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NEB Considers Petition to Make Entire Mackenzie System Open Access

Newcomers to the Canadian arctic natural gas scene have fired the opening shot in a battle for access to transportation services in the C$7 billion (US$6 billion) Mackenzie Gas Project sponsored by the producer old guard.

After months of preliminary fencing the Mackenzie Explorer Group -- Anadarko Canada, BP Canada, Chevron Canada, Devon Canada, EnCana and Nytis Exploration -- has asked the National Energy Board to force open all the facilities sponsored by Imperial Oil, Shell Canada and ConocoPhillips Canada.

The struggle centers on the Mackenzie Gathering System (MGS), a 190-kilometer (120-mile) pipeline network that the project ownership group plans to build in the Mackenzie Delta. As proposed, the MGS would connect only three "anchor fields" owned by Imperial, Shell and ConocoPhillips -- Niglintgak, Taglu and Parsons Lake -- to the project's long-distance facilities. Those include a 285-mile liquid byproducts pipeline to the northern-most end of Canada's oil network at Norman Wells, as well as the planned (750-mile Mackenzie Valley Pipeline to the top of the TransCanada-NOVA gas system in Alberta.

A new formal motion filed by the explorer group calls on the NEB to assert jurisdiction over the Delta gathering system in order to regulate its tolls and tariffs including access rules. The move follows unsuccessful attempts, in months of preliminary paper exchanges and then weeks of hearings, to budge the project sponsors off a position that the gathering grid is a private, purpose-built field facility.

In writing and orally, the project owners have stuck steadfastly to a position that they would be prepared to accommodate newcomers to the MGS, but only as and when shipping contracts are signed. The project owners have also turned down repeated requests to redesign the gathering system in ways that the explorer group's engineers say are necessary to give it a built-in means of expanding enough to enable full development of new discoveries in future.

By refusing to cast the MGS as a common carrier like the long-distance parts of the Mackenzie system, the explorer group says the project owners are effectively limiting the potential for arctic supply development by concentrating on building only the most economical system for their own fields. Privately, critics more bluntly point out that the scheme would make the Canadian arctic the preserve of the producer in-group with legacy discoveries made in the last northern drilling boom in the 1970s and early '80s.

As the Mackenzie plan now stands, the explorer group motion complains that the project "would be free to favor owners over non-owners, to charge non-owners whatever tolls it wishes, and to refuse to expand the MGS." The arctic newcomers' alliance insists the entire project including the Delta gathering network, if forced open under NEB supervision, "can and should be designed, constructed and operated as a basin-opening, open-access transmission system that is subject to financial regulation in the public interest. Tolls charged would be just and reasonable for all services on the system, and the MGS would be expanded as required to provide additional capacity."

The explorer group was expected to accumulate plenty of allies as the case continued including other aspiring arctic gas producers and the Northwest Territories government. The territorial administration in Yellowknife retained former NEB Chairman Roland Priddle as an expert witness to support efforts to ensure the Mackenzie project becomes a true "basin-opening" piece of work. Mosbacher Operating Ltd. and Inuvialuit Regional Corp., business arm of the Delta aboriginal community, promptly urged the NEB to do whatever is necessary to ensure all new northern gas facilities are accessible to all developers of new supplies.

Virtually all concerned in the arctic gas case maintain the gas old-guard owners of the project are significantly underestimating northern supply potential by concentrating on well-established reserves available for shipping from the outset of development.

The NEB gave the project owners until early May to reply to the access motion and tentatively scheduled special hearings for early June, unless the dispute can be resolved by exchanges of documents.

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