                                                                                                
MR. BLAIR  pointed out  an international  offshore boundary  dispute                                                            
that would have  to be resolved showing the boundaries  on the chart                                                            
along with  Ivvavik National  Park, which  has essentially  the same                                                            
anti-development  policy as ANWR.  Herschel Island Territorial  Park                                                            
has a one-kilometer  workboat  pass where a  pipeline could  be put,                                                            
but there are environmental  areas it would come close to. Mackenzie                                                            
Valley trough is a tectonic  plate that sinks one to two millimeters                                                            
per year and has  filled in with very soft sediments.  So if you put                                                            
a pipeline in, it's very  difficult to establish a trench or to keep                                                            
a trench  stable in that  area. They started  to preclude that  area                                                            
because  of a  whole series  of environmental  issues  that  started                                                            
pushing them onto  shore. He noted that the North  Slope, management                                                            
zone  D, needed  both short  term and  long term  environmental  and                                                            
socio-economic  impacts mitigated  before development could  happen.                                                            
                                                                                                                                
The consultants  identified the Arctic  National Wildlife  Refuge as                                                            
critical  for the OTT route,  because it  precluded the majority  of                                                            
the route for doing any  winter construction and any support on land                                                            
for staging areas or camps.  Similarly for the Ivvavik National Park                                                            
and the Herschel  Territorial Parks  on the Yukon side. The  Barrier                                                            
Islands are identified  as possible to construct on, but are nesting                                                            
habitat for squaw  duck and sea duck. In the summer  time, it's also                                                            
their molting and staging area.                                                                                                 
                                                                                                                                
Using  satellite photography,  MR.  BLAIR  said, they  can tell  the                                                            
Barrier  Islands are  actually migrating  from east  to west  - away                                                            
from Canada. They  are actually eroding on the east  and starting to                                                            
deposit on  the west side. The sub-sea  area is continually  eroding                                                            
and any pipeline would have to deal with that challenge.                                                                        
                                                                                                                                
MR.  BLAIR said  the  coastal erosion  storm  surge  caught them  by                                                            
surprise:                                                                                                                       
                                                                                                                                
     Most  of the coast  is permafrost area,  so it's ice-rich                                                                  
     areas. In the August/September  storm periods, it actually                                                                 
     melts. The warm water and  the waves build up on it and it                                                                 
     actually  collapses the banks.  So you're actually losing                                                                  
     about  one to  three  meters on  the shoreline  per  year.                                                                 
     Also, if you  think about it on the seabed portion  of it,                                                                 
     it's actually dropping as  well, about one meter every ten                                                                 
     years. That's for about  the first half kilometer from the                                                                 
     shore. If  you're to put a pipeline in that area  and were                                                                 
     to bury it in the first  year, in ten years you would have                                                                 
     lost  one meter  of cover. In  20 years,  you've lost  two                                                                 
     meters.  So, if you  buried it with  two meters of cover,                                                                  
     you'd have an exposed pipeline.                                                                                            
                                                                                                                                
     In extreme  events, in the stamukhi  zone, it comes  right                                                                 
     up to  the banks. They've had  events where they actually                                                                  
     lost  50 meters of  shore in  any given year.  That was  a                                                                 
     significant event. We talked  quickly about the Camden Bay                                                                 
     seismicity,   which  is  primarily   for  the  compressor                                                                  
     station.                                                                                                                   
                                                                                                                                
MR. BLAIR said that the Jones Act requires when working in U.S.                                                                 
waters, one  needs to use U.S. flag  ships, which would be  used for                                                            
lay barges and probably support vessels as well as trenching                                                                    
equipment.  Most of the contractors  that have North Sea  experience                                                            
have international flagships, which would have to be taken into                                                                 
account.                                                                                                                        
                                                                                                                                
MR. BLAIR  said that  coming out of  Prudhoe Bay  there is a  unique                                                            
environmental feature called  the Boulder Patch with arctic kelp and                                                            
all the associated  fish and wildlife. This is an  area the pipeline                                                            
would have to  be routed around. The Barrier Islands  have migratory                                                            
birds  and  ringed  seals. Bowhead  whales  feed  off  the  Herschel                                                            
Islands in the spring and  in September/October there is the Alaskan                                                            
whale hunt, a  key activity for the Native population  there. One of                                                            
the  consultants  pointed out  that  if the  activities  of the  two                                                            
pipelines were  pushing the whales into the deeper  water where they                                                            
couldn't  get hunted,  there  could be  a requirement  to shut  down                                                            
construction  activity.  So you  might be  losing one  month out  of                                                            
their two-month window for construction.                                                                                        
                                                                                                                                
