Gas line on track

Aboriginal veto threat, shipping talks not expected to derail Mackenzie filings

Gary Park

Petroleum News Calgary Correspondent

Owners of the Mackenzie Gas Project see no delays in their plans to file major regulatory applications in 2004, despite threats of an aboriginal veto and some rumblings of discontent among potential shippers.

Imperial Oil, the lead partner, is confident that the pieces are coming together for what is probably the largest project in Canadian industrial history, External Relations Manager Hart Searle told Petroleum News.

“There is a very aggressive push on to complete the work, but we want to do it right,” he said. “It has always been our wish to submit as complete a suite of applications as possible.”

However, Searle conceded that preparing the applications is a “bit of a moving target” that makes it difficult to set a specific timetable for the filings, including plans for each of the three Mackenzie Delta anchor fields, gas gathering systems, the main gas pipeline and a natural gas liquids pipeline.

One of those wrinkles surfaced last month when the Deh Cho First Nations, the only aboriginal community that has yet to embrace the Mackenzie Valley pipeline, issued a threat to exercise their “legal right to veto the project.”

Deh Cho threaten veto

The manifesto said the Deh Cho, speaking for 13 Dene and Metis governments, will “carefully scrutinize consultation efforts with the view to taking whatever action is necessary if the project proceeds without proper consultation.”

Deh Cho consent for the pipeline will come only “after we have received full information disclosure, have had adequate time to review the material and have been provided with adequate financial and human resources to conduct our own analysis and develop our positions.”

“The consultations with Deh Cho leaders are not limited to stakeholder consultations and public reviews which the (project proponents and the governments) must conduct to fulfill regulatory and legislative requirements ... (they) must propose a process in which they will listen to what Deh Cho leaders identify as Deh Cho rights and provide a response that fully and expressly recognizes, addresses and accommodates those rights."

Some of issues surfaced in ‘good faith’ talks

However, he said some of the issues have surfaced in on-going “good faith” talks with the Deh Cho as part of developing benefits and access agreements with aboriginal communities along the proposed pipeline route.

Other issues are matters for the Canadian government, which is negotiating a Deh Cho claim for self-government, including a share of resource royalties.

Searle said progress with the Deh Cho was further delayed because the community did not appoint a pipeline working group until last September.

In contrast, the Inuvialuit, Sahtu and Gwich’in, who represent 75 percent of Northwest Territories aboriginals along the pipeline route, have settled land claims and also signed a memorandum of understanding that is the basis for a one-third ownership stake in the pipeline for indigenous people.

Searle said the Mackenzie proponents still hope to have benefits and access agreements concluded before they file with regulators.

‘Precedent agreements’ needed with shippers

The owners — Imperial, ConocoPhillips, Shell Canada and ExxonMobil Canada — believe they will have an agreement covering 800 million cubic feet per day from the Mackenzie Delta’s three anchor fields and are “reasonably confident” there will be additional agreements with other E&P companies to meet the initial target of 1.2 billion cubic feet per day, Searle said.

The independents were reminded last month that they have until March 15 to execute precedent agreements that take into account all shipper requirements.

Searle said the basic pipeline design was expanded by 50 percent to 1.2 billion cubic feet per day following strong expressions of interest from about 20 interested parties. The explorers have even made proposals to eventually increase the capacity to 1.9 billion cubic feet per day.

But the Mackenzie Delta Explorers Group — Anadarko Canada, BP Canada Energy, Burlington Resources Canada, Chevron Canada Resources, Devon Canada, EnCana and Petro-Canada — have only two discoveries to support any binding commitments.

That has prompted BP Canada President Brian Frank to argue for more flexibility in the pipeline design to make allowances for future exploration success.

Although the precedent agreements are required before applications can be filed, “we think there are ways to meet the concerns and needs of shippers,” Searle said.

He would not speculate on whether the Delta producers group would proceed alone if those agreements are not forthcoming.

Deh Cho remains project’s wild card

Petroleum News Calgary correspondent

Gary Park

While other aboriginal communities in the Northwest Territories decided to support the Mackenzie Gas Project in hopes of benefiting from a natural gas pipeline through their land, the Deh Cho made their participation contingent on success in self-government negotiations.

Now they have revived memories of the late 1970s when initial proposals for pipelines to carry Mackenzie Delta and North Slope gas through Canada to southern markets were stalled, largely because of unresolved aboriginal land claims.

The Canadian government launched an inquiry that resulted in a 10-year moratorium on pipeline development in the Mackenzie Valley while land claims were settled.

Over the next 16 years, the Inuvialuit, Gwich’in and Sahtu settled their claims covering land from Inuvik to a point about halfway between Norman Wells and Fort Simpson, leaving the Deh Cho to continue a head-to-head battle with the federal government for their own government that would have access to a share of resource royalties.

Since October 2001, the Deh Cho have steadfastly refused to join the 75 percent of Northwest Territories aboriginals who signed a memorandum of agreement with the Mackenzie Delta Producers Group that opened the way to one-third ownership in the pipeline for indigenous people.

Bargaining position ratcheted up

Just how tough-minded the Deh Cho can be was evident last fall when the first nations complained about an alleged conflict of interest involving the wife of Paul Bernier, vice president of the Canadian Environmental Assessment Agency, who was a key figure in developing the regulatory process for a Mackenzie Valley pipeline.

Maureen Bernier held 12 mineral claims on the pipeline route and the Deh Cho, while awaiting the results of an investigation into the alleged conflict-of-interest, offered $100 for every stake removed from Bernier’s claims.

Imperial Oil efforts to involve aboriginals

In a pre-Christmas speech, Imperial Senior Vice President K.C. Williams said “one of the critical strengths of our initiative is that we have cultivated and maintained significant aboriginal direct involvement” with the project, including more than 500 meetings with the full range of interested parties.

He said the willingness of northern leaders to consider pipeline development on their land has attracted industry, community and political attention to the region.

For all the success of the 2001 memorandum of understanding and the hopes of filing the major regulatory applications in 2004, there has been a lingering unease over the aboriginal issues that remain on the table.

Without referring to any specific problem, Hal Kvisle, chief executive officer of TransCanada, told a fall conference that “regulatory delays or some kind of flare-up on the aboriginal front” could derail Mackenzie progress.

Northwest Territories plans meeting

Hopes of a breakthrough with the Deh Cho were raised last April when they signed an interim resource development agreement with the Canadian government, opening some Deh Cho lands for oil and natural gas exploration, while removing about 18,000 square miles from exploration.

The agreement provided “additional clarity” on how resource development might take place in the Deh Cho region and was a positive signal that the various parties could achieve such an agreement, Searle said at the time.

Since then Herb Norwegian has been elected grand chief, bringing a different style to pipeline negotiations, but just as committed to protecting traditional lifestyles without shutting the door to resource development.

In interviews, he has been emphatic that industry has nothing to fear “so long as they negotiate.”

For the Deh Cho, Norwegian said the challenge is to reach a balance between drilling rigs and pipelines and aboriginal traplines and hunting territory.