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Northwest Territories Demands on Mackenzie Project Escalate

A blunt greeting has been given to the newly elected Conservative regime in Ottawa by a Northwest Territories government out to parlay northern gas development into a new economic deal for the Canadian Arctic.

Good northern relations will cost more than keeping promises -- led by a C$500 million (US$425 million) "socio-economic impact fund" -- created by former deputy prime minister Anne McLellan before she lost her Edmonton seat in the Jan. 23 election defeat of the national Liberal government.

"It is not enough," the territorial government says in a written message to the Mackenzie Gas Project Joint Review Panel, which northern leaders are taking every opportunity to relay to other ears in high places across Canada.

The National Energy Board (NEB) has final say on approving the C$7 billion (US$6 billion) project but pledged to incorporate the panel's findings in its decision due by mid-2007. When the NEB opened the pipeline hearings Jan. 25, chairman Ken Vollman told a standing-room-only crowd of community and industry leaders "talking to the Joint Review Panel on these issues is talking to the National Energy Board."

The territorial government's 74-page document includes 73 recommendations on topics ranging from protecting archeological sites and streams to priority hiring of local workers and contractors.

The wish list is the details of a larger message to Ottawa. Northern leaders want to be like Albertans -- in control of their natural resources, and equipped with revenues from exploiting them to make their own decisions on adaptations to industrial and population growth.

McLellan's fund was to be a trust, built gradually by 10 annual C$50 million (US$43 million) installments, for locally determined uses by widely scattered native communities along the 1,200-kilometer (750-mile) pipeline route through the Mackenzie Valley. She did not have time before the election to set up the account with legislation.

Merely coping with "forced growth impacts" of resource industry development -- by maintaining current standards of northern policing, health, welfare, transportation, education, and employment services -- is forecast to cost the territorial government an estimated extra C$475 million (US$404 million) over 10 years. The gas project is forecast to cause about half the strain, with the rest generated by other expanding activities led by diamond mining.

The message to Ottawa is that a generations-old northern pattern of territorial complaining and pleas for help can be changed for the better. The Tories can make a difference by finishing marathon "devolution" negotiations on transferring at least some form of province-like stature.

The Northwest Territories expect to obtain only a tiny share in benefits of the gas development so long as Yellowknife remains a subsidiary of the federal government with no income sources of its own.

Territorial personal tax revenues during construction of the gas project are forecast to be only C$10 million (US$8.5 million) a year. Corporate and business taxes are unpredictable. Those depend on head office locations and the taxable status of contractors and suppliers, or factors Yellowknife has little ability to influence.

Once the proposed pipeline and three initial gas fields on the Mackenzie Delta go into operation, federal revenues are forecast to average C$377.8 million (US$321 million) a year.

But the territorial government is expected to net only C$21.8 (US$18.5 million) after "offsets" under a "formula financing" system claws back all but 5% of gas-related revenues by reducing various federal grants.

Like a land claim settlement that would improve the Deh Cho region's attitude as the last native holdout against the gas project, territorial "devolution" was mired in prolonged, inconclusive negotiations when the government changed in Ottawa.

Unlike the Deh Cho along the southern 40% of the pipeline route, territorial Premier Joe Handley and Industry Minister Brendan Bell are avid supporters of the project and cooperating with the sponsors at every opportunity. But the territorial government is also warning the review panel that a continuing impasse in talks with Ottawa would jeopardize chances of coming up with a clear plan for coping with industry.

"The earliest date for the transfer of public lands and resources, and the related resource revenues, is 2008," the panel is told.

"The result for the government of the Northwest Territories is uncertainty regarding its fiscal ability to address the impacts of the project that fall within its responsibility. The proponents also acknowledge (in the gas development's environmental impact statement) the profound financial difficulties that could face the territorial government."

Handley and Bell have wasted no time in letting the Tories know they have a chance to make northern and industry friends by stepping into the breach left by the defeated Liberals. As the votes were counted Nov. 23, both leaders were in Calgary to add a territorial flavor to the victory celebrations in the home city of Prime Minister Stephen Harper and Indian Affairs and Northern Development Minister Jim Prentice. Within days of his appointment, the minister pledged to go to work on creating favorable conditions for northern gas and pipeline development. The effort remains a work in progress still in the talking stages in government agencies and committees, but the marathon northern pipeline hearings give Ottawa's changed officialdom time to catch up with the Mackenzie project.

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