The Mackenzie  Valley has two beluga whale zones -  one right in the                                                            
mouth of  the Delta.  That is one  of the reasons  the pipeline  was                                                            
pushed  on shore. The  study touched  quickly on  the eastern  North                                                            
Slope, management zone  D, where they would have to address the fish                                                            
and wildlife and  preservation of natural uses. Kendall  Island Bird                                                            
Sanctuary again pushes  them on shore as quick as possible. There is                                                            
the Inuvialuit  beluga whale  hunt in the  June/July period  and the                                                            
consequences of that.                                                                                                           
                                                                                                                                
For winter  activities, Mr. Blair  said you would be looking  at the                                                            
shore approaches  building out to where the lay barges  would start.                                                            
By the end  of winter, you  would be off  the ice and starting  land                                                            
activities.  You  would have  winter  construction  building out  to                                                            
about a 10-meter  depth and then the lay barges would  take over for                                                            
the offshore.                                                                                                                   
                                                                                                                                
Down  in the  Mackenzie  Valley,  there is  an  evolving  regulatory                                                            
process  with  the Canadian  government  and  some  unresolved  land                                                            
claims in the  southern Northwest Territories and  at the top of the                                                            
Mackenzie Valley.                                                                                                               
                                                                                                                                
MR. BLAIR showed  the committee the gouge density  and the number of                                                            
gouges per  square kilometer at the  different depths. In  the 20 to                                                            
30 meter  zone (stamukhi)  you get the highest  frequency of  gouges                                                            
per square  kilometer dropping off  in the 50 to 60 meter  zone. The                                                            
maximum  gouge depth  is where  the big  ice features  come in.  The                                                            
Arctic  pack ice pushes  them deeper  and deeper  until they  either                                                            
ground-out and  continue along that ridge from east  to west or they                                                            
may break up and start pushing in.                                                                                              
                                                                                                                                
     From  the standpoint  of  a pipeline,  you're  looking  at                                                                 
     burying  not just below  where the ice  field is, but  the                                                                 
     ice field  works like a bulldozer pushing and  compressing                                                                 
     the ice. If you have a pipeline  sitting on the bottom, if                                                                 
     the ice keel  actually impacted on the pipeline,  it could                                                                 
     buckle  it. So  you want  it down  below, so  if your  ice                                                                 
     pushes  in, your pipeline can  actually flex in a trench.                                                                  
     So it will start to flex  versus actually buckling it. One                                                                 
     of the  things you'll have to  do is build a wider trench                                                                  
     and that's what the Northstar project and BP did.                                                                          
                                                                                                                                
MR. BLAIR said that you could backfill the trench with select                                                                   
material, which Northstar did, so the pipeline would not get                                                                    
locked in. The shallow areas where there are continual sea-bed                                                                  
movements is a problem. Even select fill gets eroded out and                                                                    
filled back in eventually starting to freeze the pipeline in                                                                    
place.                                                                                                                          
                                                                                                                                
     For  the stamukhi zone,  if you were  to construct in  the                                                                 
     30-year  area, you would  need to have  at least three  to                                                                 
     four meters  of cover - five  and a half meters of actual                                                                  
     trench  depth.  Width-wise,  you would  have to  go  about                                                                 
     eight  to 10  meters wide.  So you're excavating  an  area                                                                 
     about as wide  as this room and half again as  high to put                                                                 
     your pipe  in. Of course, if  you're thinking about  doing                                                                 
     that,  you're about 60 meters  up, you're in water that's                                                                  
     continually  moving and the technique you use  is actually                                                                 
     called  a suction hopper  dredger which  is like a vacuum                                                                  
     cleaner  on the bottom. So you're  30 meters up trying  to                                                                 
     vacuum over  the same area continually until you  get that                                                                 
     kind  of depth. You  take about a foot  at each pass  with                                                                 
     the suction dredger.                                                                                                       
                                                                                                                                
For perspective,  one pipeline  actually goes  from a wellhead  to a                                                            
loading  facility.  It's a  two-kilometer  line and  they buried  it                                                            
below any of  the area of ice scours  so they could actually  lay it                                                            
straight  on  the  bottom.  The only  time  you  get  the  trenching                                                            
activity  is when you  are going from  the land  out deep enough  so                                                            
that you  pass the  shoreline influences.  Getting  a quote for  500                                                            
kilometers  of trenching  isn't reliable,  because nobody does  more                                                            
than 10 kilometers of trenching.                                                                                                
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
CHAIRMAN TORGERSON asked what they do with the material.                                                                        
                                                                                                                                
MR. BLAIR  replied that normally  at the end  of the day, you  would                                                            
fill up  your suction hopper  dredger and take  it to an area  where                                                            
you need fill  material. In this case, they would  probably backfill                                                            
the  trench  with  it.  It  would  be  very  fine  material  causing                                                            
siltation,  so the  area would  have to  be contained  from  adverse                                                            
environmental impacts.                                                                                                          
                                                                                                                                
