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Vol. 10, No. 30 Week of July 24, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Mackenzie hopes up

Canadian government ready to provide C$500M to absorb pipeline impact

Gary Park

Petroleum News Canadian Correspondent

There is no chance that Mackenzie Delta gas will start moving to market this decade, but the odds of gas flowing by 2010 have dramatically improved.

In the space of a week, pacts with aboriginal regions and the Northwest Territories government broke deadlocks that had placed the C$7 billion Mackenzie Gas Project at risk.

Meanwhile, regulators have signaled that public hearings could start by mid-November.

These breakthroughs have “started to put a firmer foundation” under the project and created “cautious optimism that we can be fully back on track” three months after fieldwork was stopped, Imperial Oil spokesman Hart Searle told Petroleum News.

He said that in aggregate the “encouraging steps” that have been taken strengthen the commitment of the Mackenzie consortium.

But the delays to this point have scuttled the original ambitions to bring a pipeline into operation by 2009, Searle said.

Beyond that he would not offer predictions other than to say a “firmer and credible schedule” can be set once regulatory hearings get under way.

For now, Searle said there are major steps ahead in reaching land access and benefits agreements with aboriginal regions in the Northwest Territories and obtaining greater clarity relating to the regulatory hearings, including timelines.

Searle said initial discussions have taken place with the aboriginal communities on access and benefits and “we now need to provide a detailed agreement.”

Canadian government antes up

What has given a sharp lift to the outlook for that aspect is a July 18 announcement that the Canadian government is ready to provide C$500 million over the next 10 years to First Nations along the pipeline route.

Deputy Prime Minister Anne McLellan said July 18 all participants at the signing — the Northwest Territories government and the Gwich’in, Kahsho Got’ine, Inuvialuit, Tulita/Dene and Deh Cho first nations — agreed the deal “represents an important step in the collective effort to move the project forward.”

The money will be placed in a standalone fund with the first nations overseeing the spending on items such as health care, education and policing.

In reaching that milestone decision, the federal and northern leaders removed demands on the Mackenzie partners that had climbed to hundreds of millions of dollars to pay for social and economic impacts stemming from the pipeline.

The consortium said in April that those costs were beyond its scope and responsibility.

Environmental review ready for hearing

Another advance was made July 18, when the joint review panel charged with conducting the environmental review said it had sufficient information to proceed to the public hearing phase, provided has received additional information by Sept. 30.

It said some deficiencies identified by interveners represent differences in the scope and content of the review and could be more appropriately handled in public hearings.

The panel turned down requests that it delay the start of hearings until certain agreements, mitigation strategies and plans were fully detailed by Imperial Oil. So long as the additional information is supplied, the panel indicated it could issue 45 days notice that would allow hearings to start in mid-November.

That coincides with Imperial’s own request July 15 to the National Energy Board, which runs separate hearings on technical and economic issues. Imperial told the federal regulator it needed another two months to settle the benefits and access agreements and the regulatory concerns.

Among those not convinced that the joint review panel is in a position to embark on hearings is Kevin O’Reilly, a Yellowknife environmentalist.

“I just don’t think we’re there yet,” he told the Canadian Broadcasting Corporation. “Hearings can be a place where you can sort out different peoples’ views about a project, but we don’t even understand exactly what this project is, what its effects are and how they can be mitigated.”

Out-of-court settlement reached

The July 18 announcements came a week after the Deh Cho and federal government reached an out-of-court settlement on two lawsuits that represented potential roadblocks to the pipeline plans.

Ottawa committed C$31.5 million in funding — including C$15 million for economic development — and promised to consult with the Deh Cho on future oil and gas exploration in their territory.

Another issue surfaced earlier in July when the Mackenzie Explorer Group filed a submission with the National Energy Board that described the pipeline’s design as inadequate.

The group, that includes Devon Energy, Chevron Canada Resources, EnCana, Anadarko Canada, Petro-Canada, Apache Canada, BP Canada Energy and Burlington Resources Canada, said there is more gas in the Mackenzie Delta region than the proposed system can handle.

A study for the explorer group by Calgary-based engineering firm Sproule Associates concluded that there might be a need for 2.5 billion cubic feet per day of capacity, more than double the anticipated start-up volumes.

The companies are all outside the main Delta owners group of Imperial, ConocoPhillips Canada, Shell Canada and ExxonMobil Canada, who control about 5.8 trillion cubic feet of gas reserves.

Devon Canada Vice President Michel Scott said the group is not trying to block the project. Its primary purpose is to ensure there is flexibility to accommodate future gas discoveries in northern Canada.

Searle told the Globe and Mail that the main owners are concerned that if they build a pipeline that is too big the shipping tolls will go too high.

However, Sproule estimates there could be 46 trillion cubic feet of undiscovered gas in the Delta and Beaufort Sea, without even venturing to the Arctic Islands.



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