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Ottawa Says It's Not Interested in Share of Proposed Arctic Pipeline

Posted on: Friday, 18 May 2007, 18:00 CDT

By BOB WEBER, The Canadian Press

(CP) - The federal government says it isn't considering an equity share in the proposed Mackenzie Valley natural gas pipeline.

"The story is false," Deirdra McCracken, spokeswoman for Indian Affairs Minister Jim Prentice, said Friday. She said the government told proponents some time ago the government wouldn't consider buying into the planned $16.2-billion project.

Imperial Oil (TSX:IMO), head of the consortium behind the pipeline, also denied a report that the government was considering to take over Imperial's share.

"The project is not dead and we did not advise the government that it was," said company spokesman Pius Rollheiser in Calgary. "We're not interested in stepping aside."

But the head of an aboriginal consortium hoping to help build the pipeline said the possibility was raised during talks between the federal government and project proponents on a fiscal framework for the deal.

"(The talks) are in a very preliminary stage," said Fred Carmichael of the Aboriginal Pipeline Group, which plans to take a one-third share in the project.

"We're always looking at options. There's a lot of stuff out there because of the delays. APG certainly welcomes the possibility of federal involvement in the gas project."

Progress on the pipeline, seen as crucial to the economic development of the Western Arctic, has been repeatedly slowed by regulatory tangles, legal actions and soaring costs.

Hearings that were supposed to be completed last fall are running about a year behind schedule due to information filings by main pipeline proponent Imperial Oil (TSX:IMO) and court rulings that some aboriginal bands along the route haven't been adequately consulted.

As well, the budget for the 1,200-kilometre line had grown from $3.5 billion when it was originally proposed to the most recent estimate of $16.2 billion.

Imperial has pushed back its own timeline by three years, meaning the pipeline wouldn't start producing until 2014

Faced with increasing costs and delays, Imperial has said the project wouldn't be economic without some government inducements such as tax breaks. An equity stake for the government has been raised as a possibility before, but Carmichael's comments were the first public confirmation that the subject had been broached in talks.

A federal ownership stake might have long-term advantages in ensuring that all Mackenzie gas - not just that owned by the three pipeline proponents - could find a way to southern markets, Carmichael said.

"If we had federal government participation, it would certainly make this true northern infrastructure (and) make sure that this is truly a basin-opening project."

Imperial, ConocoPhillips and Shell (TSX:SHC) own the largest proved gas reserves in the area. But other companies have been exploring throughout the Mackenzie Valley and have expressed concern to the National Energy Board that current pipeline plans would make it hard for them to find room for any gas they find.

"I would think the explorer's group and the rest would welcome the government with an equity in (the pipeline)."

Carmichael suggested that Imperial may be setting the profit bar too high.

"If they don't think it's sufficient returns for them but it's still profitable, then I would encourage them to step aside and let this pipeline get built. If it takes government to do that, let's open up this country.

"We've come a long way with the producers, but my preference would be whoever wants to get the project back on track."

Carmichael says the pipeline would be a good investment for Canada. The project would not only open up trillions of cubic feet of natural gas, but would also provide a huge and irreplaceable economic boost for the Western Arctic.

Most aboriginal bands along the proposed route support the project and are members of the Aboriginal Pipeline Group.

One group, the Dehcho First Nation in the southeast corner of the Northwest Territories, continues to hold out.

Source: Canadian Press

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