Pegasus did  some work for  them and said  that in any of  the areas                                                            
the  width   and  depth  of  the   trench  is  really  a   potential                                                            
showstopper. The amount  of suction hoppers needed for trenching and                                                            
backfilling aren't available  and then that turns the project into a                                                            
critical  timeline period.  You  would be  limited to  a 1.0 to  1.5                                                            
point five meter  trench in the 60-meter zone, which  they found was                                                            
most cost effective.                                                                                                            
                                                                                                                                
MR. BLAIR  continued saying  that the next  item was the  restricted                                                            
open ice windows. With  a lay barge, you have to figure out how much                                                            
time you  actually have  in the  wintertime to  construct. Over  the                                                            
years they have a good  satellite base and one can see where the ice                                                            
starts to  break up  along the route  and starts  to form again.  He                                                            
showed  the committee  a graph  of open  water days.  He added  that                                                            
there are areas  along the route that  are never completely  free of                                                            
ice. During  storm events,  the rubble fields  will move in  and out                                                            
and that has to  be worked around. Another impact  is that there are                                                            
about 90  days of open  water where the  pack ice actually  recedes.                                                            
Counter to that is the  larger fetch, which is the time the wind can                                                            
actually build the waves  up. So you end up with higher waves. Waves                                                            
over one  meter in  an ice area  start to impact  on the ability  of                                                            
support  tugs that  move  ice away  from the  lay  barges and  their                                                            
anchor lines.  The ice will start  fouling the anchor lines,  so you                                                            
have to continually  move the it away.  If the swells get  to two to                                                            
three meters and more frequent,  you actually have to start shutting                                                            
down the lay  barge activities. He  summarized that there  is a high                                                            
degree of uncertainty  about what year you're going  to get the high                                                            
open water season.  On the probability chart of years  1970 to 1998,                                                            
it comes out to a 50 percent  chance of having 40 days available for                                                            
construction.  That takes into account the mobilization  and getting                                                            
the equipment up into the area around Pt. Barrow from Seattle.                                                                  
                                                                                                                                
MR. BLAIR said they looked  at storing equipment over the winter and                                                            
a winter harbor  site. Currently,  there isn't any place  they could                                                            
over-winter  the  equipment.  Even  if  the lay  barges  were  over-                                                            
wintered,  they  would  have  to  be  ice-proofed.   Currently,  all                                                            
contractors,  like Crowley Marine,  move their equipment  out at the                                                            
end of the  season and back in at  the beginning. The cost  of doing                                                            
that versus  establishing  a winter harbor  and winterizing  all the                                                            
equipment  balanced out.  He said they  are left  with a 50  percent                                                            
chance  of having  39 days  for construction  (taking  into  account                                                            
mobilization, demobilization,  ice days, storm and wait days). There                                                            
is a 70 percent chance of having 30 construction days.                                                                          
                                                                                                                                
MR. BLAIR  continued the  analysis and said,  "If you mobilized  all                                                            
the equipment up there  and hit a year like this year, where the ice                                                            
either doesn't allow you  to get past Pt. Barrow or doesn't move out                                                            
enough that  you can do any significant  construction, you  could be                                                            
delayed  one year.  If you  are delayed  one year  on construction,                                                             
that's typically another 10 to 50 percent added to the cost."                                                                   
                                                                                                                                
The construction  days  required  per line  is 150 to  200 days  and                                                            
three  or four  pipeline  [indisc.]  to do  that over  a  three-year                                                            
period.  They would  need three  to four  lay barges  and  currently                                                            
there's only one or two  that are capable of doing the construction.                                                            
So they would have to build  some lay barges and some icebergers and                                                            
tugs  for  support.  Equipment  would  need  to  be  built  for  the                                                            
trenching and  backfilling. However, a delay of one  or two years is                                                            
like actually buying all  the equipment yourself. From a contractors                                                            
standpoint,  if you're delayed  a year, you've  probably bought  the                                                            
equipment as far as the  cost goes, but it's not yours. So you might                                                            
as well buy it  and sell it at the end. You would  also need to have                                                            
lay barge capability  for maintenance.  If Foothills designed  their                                                            
own  lay barge,  they would  probably  use dynamic  positioning  and                                                            
those are expensive and  haven't been proven in arctic environments.                                                            
                                                                                                                                
MR. BLAIR said the conclusions  the consultants came up with for the                                                            
OTT route was the foreshore  route was not viable, primarily because                                                            
you couldn't have any support  off the land. The nearshore route was                                                            
probably  not viable because  you get into  the Barrier Islands  and                                                            
Herschel Island,  sensitive wildlife, ice scour, etc.  Additionally,                                                            
there  is restricted  summer  access with  25 percent  of the  route                                                            
being very steep with pack  ice right next to it. In the summer time                                                            
you couldn't  get in, if something  happened to your pipeline.  It's                                                            
not safe for the  ships to try to use a lay barge  to get any vessel                                                            
close to  shore with the  waves. If there  were construction  in the                                                            
summer  time, you would  have to  do the maintenance  in the  winter                                                            
time.  A ruptured  pipeline in  the summer  would have  to wait  six                                                            
months for repairs.                                                                                                             
                                                                                                                                
