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New federal point man for Mackenzie gas line says equity possible Handley: Imperial looking at all options for Arctic gas, including LNG and Dempster Lateral connecting to Alaska Highway line Gary Park Petroleum News
There will be no direct Canadian government subsidies for the proposed Mackenzie Valley natural gas pipeline, but an ownership position is possible, says a newly appointed chief federal representative for the project.
Hired by the government to manage the file, Andrei Sulzenko, previously a lead negotiator for the Canada-U.S. Free Trade Agreement, told reporters Sept. 27 that although he is not forecasting an equity stake he would not view government ownership as a subsidy.
But neither federal Indian and Northern Affairs Minister Jim Prentice nor Imperial Oil, the Mackenzie lead partner, showed any enthusiasm for the idea, which has been shot down in the past.
Imperial has flatly rejected the option, saying it is only seeking a fiscal framework of royalties and taxes that recognizes the high costs and risks of the project.
Sulzenko, speaking at an Insight Information northern energy conference in Calgary, noted that governments have a history of participating in private sector projects “in various guises, as equity partners.”
“In those circumstances, those are commercial terms,” he said. “There’s an investment and because of the risk there’s a return to the taxpayer. I don’t consider that a subsidy.”
Prentice, who met with Imperial Chief Executive Officer Tim Hearn in August, said he would not discuss the prospects of an equity stake and was not prepared to say how much the government might be willing to offer when negotiations resume with the Mackenzie partners.
Until he receives Imperial’s latest proposal he was “not prepared to speculate on anything,” Prentice said.
Imperial says it is not asking for subsidies Imperial spokesmen have told Petroleum News that, despite reports they had previously asked for C$1.2 billion in tax credits and incentives, they are not asking for subsidies.
At the same conference, Northwest Territories Premier Joe Handley said he remains upbeat that the Mackenzie project will go ahead because it is “too big and too important for our country and our territory to be lost.”
He said the gas is needed by the North American market and by Imperial, provided it can make the economics work.
While conceding he is worried about delays and rising costs, Handley said there is “good progress on a number of fronts.”
But every delay means a delay in the pipeline,” he said. “Every time that happens you expose yourself to more uncertainty.”
Imperial looking at LNG and Dempster Lateral options Handley told reporters that Imperial is weighing a full range of options as it recalculates the Mackenzie costs.
In addition to the conventional pipeline plan, the premier said he understands the company is comparing the costs of a liquefied natural gas project and the so-called Dempster Lateral, which would see the Mackenzie Delta gas carried across the Yukon to connect with an overland pipeline from Alaska to the Lower 48 states.
Imperial has only said it is exploring any possibilities, including a tighter construction schedule that could lower costs.
But Handley expressed strong reservations that the Canadian government would offer any fiscal handouts to improve the Mackenzie economics.
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