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Native dissension puts cloud over Northwest Territories pipeline Two aboriginal groups refuse to support Mackenzie Valley project; shift allegiance to Arctic Resources “over-the-top” proposal to gain full ownership Gary Park PNA Canadian Correspondent
Echoes from 20 years ago, when Native dissension was partly responsible for scuttling the first attempt to develop Arctic gas, are reverberating through the Northwest Territories, again raising doubts that the multi-billion venture will proceed.
The breakdown started when the Deh Cho First Nation refused to sign a memorandum of agreement with the Mackenzie Delta gas owners, who offered aboriginal groups one-third ownership in a proposed standalone Mackenzie Valley pipeline, then spread when two of five Sahtu First Nation groups pulled their signatures from the document.
The Deh Cho plans an assembly of its members in late August to discuss its next move. By then, an economic analysis by the gas owners is expected to be available.
The Sahtu took an even harder line, endorsing the rival project by Houston-based Arctic Resources Co., which has been the only proponent so far of an “over-the-top” pipeline, linking the North Slope and Mackenzie Delta.
Northwest Territories Finance Minister Joe Handley said the withdrawal of two key Native communities from the agreement is threatening to close a narrow window of opportunity for a Mackenzie Valley pipeline. Alaska could go first The more delays and disagreements there are, the more likely the Alaska Highway pipeline will go ahead, flooding the Lower 48 markets and making development of a Northwest Territories pipeline uneconomic, he said.
“My biggest fear is that while we’re diddling around with various options, we could see the Alaska pipeline go first,” said Handley. “If that happens, our pipeline would not be needed any more.”
He warned that splintering Native support could scare away potential investors, as well as the Delta producers’ group.
“We could be sending mixed signals to southern investors,” he said. “Some of the producers could say, ‘Well, to heck with it, we’re not going to do it.’”
Compounding the uncertainties, Arctic Resources said the Sahtu landowners had been joined by an Alberta Native group in endorsing its Northern Gas Pipeline Project, which would be 100 percent Canadian aboriginal and American Native owned, if an “over-the-top” pipeline proceeds.
“This gets us well started,” said Harvie Andre, chairman of Arctigas Resources Canada, the Canadian arm of Arctic Gas, of the Sahtu endorsement.
He said Arctic Gas is increasingly confident that the Sahtu group will be in full agreement with the Northern Gas project and “we have some reasons to be optimistic about the Deh Cho.” In addition, he said the offer remains open to the Gwich’in and Inuvialuit who have signed the agreement with the Delta gas owners, known as the Northern Producers Group. Sahtu back Northern Gas The Sahtu leaders said they concluded the Northern Gas proposal was the best option for aboriginal interests because of superior economics and the extent of direct Native involvement in the project.
Larry Tourangeau, president of Ernie McDonald Land Corp. in Norman Wells, Northwest Territories, said his organization, one of three Sahtu landowners, has passed a resolution telling the Delta owners it wants out of the June agreement.
He said he will now try to convince other Native groups to back the Arctic Resources plan because it can best serve the interests of Canada, the United States, the petroleum industry, the environment and aboriginal people by building a single, cost-effective pipeline connecting both Alaska and northern Canada to southern markets.
“We believe that aboriginal ownership and involvement, as proposed in the Arctic Resources approach, will improve the prospects for a safe, timely and economic project while creating lasting value for our people and traditions,” Tourangeau said. Aboriginal line hardens The hardening line by those aboriginal leaders wanting full ownership of a pipeline and not prepared to settle for the one-third offered by the Northern Producers Group was reflected in the comments of Deh Cho Grand Chief Michael Nadli.
“No pipeline will be built through our territory unless industry deals with us and meets certain conditions for oil and gas exploration,” he said. “It will be built on our terms.”
However, Andre said Arctic Resources is not interested in a Mackenzie Valley standalone line because the financial structure wouldn’t support the delivery of just Mackenzie Delta gas.
“We firmly believe that at the end of the day the Prudhoe Bay producers will say they can’t afford to go through Alaska, but are coming over the top,” he said.
Arctic Resources expects to announce a target date within the next few weeks for filing a regulatory application, seeing no reason why that would be harmful to subsequent producer efforts, Andre said.
Arctic Resources believes its project could be entirely debt-financed through a bond issue, giving northern Canadian aboriginal groups 100 percent legal and beneficial ownership, subject to certain limitations and restrictions in favor of shippers and holders of revenue bonds that would be issued by a special purpose company to be organized under Canadian law.
The company would be owned by aboriginal groups involved in governing the lands along the right of way.
Andre said he anticipated similar provisions would be offered in Alaska.
Arctic Resources has proposed that it would manage the pipeline under a long-term program administration contract, subject to negotiations this summer with aboriginal groups who sign a memorandum of understanding.
In addition to its current investor group, Arctic Resources plans a consortium including producers and other industry participants along with for-profit northern Canadian aboriginal and Alaskan Native organizations. Handley concerned about ownership Handley gave a blunt warning that in seeking a larger equity stake, aboriginals stand to lose more than they gain.
“This is scary to me,” he said, explaining that aboriginals could take on all the liability if anything went wrong, or the project turned out to be unprofitable.
“This could wipe them out as economic entities if there was a catastrophe with the pipeline,” he said.
A spokesman for Imperial Oil, the lead partner in the Northern Producers group, along with ExxonMobil Canada, Shell Canada and Gulf Canada Resources, said the Arctic Resources project isn’t a serious threat to his group because any pipeline project that goes ahead will need producers to co-operate by agreeing to ship their gas.
He said the group is still committed to the Mackenzie Valley project.
“Nothing we’ve heard so far that presents a significant impediment for us,” the spokesman said, adding that although it has taken longer than expected to receive aboriginal support, the gas owners are willing to give all parties time to consider the proposal.
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