They  found that  the  offshore  was probably  viable  with  routing                                                            
modifications  around  the Boulder  Patch and  environmental  areas.                                                            
Already short  season windows of about  40 days could be  reduced if                                                            
bowhead whales were pushed out of their feeding area.                                                                           
                                                                                                                                
MR.  BLAIR  said  that  despite  all  the  information,  there  were                                                            
significant  data gaps. Significant  technical design work  would be                                                            
required with  a trench to make sure the pipe would  flex instead of                                                            
buckle. A  deep wide trench  to avoid ice  scour, even at 60  meters                                                            
might need to be wider  and deeper. The biggest concerns were highly                                                            
unpredictable  and uncontrollable weather risks, a  short open-water                                                            
season and  limited access for maintenance.  If there were  an event                                                            
on  the  pipeline,  you  wouldn't  be  able  to  repair  it  in  the                                                            
wintertime,  because there are two  to four meters of pack  ice that                                                            
is continually  moving. They looked at monitoring  using submarines,                                                            
but found that diesel submarines  don't have the span, so they would                                                            
need a nuclear submarine to do leak detection.                                                                                  
                                                                                                                                
MR. BLAIR said the UTT  route is 2970 kilometers long and similar to                                                            
the OTT route.  They kept the same  operating pressure of  2050 psi.                                                            
Currently, most  of the operating pipelines are in  the 1000 to 1440                                                            
psi. rate. The  highest operating line rate now is  Alliance at 1760                                                            
psi.  The  study  used  2050  psi  because   they  are  pushing  the                                                            
technology, but  not so far outside the bounds of  being able to get                                                            
creditable cost estimates from the venders and suppliers.                                                                       
                                                                                                                                
TAPE 14, SIDE B                                                                                                               
                                                                                                                                
MR. BLAIR  said this route  follows the Alaska  Highway under  ANWR,                                                            
through the Yukon Flats  Wildlife Refuge and ties into the MacKenzie                                                            
Delta. It would  be a 42-inch pipeline  and a 30-inch pipeline  tied                                                            
in at Inuvik. A 48-inch  pipe would be needed for the combined flows                                                            
of 2.5 Bcf and .8 Bcf,  3.3 Bcf initially and going to 5.2 Bcf. They                                                            
assumed  a  five-year  buildup  from  the  initial  volumes  to  the                                                            
ultimate  volumes. Over  a five-year  period,  compression would  be                                                            
added  in equal  increments to  build up  to 4  Bcf. They  estimated                                                            
three  years  of construction,  primarily  because  of  the  48-inch                                                            
pipeline  challenge  in  the  south. They  have  access  for  moving                                                            
manpower and equipment  up the Highway for over the top and from the                                                            
sea. On one  side, all the equipment  would move into Hay  River and                                                            
come up the Mackenzie  River, which is open two months  (mid-July to                                                            
mid-September).  But  they  would  be  stuck  with  a 700-kilometer                                                             
stretch  where there  is  a little  bit of  access  to the  Dempster                                                            
Highway.  The  rest  of it  is  essentially  a bit  of  a  logistics                                                            
challenge.  He noted  that instead  of a two-lane  road, they  would                                                            
need to have a  multilane highway for transportation  back and forth                                                            
and  passing.  Therefore,  the  footprint,   from  an environmental                                                             
standpoint,  would need to be bigger.  So there are more  short term                                                            
and long term  environmental impacts such as opening  up a brand new                                                            
corridor where the Porcupine Caribou herd migrates.                                                                             
                                                                                                                                
The one  critical constraint  that was found  for the UTT route  was                                                            
the Yukon Flats  Delta. He originally thought they  could go through                                                            
it, but consultants  talked with the Refuge manager  who said one of                                                            
the first  requirements to  build a pipeline  through there  is that                                                            
there has to  be an existing infrastructure  within the Yukon  Flats                                                            
area - and  there is none. So a natural  gas pipeline would  have to                                                            
feed a community.  The next requirement  is you have to prove  there                                                            
is no alternative  viable route and there is an alternative  route -                                                            
following  the existing  utility corridor.  He said  they looked  at                                                            
routing the  line following  the Highway and  coming around  and "by                                                            
the time you actually do  that, you're better off just following the                                                            
Highway."                                                                                                                       
                                                                                                                                
