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Vol. 11, No. 8 Week of February 19, 2006
Providing coverage of Alaska and northern Canada's oil and gas industry

Mac line hits more bumps

New federal minister endorses socio-economic fund, but NWT raises bar

Gary Park

For Petroleum News

The new Canadian government is sending out encouraging signals that it will deliver C$500 million in socio-economic funds to aboriginal communities along the planned Mackenzie Valley gas pipeline route, but it has been served notice that the fund may not be enough.

In a submission Feb. 14 to the Mackenzie Joint Review Panel, the Northwest Territories government said the fund — promised by former Deputy Prime Minister Anne McLellan — is “not enough.”

On the day the panel started its hearings on the environmental, cultural and social impacts of the project, the territorial government is demanding action from the Conservative government of Prime Minister Stephen Harper on a decades-old bid by the Northwest Territories to collect its own resource royalties rather than have them transferred through the federal government as well as having greater control over resource development.

Further complicating matters, the residents of a lands corporation in Fort Good Hope say they have rejected an access and benefits agreement proposed by Imperial Oil, which is demanding to see the actual count.

Government ‘supportive’ of fund

On the positive side, Indian Affairs and Northern Development Minister Jim Prentice told the Canadian Press prior to the review panel hearings that the Harper government has been “supportive” of the C$500 million fund suggested by the previous administration.

He said that although the final details have to be negotiated and any overall arrangement needs cabinet approval, the issue is “important and is something we will turn our attention to fairly quickly.”

Prentice said he understood the importance of a fund and the role it is designed to play in building a social infrastructure in the Northwest Territories.

Unlike parallel National Energy Board hearings, which focus on economic and technical matters, the Joint Review Panel will capture the depth of feeling among northern residents about the pluses and minuses of the Mackenzie project, with almost 100 parties registered as intervenors, including aboriginal communities and tiny hamlets who are concerned about how their fragile ecosystems might be affected and what training, job and business opportunities will be available to them.

The Northwest Territories government has calculated the pipeline could generate 15,000 person-years of work in the territories over its lifetime as well as encouraging a wave of new energy exploration and supporting the long-held hope of many that an all-weather road can be built along the Mackenzie Valley.

Environmentalists and federal scientists are also poised to enter the debate, unhappy that Imperial and its partners — Shell Canada, ConocoPhillips Canada and ExxonMobil Canada — have failed to calculate the effects of climate change on the project.

Some are expected to argue that the loss of permafrost and rising ocean levels could put the Mackenzie Delta gas fields and pipeline at risk.

The panel delivers its report and recommendations to the National Energy Board after its hearings conclude Nov. 16, but the final approval is in the hands of the federal regulator, which is expected to deliver a verdict by mid-2007.

NWT government looking at costs

In its submission to the board, the Northwest Territories government said the Mackenzie project is likely to account for half of the additional C$475 million in socio-economic costs — such as policing, health, welfare, transportation, education and employment services — that the territorial government will face over the next 10 years.

But the Northwest Territories is forecast to receive only C$10 million a year in personal tax revenues during construction of the C$7.5 billion project, while corporate and business taxes are an unknown.

Once the three Delta anchor fields and the pipeline start commercial operations, the Canadian government is expected to reap almost C$378 million a year in various revenues, of which only C$21.8 million will go to the Northwest Territories after taking into account a financing formula that reduces federal grants by clawing back 95 percent of gas-related revenues.

The NWT also warned that slow progress in talks with Ottawa could see the transfer of public lands and resources and the related resource revenues delayed to 2008.

The upshot for the NWT is “uncertainty regarding its fiscal ability to address the impacts of the project that fall within its responsibility,” the submission said.

Lands corporation won’t disclose voting results

Meanwhile, in Fort Good Hope the lands corporation is refusing to disclose the voting results that turned down an agreement intended to provide access to Ka’sho Got’ine land to build the pipeline.

Arthur Tobac, president of the Yamoga Lands Corp., said the atmosphere in his community is “really tense … there’s a lot of unrest here.”

He said some lands corporation members are confused about how the access and benefits pact will fit with the one-third ownership share of the pipeline that is being pursued for Native communities and are unsure how much they can expect from the federal government’s impact fund.

Former NWT premier Stephen Kakfwi, negotiator for the Fort of Good Hope, accused Imperial and Prentice’s department of dividing the people and undermining its leaders, but he and Tobac are hopeful that a turnaround is possible.

Imperial spokesman Pius Rolheiser told the Canadian Broadcasting Corp. that it is “critically important” for his company to know whether the community vote was overwhelmingly against the agreement, or if it slightly favored rejection.



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