Mackenzie fiscal talks stalled

Imperial Oil has hit the pause button again with the Mackenzie Gas Project, with Chief Executive Officer Bruce March confirming his company and the Canadian government are taking a “time out” from discussing a fiscal framework.

But he insisted that although “we’re not meeting any longer with the federal government,” Imperial “continues to think it’s a very good project.”

March said Imperial has third-party estimates that the Canadian economy would benefit to the tune of C$100 billion from the MGP, half of that in taxes and revenues to the federal government.

The MGP would also “bring very material benefits to the Northwest Territories,” he said.

“That’s why we remain very, very supportive of it. … It’s just a question of trying to find the right supporting framework for all stakeholders involved,” he said.

March indicated that although Imperial is “not meeting any longer” with Ottawa that “doesn’t mean we won’t ever meet again. It just means we both agreed for this period of time,” the National Energy Board should be able to consider its final decision on the project then resume negotiations, possibly in September or October.

He noted that Imperial alone has already spent up to C$600 million on the MGP, although the development team was disbanded in 2006. There have also been reports that progress towards a deal on taxes and depreciation was halted last year.

Brenda Kenny, president of the Canadian Energy Pipeline Association, told the Calgary Herald that the length of time spent by regulators on the MGP application “is an inordinate amount of time. … It is the best of the worst of examples.”

Russ Girling, the incoming chief executive officer of TransCanada, the frontrunner to carry gas from the Mackenzie Delta to northern Alberta, told analysts April 30 that both the MGP and the Alaska Pipeline Project will provide gas that North America “will need in the decades to come.”

His current boss Hal Kvisle said a combined 5 billion cubic feet per day of Alaska and Mackenzie Delta gas would cover only one-third of the anticipated of 15 billion cubic feet per day of new North American volumes needed every year “just to maintain flat production,” without taking into account the conversion of power plants to gas from coal.

He said that even the “very best” North American shale gas plays need gas prices of $4 per thousand cubic feet to cover finding, development and production costs.

—Gary Park