One  of the  most serious  UTT problem  is  opening up  a brand  new                                                            
corridor  with  transportation  and  supply  logistics  in  what  is                                                            
primarily  the Porcupine  caribou migratory  corridor. The  Gwich'in                                                            
communities  rely very  heavily  on the  caribou  for a subsistence                                                             
lifestyle.  Add to  that the evolving  regulatory  process with  the                                                            
Canadian  government going  down the  Mackenzie  Valley. They  would                                                            
need  a detailed  protection  plan for  protected  areas,  primarily                                                            
because  of developing new  corridors. Branching  off the  Mackenzie                                                            
Valley corridor  and the TAPS,  many areas  need a lot of base  line                                                            
environmental  information and similar protection  plans. Unresolved                                                            
land claims  in the  bottom of  the Mackenzie  and significant  data                                                            
gaps through  the 440-kilometer corridor  make it more complicated.                                                             
One of the reasons  this route was abandoned earlier  was they found                                                            
some ice-rich  areas that would present stability  problems, if they                                                            
thawed. So  they would have  to reroute the  pipe or build it  up on                                                            
pilings like the TAPS.                                                                                                          
                                                                                                                                
The conclusion  for the UTT route  is that it's probably  not viable                                                            
because of the Yukon Flats  restriction and significant data gaps in                                                            
the 700-kilometer corridor.                                                                                                     
                                                                                                                                
Number 2150                                                                                                                     
                                                                                                                                
The Alaska  Highway  Gas Pipeline  Project is  2820 kilometers  long                                                            
following  the Highway  down through  Alaska to  the Yukon and  into                                                            
B.C. He pointed out that  they used the same terminus for all of the                                                            
routes, at Gordondale, for equitable comparison.                                                                                
                                                                                                                                
MR. BLAIR said  that the Alaska Highway  project would be  a 42-inch                                                            
pipeline,  building up  compression from  2.5 Bcf  to 4 Bcf  and two                                                            
years construction.  The construction  time is shorter because  both                                                            
summer and  winter construction  seasons could  be used and  all the                                                            
supply  logistics are  off  the Highway,  a distinct  advantage.  He                                                            
explained,  if a  contractor  has  continual access  so  he can  get                                                            
another piece of equipment  for whatever reason, he knows he can get                                                            
it in off the Highway.  But if he is bringing all his material in in                                                            
a two month  window, like on the Mackenzie,  he would bring  in more                                                            
equipment  than was needed,  in case something  broke. You're  stuck                                                            
otherwise.  If you bring  all your equipment in the summer time, you                                                            
have  to pay for  it, from  the contractors'  standpoint,  to be  on                                                            
standby for the time you're not using it.                                                                                       
                                                                                                                                
There  were  no  critical  constraints  identified  for  the  Alaska                                                            
Highway.  Unresolved  land  claims in  the  Yukon were  one  serious                                                            
constraint. The conclusion  they had was that the Alaska Highway Gas                                                            
Pipeline  Project  was a  viable route  and  had winter  and  summer                                                            
construction seasons.                                                                                                           
                                                                                                                                
MR. BLAIR  explained that  the Mackenzie  Valley pipeline route  was                                                            
1700 kilometers long going  from Inuvik to Gordondale. They kept the                                                            
same  operating pressure  of  2050 psi  with initial  volume of  0.8                                                            
Bcf/d to 1.2  Bcf/d and it would take  two years to build.  He noted                                                            
if  the volumes  go up  on  any of  the routes  that  the costs  and                                                            
requirements  will  go  up  proportionately.   Consultants  for  the                                                            
Mackenzie Valley identified  no critical constraints. On the serious                                                            
side  there   were  the   evolving  regulatory   process,   detailed                                                            
protection  plans and  unresolved  land claims.  The conclusion  was                                                            
that the  Mackenzie  Valley was a  viable route,  but was  primarily                                                            
winter  construction.   The  only  parts  that  wouldn't  be  winter                                                            
construction would be the compressor stations.                                                                                  
                                                                                                                                
The first  thing  they did for  the cost  estimates  was make  a Key                                                            
Milestone Gantt  Chart or a detailed schedule of all  the activities                                                            
from  conception through  permitting,  EIS, design,  procurement  of                                                            
materials, through  construction, preconditioning,  conditioning and                                                            
operations  of the lines.  They chose  a low-risk  option for  their                                                            
comparison.  They assumed permits  and regulatory approvals  were in                                                            
place before  committing to  material orders.  For the OTT  and UTT,                                                            
that worked  out to  a nine or  10-year timeline;  on the  Mackenzie                                                            
Valley  an eight to  nine year timeline  and on  the Alaska  Highway                                                            
Project  six to seven  years.  Mr. Blair  said that  any one of  the                                                            
timelines could be advanced by taking some calculated risks.                                                                    
                                                                                                                                
