May 25, 2001 --- Vol. 7, No. 61May 2001

NWT Aboriginal groups would own one-third of Mackenzie gas pipeline

Aboriginal leaders in the Northwest Territories have made a major breakthrough in their bid for an ownership stake in any gas pipeline down the Mackenzie Valley.

Officials with the NWT Aboriginal Pipeline Group, the NWT government and the consortium of Mackenzie Delta gas owners say a framework for a one-third share has been agreed on and negotiations are now moving to the details, including financing.

Nellie Cournoyea, a former NWT premier who chairs the pipeline group's executive committee, said the specific remain confidential. But she indicated that financing a one-third aboriginal stake in a possible C$3 billion pipeline could be based on the volumes of gas being shipped.

More information is expected at a meeting of aboriginal communities in Hay River, NWT, on June 4.

NWT Energy Minister Joseph Handley confirmed a tentative pact has been achieved. He said the government is anxious for aboriginals to have an equity stake in a pipeline. Sources close to the talks said the NWT and Canadian governments may be asked for loan guarantees to cover aboriginal participation.

Officials with the consortium of Delta gas owners Imperial Oil, ExxonMobil Canada, Shell Canada and Gulf Canada Resources agreed that a deal is in the works.

The consortium is expected to release its findings later this year on the economic feasibility of Delta gas development.

Meanwhile, the Canadian, NWT and Yukon governments and regulatory agencies announced they have an agreement in principle for a joint environmental review of any Arctic pipeline applications.

Assessment board sets $3.017 billion rate for trans-Alaska pipeline system

For the first time the state's property tax assessment of the trans-Alaska pipeline system was appealed to the State Assessment Review Board, which in a May 24 decision set aside the Department of Revenue Tax Division's 'reconciled' assessment of $2.75 billion in favor of the $3.017 billion number from the state's income model.

The assessment was appealed by the municipalities the City of Valdez, the Fairbanks North Star Borough and the North Slope Borough. The Tax Division reconciled the $3.017 billion number from its own trans-Alaska pipeline system settlement agreement methodology, TSM, model, with appraisals done for the municipalities (a valuation of at least $2.9 billion) and for the owners (a valuation of $2.1 billion) to reach the assessment value of $2.75 billion. The review board said the state's reconciliation was not justified, and set the assessment at the state's original number of $3.017 billion.

The board said state statute allows the board to adjust the division's assessed valuation only if evidence in the record shows the valuation is unequal, excessive, improper or otherwise contrary standards set out in statute. The board said that after reviewing the record, it concluded that "the evidence clearly shows that reducing the Division's original valuation of $3.017 billion to $2.75 billion resulted in an assessed value that is improper."

The board said most of the differences in the parties' valuations were attributable to capitalization rate, post-TSM tariff rates (the settlement runs only through 2011), future production through-put projections and dismantlement, removal and restoration costs, DR&R. It found the division's TSM model income approach produced "the most reliable valuation."

The board said it disagreed with the division's reconciliation which lowered the assessment to $2.75 billion because the division failed "to clearly articulate" what measures it selected from the other appraisals to justify a lower valuation and because the board was concerned that the division "may have unconsciously given too much weight to an expectation that its 'reconciled' valuation should follow the graphed line of historically decreasing assessments arrived at through negotiated settlements in recent years." The board said the graph line of decreasing assessments "is not an indicator of value that would justify a reduction in the valuation of the TAPS arrived at through the TSM model."

Petroleum News - Phone: 1-907 522-9469 - Fax: 1-907 522-9583
[email protected] ---