US embassy cable - 04OTTAWA3413

UNCLAS SECTION 01 OF 02 OTTAWA 003413 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR WHA/CAN AND EB/ESC/IEC 
DOE FOR INTERNATIONAL AFFAIRS: PUMPHREY, DEVITO, DEUTSCH 
DOE ALSO FOR OFFICE OF OIL AND GAS GLOBAL SECURITY: HARMON, 
KORNFELD 
STATE PASS USTR: CHANDLER 
STATE PASS FERC: LONGENECKER 
 
E.O. 12958: N/A 
TAGS: ENRG, ETRD, EPET, CA, John Efford, Alaska Pipeline, Energy 
SUBJECT: AMBASSADOR DISCUSSES NORTHERN PIPELINES WITH 
ENERGY MINISTER EFFORD 
 
 1.  (U) Sensitive but unclassified.  Not for distribution 
outside USG channels. 
 
2.  (SBU) Summary: The Ambassador paid a courtesy call 
December 14 on Minister of Natural Resources John Efford, 
reviewing a range of topics relating to plans for natural 
gas pipelines from Alaska's North Slope and Canada's 
Mackenzie Valley.  Regarding the Alaska pipeline, Minister 
Efford said that any move to issue construction permits for 
the Canadian portion of the line that did not recognize 
TransCanada PipeLine Ltd.'s exclusive construction 
"certificates" would raise a host of legal, regulatory and 
financial issues.  As for the Mackenzie Valley project, 
Efford said that the issue of compensation for the Deh Cho 
aboriginal band is currently before the courts, and he 
expressed hope that the judicial process would move 
quickly.  Minister Efford also touched on the prospects for 
liquid natural gas (LNG) facilities in Canada, and trilateral 
energy initiatives with Mexico under the North American 
Energy Working Group (NAEWG).  He expressed hope that the 
Energy Secretary-designate would be able to visit Canada 
soon.  End summary. 
 
Alaska Gas Pipeline 
------------------- 
 
3.  (SBU) Meeting with the Ambassador and ESTOFF in a 
conference room in Ottawa's Parliament Building, Minister 
Efford underlined that TransCanada believes very strongly 
that it has, through its Foothills Pipe Lines subsidiary, 
exclusive "certificates of convenience and public 
necessity," issued in the 1970s, to construct the Canadian 
portion of the Alaska natural gas pipeline.  The authority 
for the certificates is derived through the Northern 
Pipeline Act (NPA) of 1977, currently the only Canadian law 
specifically addressing the Alaska gas pipeline.  Through 
another wholly owned subsidiary, TransCanada also holds 
certificates for the Alaska portion of the line under the 
1976 Alaska Natural Gas Transportation Act.  The U.S. 
portion of the line may also be built under the separate 
authority of the Natural Gas Act, in which case 
TransCanada's certificates would have no standing. 
 
4.  (SBU) Referring to a recent round of lobbying in Canada 
against the exclusivity of TransCanada's certificates by 
North Slope gas producers BP and Conoco-Phillips, Efford 
said that the producers yet to come up with a realistic 
alternative pipeline proposal (the third producer, 
ExxonMobil, has told us that they believe it is premature 
to address the certificates issue until the producers 
establish financial terms for the pipeline).  Efford said 
that while the producers have voiced a general complaint 
that they do not want to be locked into doing business only 
with TransCanada, he believes that there is ample room for 
negotiation among all the stakeholders regarding who will 
build the pipeline. 
 
5.  (SBU) Efford opined that any challenge to TransCanada's 
NPA certificates would "absolutely" provoke an immediate 
court challenge, as the company believes it has maintained 
the validity of its certificates for nearly thirty years. 
Efford also voiced concern that any move by Canada to 
revise its legislation and issue certificates to another 
company could force a renegotiation of the 1977 U.S.-Canada 
Transit Pipeline Treaty.  He further noted that the 
environmental permitting process, always difficult in 
Canada, would become even more complicated if a route other 
than TransCanada's were to be proposed.  As an aside, 
Efford told us that he has argued within the GOC for 
instituting timetables for Environmental Impact 
Assessments, but that writing a timetable into legislation 
is "almost impossible." 
 
6.  (SBU) Efford noted that the U.S. Congress inserted a 
"Sense of Congress" resolution in the 2004 Alaska Natural 
Gas Pipeline Act that the steel for the Alaska pipeline be 
made in North America, but that the 52-inch pipeline 
favored by BP and Conoco-Phillips could only be 
manufactured in Asia.  Efford acknowledged that the 
pipeline requirements have changed since 1977, when 
certificates were issued for a 48-inch pipeline, but said 
the technology for pipeline construction and operation has 
advanced greatly in the past 25 years.  He stated that a 
48-inch pipeline, manufactured in North America using 
modern methods, should be adequate for the pipeline's 
current requirements. 
 
Mackenzie Valley and the Deh Cho Process 
---------------------------------------- 
 
7.  (SBU) Efford told us that the Deh Cho band is using the 
Mackenzie Valley gas pipeline project to gain leverage for 
tribal land claims.  About 40 percent of the proposed 
pipeline's route would pass through Deh Cho lands, and the 
band is suing the Government of Canada to gain more 
representation on the pipeline review panel.  Efford 
expressed hope that the judicial process will move quickly 
to resolve the Deh Cho's claim, and noted that the issue of 
the Deh Cho's participation has not yet led to delays in 
the project. 
 
Other Energy Matters 
-------------------- 
 
8.  (SBU) Regarding the construction of LNG projects in 
Canada, Efford said that the Irving Oil Company is already 
performing preliminary work on a new terminal in Saint 
John, New Brunswick.  He also stated that that there is 
unlikely to be serious opposition to other proposed LNG 
terminals in Atlantic Canada.  Efford said that he 
understood U.S. initiatives to make Mexico a full partner 
in North American energy issues, and that Canada supported 
the effort.  At the conclusion of the meeting, Efford told 
us that he hoped the new U.S. Energy Secretary-designate 
would be able to visit Canada as soon as possible.  The 
Ambassador responded that a visit might usefully include a 
tour of the Alberta oil sands or the James Bay 
hydroelectric projects in Quebec. 
 
 
 
Visit Canada's Classified Web Site at 
http://www.state.sgov.gov/p/wha/ottawa 
 
CELLUCCI