CHAIRMAN TORGERSON  asked if the two-year construction  time assumed                                                            
the materials were already on site.                                                                                             
                                                                                                                                
Number 1900                                                                                                                     
                                                                                                                                
MR.  BLAIR responded  that  the two  years was  actual construction                                                             
time. Infrastructure would  have to be built, which would take about                                                            
one year for all the projects.  This is when the camps and stockpile                                                            
sites are built while the pipe was being fabricated.                                                                            
                                                                                                                                
He explained  that for their  cost estimates,  they built crews  for                                                            
each  of the  sections taking  into  account variables  in  terrain,                                                            
weather conditions,  etc.  They got budget  cost estimates  from the                                                            
pipe venders  and  built on their  historical  database. Cash  flows                                                            
were worked  out, indirect  costs, operating  and maintenance  costs                                                            
were added for the different routes.                                                                                            
                                                                                                                                
MR.  BLAIR  said  the  pipe  would  have  to  be  moved  in  in  the                                                            
summertime,  but  would have  it sitting  there  until  it could  be                                                            
installed in the wintertime.                                                                                                    
                                                                                                                                
     When you're  looking at actually buying your equipment  in                                                                 
     advance,   you're   paying  a   higher   interest  during                                                                  
     construction  for  having acquired  either  that piece  of                                                                 
     equipment  early  until you  actually  use it.  So it's  a                                                                 
     higher financing cost. That  actually does play a big role                                                                 
     in  the pipeline. But  it gives significant  advantage  to                                                                 
     any  of the  routes that  have  similar weather  like  the                                                                 
     Alaska  Highway Pipeline route  where you're able to  move                                                                 
     equipment  and manpower  just in  time and  in advance  of                                                                 
     when  you actually need  it than having  to deal with  the                                                                 
     weather windows to bring it in.                                                                                            
                                                                                                                                
MR. BLAIR  said they  would look  at on-site  fabrication shops  for                                                            
things like joining  two twelve-meter pipes to get  a 24-meter pipe.                                                            
Fewer joints  in field  construction means  higher productivity.  He                                                            
said they  had modularized  compressor  and chilling  stations  in a                                                            
southern  area, some  of it for  the Anchorage  facilities that  are                                                            
there.                                                                                                                          
                                                                                                                                
The objective  is minimizing the amount  of hookups you need  in the                                                            
field. Data  and control communications  would have to be  installed                                                            
if there wasn't any. Most  of the activities need a one-year advance                                                            
ramp-up time.  Crew size dictates  the size  of the camp and  at -40                                                            
degrees, you need to run  your equipment 24 hours a day. So you have                                                            
to know how  much equipment and fuel  you actually need to  do that.                                                            
Down  south, you  just run  it when  you need  it.  In the  northern                                                            
environment, the  length of the construction season  has to be taken                                                            
into consideration.                                                                                                             
                                                                                                                                
Permafrost,  buoyancy control and  trenching need a lot of  research                                                            
and development  and the  productivity rates  are different  than if                                                            
you trench through  unfrozen grounds. The study touched  on the cost                                                            
of stranded  construction equipment,  which is brought in,  but only                                                            
gets  used  during  the winter.  The  indirect  costs  of  business,                                                            
financing,  community,  social  and  economic  are typical  for  any                                                            
project. They  have based their estimates on grade  E steel, but are                                                            
doing some  R&D on different grade.  So if you go to a higher  grade                                                            
of steel strength,  you can actually reduce your roll  thickness and                                                            
save money on steel costs and welding time.                                                                                     
                                                                                                                                
MR. BLAIR  said they would  actually have  to prove the chilled  gas                                                            
decompression  theory  as  with  permafrost  directional   drilling.                                                            
Colville  River  did one  directional  drill,  but  it was  a  small                                                            
diameter.  So they have to  do a lot of  R&D to confirm information                                                             
and that is built into  the cost estimates for things like insurance                                                            
and interest during construction  and operating costs like salaries,                                                            
wages,   transportation,   materials,  accommodations,    utilities,                                                            
property taxes, overhaul.  Fuel gas is not included typically except                                                            
for the actual [indisc.] calculations.                                                                                          
                                                                                                                                
He  pointed out  that  their pipeline  designs  assumed  a 2050  psi                                                            
output, but that  estimate was based on the figures  from a year and                                                            
half ago  when gas was  $1.50 - $3.00 range.  "If you're  projecting                                                            
gas in the $4.00 - $5.00  range and are burning it in the compressor                                                            
stations  and  looking  at  the  lowest   operating  costs  of  your                                                            
facilities  over  the  whole  life  of the  pipe,  then  you've  got                                                            
maintenance  on your  compressors,  plus the  cost of  fuel gas,  if                                                            
you're having a very compression  intensive design. What you may opt                                                            
for is a larger  diameter line, which  usually has a higher  capital                                                            
cost initially,  but over the life of the pipe, you're  burning less                                                            
fuel gas.  So when you're  putting a higher  price on the fuel  gas,                                                            
you have to run a more efficient system."                                                                                       
                                                                                                                                
