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Devon Schedules New Beaufort Sea Drilling to Feed Mackenzie Pipe

Devon Schedules New Beaufort Sea Drilling to Feed Mackenzie Pipe

While one aboriginal group is still putting up a fight, others are declaring the Canadian Arctic open for business, and the natural gas industry is betting the majority will prevail in the Northwest Territories. Devon Canada Corp. declared intentions to go ahead on the first new Beaufort Sea drilling campaign in more than 20 years.

In a new filing with the National Energy Board, the subsidiary of Oklahoma City-based Devon Corp. seeks permission for exploration wells in shallow water along the coast of the Mackenzie Delta. The production company's program parallels the schedule for the C$7-billion (US$5.6-billion) Mackenzie Gas Project.

By the time the MGP consortium of Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada aims to complete a Delta production system and a Mackenzie Valley pipeline in 2009 or '10, Devon plans to prove up gas reserves on a 3,385-square-kilometre (1,350-square-mile) spread of exploration licenses. The MGP design includes provisions for expansion to accommodate new discoveries.

The Devon program calls for four wells, into geological prospects identified near the Delta population and industrial centre of Tuktoyaktuk by a three-dimensional seismic survey, starting in the 2005-06 winter drilling season. The company risks being forced to relinquish its exploration properties back to the Canadian government unless drilling commences before the end of 2006. While the schedule is tight by Canadian Arctic standards because it allows only a few months for regulatory approvals, the process already highlights a co-operative attitude of aboriginal communities on the Delta and in the northern reaches of the Mackenzie Valley.

On the Delta and in the Beaufort Sea shallows, Devon is working inside a sprawling zone controlled by the Inuvialuit or Eskimos of the western Arctic under a 1980s land claim settlement. In addition to participating in the Aboriginal Pipeline Group, which has a one-third interest in the Mackenzie Valley gas transmission project, the Inuvialuit have worked with Devon rather than against it.

The company was allowed to carry out its offshore seismic surveys, short distances from coastal whale and seal hunting grounds, without an environmental ruckus. Inuvialuit authorities have agreed to collaborate with federal counterparts on a coordinated environmental review of the drilling program rather than to insist on separate scrutiny by aboriginal agencies created under self-government provisions of the land claim settlement. The drilling program is in environmentally low-risk areas in winter known as the zone of "land-fast ice."

In Devon's target areas, the ice freezes outwards from the coast and stays stationary rather than drifting and breaking up into floating floes that clash with colossal force as a result of ocean current and wind action. The pacific, co-operative attitude of the territorial native majority is also showing in the Gwich'in community of the Delta and northern Mackenzie Valley. A new northern construction consortium, majority-owned by natives but led by Edmonton entrepreneur Brian Butlin as president, stepped forward to bid on contracts to build as much of the MGP as can be had.

The new Mackenzie Aboriginal Corp. is owned 51% by Gwich'in Development Corp. of Inuvik and 49% by six western Canadian firms in a cross-section of construction specialties. The participants also represent much of western Canada's industrial construction capacity. The venture includes Butlin's Flint Energy Services Ltd. as well as Ledcor Industries Inc., Midwest Management (1987) Ltd., North American Pipeline Inc., Pentastar Energy Services Ltd. and Peter Kiewit Sons Co.

The consortium hopes to enlist other northern aboriginal corporations, Gwich'in Development president Fred Carmichael said. He is also chairman of the Aboriginal Pipeline Group. Carmichael said "we have the majority interest in MAC because we want to make sure the Gwich'in and future aboriginal partners in this venture participate in the construction of the pipeline in a meaningful way and benefit to the fullest extent possible." Territorial observers give the new construction consortium good odds of recruiting the Inuvialuit on the Beaufort coast and the Sahtu in the central Mackenzie Valley.

Both communities are shareholders in the Aboriginal pipeline venture and their leaders have repeatedly expressed the same ambitions as Carmichael. The Inuvialuit, Gwich'in and Sahtu are also committed to fight in court against lawsuits filed to hold up the Mackenzie project by the lone aboriginal holdout along the 760-mile pipeline route, the Deh Cho of the southern Northwest Territories.

Even the Deh Cho have emphasized they are not opposed to gas development but instead are linking its fate to unresolved land-claim negotiations with the federal government. Aboriginal law specialists are advising industry that the outlook for working on native turf improved significantly as a result of late-November rulings on two northern British Columbia cases by the Supreme Court of Canada (see Daily GPI, Nov. 30).

The decisions limited the responsibilities and liability of companies operating among aboriginal communities, saying the primary duty of dealing directly with them resides with the provincial or federal Crown, as the government is known legally in Canada. The high court said companies can only be made to carry out processes of consultation and accommodation, and that there is no aboriginal veto right on industrial projects that cater properly to community interests.

Specialists in the field, after digesting the unanimous rulings crafted by Chief Justice Beverley McLachlin, describe them as true landmarks that should go to far to cast light on a murky area in Canada. "What is clear is that the law of Canada no longer saddles industry as a surrogate for the purposes of discharging Crown consultation and accommodation duties to aboriginal peoples," said a circular to industry by the Vancouver law firm of Clark, Wilson. "As a practical matter industry strategies for consultation should continue unchanged," with the odds of them working improved so long as they follow proper procedures that lawyers and company native affairs department can now develop with greater confidence than ever before.

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