Stalling completion of the Mackenzie Gas Project, an Alaska gas pipeline through Canada and new liquefied natural gas terminals by two years could cost Canadians C$58 billion over the 20-year period from 2006.
The estimate is contained in a report by the Canadian Energy Pipeline Association, which warns that delays will boost natural gas prices by 15 percent.
Association President David MacInnis said the two primary hold-ups are complex regulatory processes and the absence of a fiscal framework.
He told delegates to a North American Gas Strategies conference in Calgary Oct. 24 that pipelines are part of the critical energy infrastructure that allows Canada to deliver its energy potential.
Without giving an indication when the Canadian government will rule on the two Arctic projects, Natural Resources Minister John McCallum said it is “fundamentally in (Canada’s) interests to have the Mackenzie project proceed expeditiously and prior to the Alaska pipeline.”
He told a House of Commons committee Oct. 26 he has been informed that the Mackenzie pipeline remains “well ahead of the Alaska pipeline in terms of timing.”
But he said Canada is still negotiating with aboriginal regions along the pipeline right of way to resolve benefits and access agreements. The Mackenzie partners are also waiting for the government to settle the fiscal terms of the pipeline.
MacInnis said Canada’s “oil and gas resources, coupled with the ability to get them to market in a timely manner is a great source of economic advantage. If we exploit it correctly and properly, it will continue to feed the Canadian and North American economy for many decades to come.”
Project lag equals cost increases
But letting the major projects lag would spread cost increases across Canada, with Alberta consumers carrying 35 percent of the burden, followed by Ontario at 33 percent, British Columbia at 13 percent and 19 percent impacting consumers in Canada’s seven other provinces.
Residential gas consumers in Ontario would absorb 40.5 percent of that province’s cost increases, with the fuel costing an extra C$7.8 billion, while 73.7 percent of Alberta’s impact would fall on industrial gas users.
A companion study showed that a hypothetical C$1.52 billion, 600 mile gas pipeline — half of it in Alberta and half in British Columbia — would pump an extra C$1.2 billion into the Canadian Gross Domestic Product.
Of that, C$202 million would spread outside those two provinces, while the project would generate 17,384 jobs, 2,907 of them beyond Alberta and British Columbia.
C$20 billion over next 20 years
MacInnis said the pipeline sector expects to spend C$20 billion over the next 20 years on capital projects.
The studies commissioned by his association “show that the impact of any delays is significant,” he said.
“We need to ensure there are timely regulatory reviews and approvals and the fiscal environment remains attractive and competitive.”
The reports said North America is facing a period of tighter oil and gas supply, driving major new investments in non-traditional resource development such as oil sands and heavy oil, Arctic gas, coalbed methane, offshore oil and imported LNG.
However, the association emphasized that complexities of planning, financing and building large pipelines can be undermined by delays in obtaining approvals and permits.
Those delays can also put the supply-demand balance in North America under stress, resulting in higher costs to consumers.