MR. BLAIR  said the "apples  to apples" cost  they came up  with was                                                            
Alaska North Slope  route for 2.5 to 4.0 Bcf/d and  Delta 0.8 to 1.2                                                            
Bcf; a combined  total of 3.3 Bcf to 5.2 Bcf/d.  The  Alaska Highway                                                            
gas project  (standalone) starts off  with $7.6 billion U.S.  adding                                                            
up  to $9.7  billion  using two  percent  per year  escalation.  The                                                            
Mackenzie Valley  starts at $2.7 billion  going up to $3.1  billion.                                                            
                                                                                                                                
The combined  OTT route goes  from $11.6  billion to $13.0  billion,                                                            
the UTT routs  goes from $10.0 to $12.5 billion. The  Alaska Highway                                                            
and Mackenzie  Valley goes from $10.3  billion to $12.8 billion.  He                                                            
said  the ultimate  costs  are  essentially  the  same for  all  the                                                            
projects.  The initial  costs are a  little bit  higher for  the OTT                                                            
route because  of the second line, but the buildup  is less, because                                                            
there is less compression.                                                                                                      
                                                                                                                                
MR. BLAIR said that even  though they cost the same to install, when                                                            
you balance off the risks  associated with each one of the projects,                                                            
they found  the OTT  and UTT  have "showstopper"  environmental  and                                                            
technical   challenges   and   other   "serious"    or  cost-adding                                                             
environmental challenges greater than the other options.                                                                        
                                                                                                                                
     The conclusion was the Mackenzie  Valley was the shortest,                                                                 
     least cost route for the  Delta gas that could be advanced                                                                 
     on  its  own  timeline,  and  had  minimal  technical  and                                                                 
     environmental  risks. The Alaska Highway Pipeline  project                                                                 
     being  linked   to  the  existing  utility  corridor   and                                                                 
     transportation  route  was the quickest  least-cost  route                                                                 
     for  ANS gas,  with minimal  environmental  and technical                                                                  
     risks.                                                                                                                     
                                                                                                                                
MR.  ELLWOOD  said  this  was  the  most  comprehensive   study  and                                                            
assessment of these alternatives that is out there today.                                                                       
                                                                                                                                
SENATOR WILKEN  asked how much money his consortium  had invested in                                                            
this year and a half study.                                                                                                     
                                                                                                                                
MR. ELLWOOD replied about $6 million U.S. and 50,000 man-hours.                                                                 
                                                                                                                                
SENATOR ELTON  asked if they shared this information  with the over-                                                            
the-top  and  the  Mackenzie  Valley   people  and  what  was  their                                                            
reaction.                                                                                                                       
                                                                                                                                
MR. ELLWOOD  replied  that they  had shared  it last  week with  the                                                            
North Slope producers,  the government in Ottawa, and the government                                                            
in the Northwest  Territories. They  have shared it with  some first                                                            
nations.  There  were lots  of questions  from  some  groups. It  is                                                            
contrary  to the popular  belief that the  Alaska Highway route  was                                                            
going to be $2 billion more expensive than anything else.                                                                       
                                                                                                                                
REPRESENTATIVE  GREEN said  there were some  indications that  maybe                                                            
instead of 2.5  Bcf/d, it might go to 4 - 6 Bcf/d  and asked if they                                                            
saw any significant changes in costs with a higher throughput.                                                                  
                                                                                                                                
MR. BLAIR answered  that he thought they would find  that they would                                                            
all go up in price accordingly.                                                                                                 
                                                                                                                                
SENATOR AUSTERMAN  asked if  there was any  discussion of not  doing                                                            
the Mackenzie and just doing the Highway.                                                                                       
                                                                                                                                
MR. ELLWOOD  replied  that there  was a  fair amount  of  discussion                                                            
about which  one might go  first. People in  the Mackenzie  are very                                                            
motivated. Everyone he  has talked to thinks that gas will be needed                                                            
from both basins  in a very short period of time.  "The price can be                                                            
kept reasonable  by adding new sources, but the demand  will grow so                                                            
rapidly that  we will need both sources  about as quickly  as we can                                                            
go."                                                                                                                            
                                                                                                                                
CHAIRMAN  TORGERSON asked  what they were  doing for in-state  usage                                                            
and getting gas to Cook Inlet or any other in-state processing.                                                                 
                                                                                                                                
MR. ELLWOOD  answered  that they saw  no problem  with providing  in                                                            
some way for  in-state use of the  gas. Clearly, it was going  to go                                                            
past Fairbanks and that  could be the first place. They need to have                                                            
a base and get started.                                                                                                         
                                                                                                                                
