July 03, 2001 --- Vol. 7, No. 75July 2001

Withdrawal of native groups casts doubt on NWT pipeline

Aboriginal support for a standalone Northwest Territories gas pipeline is crumbling, raising doubts that the C$3 billion project will ever be completed.

Northwest Territories Finance Minister Joe Handley said the withdrawal of two of seven Native communities from last month's memorandum of understanding that would have given them one-third ownership of the line is threatening to close a narrow window of opportunity.

The Sahtu First Nation has informed Mackenzie Delta gas owners that it wants out of the tentative agreement, joining the Deh Cho, which has pulled out of the Aboriginal Pipeline Group, the body negotiating with the Delta owners on behalf of Northwest Territories Natives. The Sahtu said they would instead throw their weight behind a competing proposal advanced by Houston-based Arctic Resources, which has offered the Native communities 100 percent ownership of a Mackenzie Valley pipeline.

Arctic Resources and its Canadian subsidiary have been promoting the Northwest Territories pipeline, along with the "over-the-top" scheme linking the North Slope and Delta under the Beaufort Sea. Arctic Resources said the Sahtu and Alberta First Nations have now endorsed its proposal, rejecting plans by the producer consortium of Imperial Oil, ExxonMobil Canada, Gulf Canada Resources (which is expected to be taken over by Conoco) and Shell Canada.

Larry Tourangeau, president of Ernie McDonald Land Corp., which represents the Sahtu, said he will try to convince all groups in the Aboriginal Pipeline Group to back the Arctic Resources' proposal.

But Handley warned that splintering of Native support into two pipeline camps could scare away potential investors as well as the Delta producers' group. He said delays will allow the Alaska Highway project to get ahead, flooding the U.S. market with gas and making a Mackenzie Valley pipeline uneconomic.

Handley said 100 percent Native ownership would mean that aboriginals would be saddled with the full liability if there was a catastrophe with the pipeline, or the project turned out to be unprofitable. "This could wipe them out as economic entities," he said.

The Northwest Territories government last week said it was willing to provide the Aboriginal Pipeline Group with up to C$100 million in loan guarantees to obtain part ownership of the producers' pipeline.

A spokesman for Imperial Oil said the producers remain committed to the project. "Nothing we've heard so far presents a significant impediment for us," he said, adding the producers will give Native groups all the time they need to consider the proposal.

Nellie Cournoyea, chairwoman of the Aboriginal Pipeline Group, said she is still confident the aboriginals will go with the producers' proposal.

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