Why an over-the-top gas pipeline is off the table

An interesting detail in the debate to build a multibillion-dollar Alaska natural gas pipeline is what is no longer up for discussion: an over-the-top route. Although Congress made the route illegal more than five years ago, that hasn't kept the idea from popping up at the kaffeeklatsches of armchair energy analysts over the years.

The route concerns various pipeline configurations that all share a basic conceit: rather than running hundreds of miles down the Alaska Highway, the pipeline would cut sideways across the wilderness or waters of northeastern Alaska and connect with the proposed Mackenzie Valley pipeline in Inuvik, Northwest Territories, Canada, where a single pipeline would head south into Alberta.

The over-the-top route strikes some gas pipeline watchers as preferable because it reduces distance and duplication. The two highway routes on the table now -- one proposed by BP And ConocoPhillips, known as Denali, and the other by TransCanada Corp. and Exxon Mobil Corp. -- each stretch nearly 2,000 miles through northern Alaska and western Canada. In comparison, an over-the-top route would run about 200 miles directly into Canada and connect to the proposed Mackenzie pipeline.

By merging two pipelines -- a major assumption made more realistic because the same general players operate in both natural gas basins -- the over-the-top route cuts down on the amount of steel pipe that must be made and purchased, and keeps one pipeline from monopolizing the trained workforce needed to build the other. Combining the pipelines would presumably end the perennial discussions about which will come first, Alaska or Mackenzie.

The over-the-top route gained some traction in the early years of the 2000s, when two groups offered it up in pipeline proposals. The North American Natural Gas Pipeline Group, made up of the Big Three oil and gas producers, proposed a pipeline buried under the Beaufort Sea and running east to Canada. A second project sponsored by Arctic Resources Co. and ArctiGas Resources Ltd. Partnership proposed a similar route that would have eventually been turned over to Alaska municipalities and Canadian First Nations groups (believed to be a way to sidestep corporate income taxes).

But the over-the-top route has always been unpopular in Alaska. The concerns about sovereignty and ownership that lead some to support an all-Alaska line are compounded by a route that jets out of the state as expeditiously as possible in favor of a lengthy journey through a foreign country (albeit a friendly one). Worries about losing a major construction boom and a source of in-state gas running through the heart of the state led then-Gov. Tony Knowles to declare in late 2000, "My way is the highway."

As a result, Alaska statute now prohibits an over-the-top route. Congress put an additional nail in the coffin with the Alaska Natural Gas Pipeline Act of 2004, which prohibits any route that "traverses land beneath navigable waters ... beneath, or the adjacent shoreline of, the Beaufort Sea" or that "enters Canada at any point north of 68 degrees north latitude."

Laws can be repealed, though, which is why the over-the-top route reappears every so often as a solution to economic and logistical challenges facing the pipeline. Those issues have never been more at the forefront than they are right now.

While both the Alaska and Mackenzie pipeline projects remain unsanctioned and uncertain, both have gained momentum recently. In early January, the Mackenzie line got a favorable review from the Joint Review Panel in Canada. The two competing Alaska pipelines each plan to hold separate open seasons later this year to get commitments from companies to ship gas on the lines. While the Mackenzie line seems to be ahead of either Alaska project in terms of schedule, both pipeline projects have timelines within a few years of one another, meaning that the world supply of steel pipe and of skilled pipeline workers would likely be strained if both advance.

And while cost has always been a factor, recent news has offered a sense of just how much of a factor it might be. Last month TransCanada and Exxon Mobil said their pipeline project was now running from $32 billion to $41 billion, up from an initial estimate of around $26 billion. Add that to the expected $15 billion cost of a Mackenzie line, and you get a sense of the savings that might come from doubling up.