NGI The Weekly Gas Market Report / NGI All News Access

Review Panel Recommends Mackenzie Project With Conditions

After five years of study an environmental and socioeconomic Joint Review Panel for the Mackenzie Gas Project (MGP) cleared the regulatory path toward a possible go-ahead for the mega-pipeline to tap far North reserves, rejecting environmentalists arguments to dump the whole project and coming up with a suggested compromise in the decades-long land claims battle with the Canadian aboriginal Deh Cho Dene Nation. The panel's recommendation that the National Energy Board (NEB) approve the project sets the stage for about nine months of consideration by that agency.

The team of federal, aboriginal and Northwest Territories government representatives unanimously concluded it is "confident that, with appropriate policy and regulatory initiatives and responses to manage future developments built on implementation of the panel's recommendations, the MGP and future developments that might follow from the project could proceed in an acceptable manner."

However, delay of the project has raised fears among some that glutted markets and depressed prices have rendered the project obsolete.

The next steps are reviews of the panel's recommendations by project supporters and critics, exchanges of opinions and positions in documentary form, followed by final oral arguments before the NEB in April. The board has promised to hand down a decision, including any conditions, within five months of the last legal submissions or likely by the end of September.

The final structure of the decision remains open to change. The NEB is not required to adopt all or even any of the parallel review panel's recommendations and can adjust the suggestions it decides to accept to fit national government policy and economic requirements of the project as they emerge during the remainder of the hearings.

The review panel generated a lengthy wish list of scores of detailed recommendations on topics ranging from bear conservation to northern alcohol and drug abuse clinics, from 115 days of hearings in 26 communities and 5,000 written submissions. The agency took almost two years to collect the material, between February 2006 and November 2007, and then spent another two years on deciphering the evidence.

Although industry and government officials said they need time to review the bulky report, which fills two fat volumes plus a novella-length executive summary, the panel immediately won private praise for its handling of environmental and political issues that had potential to become project-breakers.

On the environmental front, the panel rejected repeated attempts by conservationists to have the Mackenzie project rejected on the grounds that it would do little more than fuel Alberta oilsands projects. The proposed production and pipeline capacity -- initially 1.2 Bcf/d, and eventually 1.9 Bcf/d -- about matches forecast gas fuel requirements for thermal extraction projects in the northern Alberta bitumen belt.

The panel, accepting repeated industry testimony that the northern gas and oil sands projects are entirely separate, said it "sees no viable way by which specific end uses could be assigned to or excluded from project gas." The agency also agreed with the industry that "mandating carbon neutrality and intervening in the market to specify preferred end uses for natural gas cannot be resolved on a project-by-project basis through the environmental assessment process. Rather, these matters must be addressed by governments through comprehensive climate change strategies."

On the political front, the review panel proposes compromises to let the gas project sidestep the oldest and worst sore spot in tangled northern Canadian aboriginal politics -- 20 years of failed attempts to settle land claims of the Deh Cho Dene, the dominant residents along the southern 40% of the proposed 763-mile Mackenzie Valley pipeline.

Along the northern half of the route, the Inuvialuit and Gwich'in on the Mackenzie Delta and the Sahtu in the central Mackenzie Valley are partners in the Aboriginal Pipeline Group that has an agreement to own a one-third share in the gas transmission system. Deh Cho community leaders have repeatedly attempted to hold the project hostage, saying it can only proceed if their land claims are settled.

The panel urges the NEB and all northern regulators to let the pipeline reach its initial target capacity of 1.2 Bcf/d and only postpone expansions until the Deh Cho come up with a land use plan for their claimed territory. The panel also suggests that failure to date to complete an economic benefits agreement with the Deh Cho should not prevent approval of the project. Instead, further negotiations are recommended.

The review panel said it "concluded that the adverse impacts of the Mackenzie Gas Project...would not likely be significant and that the project would likely make a positive contribution towards a sustainable northern future."

According to the panel's report, the MGP consists of:

Some have speculated that the advent of productive shale gas plays in the Lower 48 U.S. states might make a northern gasline, as well as a pipeline to tap Alaska's North Slope reserves, uneconomic. In April a ConocoPhillips Canada executive said the MGP had a good chance of beating an Alaska gas pipeline project to serve markets in the Lower 48 (see NGI, April 6, 2009).

The continued delay of the MGP this spring prompted Calgary-based producer MGM Energy Corp. to strike an agreement with Chevron Canada Ltd. and BP Canada to restructure an existing farmout agreement, allowing it to delay drilling and seismic activity (see NGI, May 11, 2009).

©Copyright 2010 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus