Canada won’t rule out subsidy for Mackenzie gas pipeline

Nault expects private financing, but open to federal loan guarantee

Gary Park

Petroleum News Calgary Correspondent

The Canadian government is ready to use loan guarantees to secure an aboriginal stake in the proposed Mackenzie Valley gas pipeline, but doesn’t expect its help will be needed, Indian Affairs and Northern Development Minister Robert Nault said April 7.

Despite Canada’s stated opposition to U.S. subsidies for an Alaska Highway project, Nault said guarantees remain “an option” for the Aboriginal Pipeline Group to lock up a one-third equity position in a pipeline across the Northwest Territories.

The Aboriginal Pipeline Group initially needs C$70 million to pay for its share of preliminary design and regulatory work by the Mackenzie Delta Producers Group.

“If there are loan guarantees we don’t believe that skews the marketplace,” he insisted in a conference call from a North American Gas Strategies conference in Houston, noting that Canada has offered similar support to other projects over many years.

But he said the government’s clear preference is to see producers and the marketplace “take the lion’s share of the risk.”

To that end, Nault expects a private-sector deal for the Aboriginal Pipeline Group may only be “weeks, if not days” from an announcement.

“We’ve got a few issues we want to clear up and make sure there are no loopholes down the road,” he said.

Nault said the government “looks forward to getting a preliminary information package soon” from the producers’ group.

Canada will resist floor-price subsidy

In explaining why he was in apparent conflict with Dhaliwal, Nault said his mandate is to help aboriginals north of the 60th parallel derive the full benefits of Arctic gas development.

He said the Canadian government did not spend 30 years negotiating Native land claims settlements in the Northwest Territories only to deny aboriginals an “important role in getting royalties of their own.”

Nault said there would likely be an opportunity for the government to fund pipeline job training for aboriginals.

He told the Houston conference that Canada would continue to resist any U.S. floor-price subsidy to spur development of an Alaska Highway pipeline, reiterating the government and industry argument that subsidies would distort North American gas markets.

However, he said there would be no challenge from Canada to any loan guarantees for the Alaska venture, adding “we don’t believe that skews the market place.”