A political ally, the Northwest Territories government, has stepped forward to try restoring momentum to Canada's faltering Arctic natural gas project. The territorial government is supporting the C$7 billion (US$5.6 billion) Mackenzie Gas Project so enthusiastically that it is taking a chance on angering one of its biggest constituencies, the Deh Cho aboriginal population along the southern 40% of the proposed Mackenzie Valley pipeline.
The territorial resources, wildlife and economic development department -- speaking on behalf of the entire administration in Yellowknife -- takes a clear stand in a new policy statement to the National Energy Board. The formal message, delivered to the continuing regulatory review of the project, urges the NEB not to let the Deh Cho stop the project.
The board is asked to mind a higher public interest. That public interest is a blend of rising expectations and deepening worry that northern gas will be forever frozen out of development if the second Mackenzie project fails.
The anxiety spread since the partners halted field operations in the spring until native communities along the route grant land access and benefits agreements. "The pipeline represents employment, investment and business opportunities and the pride of becoming a net contributor to Canada's economic well-being," the territorial government says. "It offers self-reliance and the opportunity for Northwest Territories residents to provide a good standard of living and quality of life for their families." This could be the last chance for arctic gas, the territorial government warns.
Government must get past resistance by a native group whose tactics include refusal to join the part-owner Aboriginal Pipeline Group, denials of local land access permits, and protest lawsuits in the Supreme Court of the Northwest Territories and the Federal Court of Canada. The territorial government acknowledges the source of the conflict. Unlike the Inuvialuit, Gwich'in and Sahtu of the Mackenzie Delta and central Mackenzie Valley, the Deh Cho have no land claim settlement.
They still lack the missing link that led Justice Thomas Berger's Mackenzie Valley Pipeline Inquiry to stop the first incarnation of the arctic natural gas project a generation ago. The territorial government pledges to do its best to help fill the gap by being "a strong supporter" of a land claim negotiations marathon that is in its seventh year with no sign of concluding any time soon, the Deh Cho Process.
"However," says the statement to the NEB, "30 years after the Berger Inquiry's report, taking into account the public interest, the Government of the Northwest Territories cannot agree that a single community or region should have a veto over approval of the proposed project."
"The Delta is a significant resource and likely the one that can be developed most quickly and efficiently as an extension of conventional North American reserves. However, it is by no means the only resource." The competition is formidable: "The large reserves in Alaska and the large potential for natural gas to enter the North American market as liquefied natural gas mean there is no guarantee the Delta reserves will be developed. In fact, if they are not developed now, they likely will not be developed for many years to come and potentially might never be."
An attempt is also made to set an example to the Deh Cho of having confidence that land claim negotiations will succeed without holding the gas project hostage. The NEB is urged to approve construction without waiting for completion of "devolution" talks with Ottawa on transferring province-like resource ownership and royalty rights to the territorial government. Conditions on territorial support for the Mackenzie project include environmental protection, a benefits agreement, and assurance the pipeline will be open to all gas production companies.
The Deh Cho are protected, the territorial government adds, pointing to interim land claim agreements of 2001 and '03 that give them revenue shares and a say in development if gas development reaches their region. Great growth is on the horizon, the NEB is told. "Just as the original oil discoveries in Alberta in the 1940s started an industry which is reaching its peak some 70 years later, the development of territorial oil and gas reserves has the potential to fundamentally alter the territories' place in the Canadian federation over the very long term."
The territorial government makes it plain that its support applies to the entire gas industry rather than solely the inner circle of the Mackenzie project's owners: Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada. With help from former NEB chairman Roland Priddle as an expert witness, the territorial administration throws its weight behind 10 Canadian gas producers that have asked the board for regulatory intervention to ensure the Mackenzie pipeline is an open-access transporter.
The territorial government says "access to such a significant corridor as the Mackenzie Valley ought only to be given to a project proponent that is prepared to develop it in the interests of all present and future users...terms and conditions of access, toll levels and design are all very important considerations." The project owners' anchor fields may represent as little as 10% of the potential for Canadian arctic gas production, Priddle says in a submission to the NEB. Besides the project owners, more than 15 companies are already involved in 65 documented significant discoveries in the region.
The potential is currently rated at up to 61 Tcf, and northern Canada remains sparsely explored compared to the western provinces which are in turn lightly tapped by U.S. standards. Echoing gas producers outside the project ownership group, Priddle urges the NEB to enforce open access to the proposed Mackenzie line including a common and fair toll regime for all and the possibility of adding "laterals" to serve new gas fields as they develop. The open-access principles should apply to the project's proposed central processing site at Inuvik and a liquids byproduct line planned for the same right-of-way as the gas route, he suggested.
On behalf of the territorial government, Priddle also advocates adopting the rolled-in costs approach of uniform tolls for all shippers regardless of their vintage on the pipeline, a method used by other Canadian gas transporters and tentatively adopted for the proposed Alaska system by Washington's Federal Energy Regulatory Commission. The Mackenzie Valley Pipeline has considerable importance to the entire Canadian gas industry, Priddle writes in his NEB submission. The project "is likely the last large intra-Canada gas pipeline that will come forward for the NEB's approval...and will complete the national pipeline network." The project can open up a new supply basin rather than just connect dormant discoveries by its ownership group of producers.
"Properly designed and regulated, the Mackenzie Gas project will access in the national interest completely new gas resources in the Delta, the broader Mackenzie-Beaufort area and in the Mackenzie Corridor," Priddle told the NEB. "And the MGP will provide gas supply to keep existing transmission pipelines operating near capacity by supplementing probably declining volumes from sources south of 60 degrees North (latitude)."
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