CHAIRMAN TORGERSON asked  when he would have something to share with                                                            
the committee.                                                                                                                  
                                                                                                                                
MR. ELLWOOD  replied that he is reluctant  to commit more  resources                                                            
at this  time, but  he would  do his  best to  get some information                                                             
together and to the committee before the end of session.                                                                        
                                                                                                                                
CHAIRMAN  TORGERSON  asked  if  the LNG  sponsor  group  would  have                                                            
numbers similar to theirs.                                                                                                      
                                                                                                                                
MR. ELLWOOD answered  that he couldn't speak for the  sponsor group,                                                            
although Foothills  was a member of it. They brought  their pipeline                                                            
expertise to the group  and thought they would see similar thinking.                                                            
                                                                                                                                
CHAIRMAN  TORGERSON   asked  if  Foothills  could  be  ready  for  a                                                            
permitted project by January 2002.                                                                                              
                                                                                                                                
MR. ELLWOOD  said they have  a lot of the  permits already,  but the                                                            
main piece missing  is the state right-of-way and  their application                                                            
has been in  abeyance for a number  of years. They are talking  with                                                            
state officials about what it would take to reactivate it.                                                                      
                                                                                                                                
CHAIRMAN TORGERSON asked  if the right-of-way had been permitted for                                                            
the Mackenzie route.                                                                                                            
                                                                                                                                
MR.  ELLWOOD  answered  that  it wasn't;  the  only  route  that  is                                                            
permitted is the Alaska Highway project.                                                                                        
                                                                                                                                
CHAIRMAN  TORGERSON asked  if although  it's  [Mackenzie] a  shorter                                                            
route, it would take longer.                                                                                                    
                                                                                                                                
MR. ELLWOOD replied  that was right. Exploration and  development in                                                            
the Mackenzie  Valley has  been on  hold for a  number of years  and                                                            
it's just been started  again. Quite a bit of work needs to be done.                                                            
                                                                                                                                
CHAIRMAN  TORGERSON asked  if the  Mackenzie route  would be  easier                                                            
because it's all Canadian.                                                                                                      
                                                                                                                                
MR.  ELLWOOD   answered  that   he  didn't   know  that  having   an                                                            
international project added any significant difficulties.                                                                       
                                                                                                                                
REPRESENTATIVE  GREEN asked  when they are  in the over $10  billion                                                            
price, would Foothills want partners.                                                                                           
                                                                                                                                
MR. ELLWOOD  answered that they are  always open to bringing  in new                                                            
partners who might  "add something to the mix that  we don't already                                                            
bring ourselves."                                                                                                               
                                                                                                                                
CHAIRMAN  TORGERSON asked  what kind  of debt to  equity ratio  they                                                            
tried to keep.                                                                                                                  
                                                                                                                                
MR. ELLWOOD answered  that they try to keep about  30 percent equity                                                            
and 70 percent debt.                                                                                                            
                                                                                                                                
SENATOR ELTON  asked if Foothills  would be interested in  a spur to                                                            
Anchorage  or would they  react to  what someone  else came  to them                                                            
with. He asked whom he meant when he said "we."                                                                                 
                                                                                                                                
Number 600                                                                                                                      
                                                                                                                                
MR.  ELLWOOD  replied that  he  meant "we"  in  the context  of  the                                                            
industry.                                                                                                                       
                                                                                                                                
SENATOR ELTON said he anticipated  that Foothills would not be doing                                                            
the Mackenzie  Valley route; that  someone else would do  it and tie                                                            
in. He asked if that was true.                                                                                                  
                                                                                                                                
MR. ELLWOOD  said that  was right. Their  shareholders, TransCanada                                                             
and West  Coast, have a  separate joint venture  that is working  on                                                            
advancing the  Mackenzie Valley route.  Foothills Ltd. is  the joint                                                            
venture for the Alaska Highway.                                                                                                 
                                                                                                                                
SENATOR ELTON  asked if they  are looking  at financing the  cost of                                                            
$12 million, minus the cost of the Mackenzie Valley.                                                                            
                                                                                                                                
MR.  ELLWOOD  responded  that  they  are  looking  at  $7.6  billion                                                            
initially for the Alaska Highway project.                                                                                       
                                                                                                                                
CHAIRMAN  TORGERSON asked  why they  are studying  the over-the-top                                                             
route.                                                                                                                          
                                                                                                                                
MR. ELLWOOD replied that they are finished with it.                                                                             
                                                                                                                                
CHAIRMAN TORGERSON  thanked them for talking with  the committee and                                                            
adjourned the meeting at 5:05 p.m.                                                                                              
                                                                                                                                
                                                                                                                                

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