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Mackenzie Gas Project Struggles in Regulatory Swamp

Canada's National Energy Board (NEB) has finished collecting witness testimony about the proposed Mackenzie Gas Project after 11 months of roving arctic hearings, but the regulatory marathon is far from over for the northern pipeline and production proposal.

"Much remains to be done, and we intend to get it done," NEB chairman Ken Vollman told the final day of "evidentiary phase" hearings in the chief Mackenzie Delta town of Inuvik. Unfinished business includes a protest motion by Alberta's Dene Tha' First Nation, updated cost estimates awaited from project leader Imperial Oil, a federal government report on aboriginal consultation, reviews of proposed approval conditions and final arguments by all participants.

The NEB will only make its final ruling on the arctic natural gas project after receiving a report from an environmental joint review panel of federal, Northwest Territories and aboriginal authorities.

The panel's witness hearings are scheduled to continue until next spring and may be extended to include special sessions for the Dene Tha'. The Alberta native group recently obtained a court ruling that it was not properly consulted when the regulatory apparatus for the northern pipeline was created five years ago (see Daily GPI, Nov. 14). The federal government has appointed a special native consultation commissioner to deal with the Dene Tha'. The government is also appealing aspects of the legal decision.

As Canada's northern pipeline hearings headed into their second year with no one setting firm target dates for the case to be finished, Tony Fogarassy, a Vancouver lawyer who guides industry across aboriginal terrain, painted a vivid picture of legal and political swamps that increasingly bog down Canadian projects.

"The law is so amorphous that everybody is sort of walking in molasses. It's so hard to move forward. Nobody is sure if you're doing it right," Fogarassy said in an interview. It is cold consolation for the Mackenzie project, but its tribulations show signs of putting a better path on the horizon. Pipeline sponsors may eventually reach solid ground on a trail being blazed this fall in Vancouver by the Federal Court of Canada, Fogarassy said.

The immediate result of Judge Michael Phelan's ruling was a victory for a protest lawsuit by the Dene Tha' in the High Level area of northwestern Alberta. The verdict cast fresh doubt on the schedule for the Mackenzie project and contributed to unresolved uncertainties over its tentative price tag of C$7.5 billion (US$6.75 billion).

But in the long run -- depending on how further court proceedings on implementing the decision and the legal appeal turn out -- "it's a positive," Fogarassy said. The ruling takes a first stab at answering one of the murkiest questions faced by Canadian corporations, natives and governments. The question arises from a doctrine created by 1980s constitutional reform and recent rulings by the Supreme Court of Canada. First Nations inherit ancestral rights and everyone else has a duty to consult aboriginal communities affected by projects. What does this big, noble idea mean in practice?

Apart from a battle over the legal principle, fought hard for the Dene Tha' by Victoria lawyer Robert Freedman, the Canadian arctic gas project is no revolutionary development for northern Alberta. By industry standards, construction of the Alberta link will be a routine job. It will not introduce a new type of activity into the area, which has been a gas drilling hot spot since the 1990s.

South of the Northwest Territories boundary the plan only requires a 103-kilometer (64-mile) connection from the proposed Mackenzie Valley pipeline to the top of TransCanada PipeLines' Nova gas gathering grid in Alberta. About one-third of the Alberta link goes into an existing TransCanada right-of-way.

About 400 tradesmen, housed well apart from aboriginal settlements in work camps on sites already used by industry, are expected to build the Alberta link in three to four months for C$212 million (US$132 million).

The Mackenzie project bogged down in Alberta by trying a path that only took into account federal and provincial jurisdictional niceties on the regulatory side, and cost savings on the operations level.

Government and industry leaders alike ignored Dene Tha' demands rooted in aboriginal rights claims. The group's claimed heritage is an ancestral hunting and trapping territory that includes parts of northern British Columbia and the southern Northwest Territories.

An arctic gas project division of labor gave the Alberta link to TransCanada instead of to the Mackenzie line ownership consortium of Imperial Oil, Shell Canada, ConocoPhillips, ExxonMobil and the Aboriginal Pipeline Group. Approval of the southern connection was left up to the Alberta Energy and Utilities Board.

The 2,500 Dene Tha' are not renowned as hostile to business. Many work in industry. Their native government has a co-operation agreement with TransCanada and is a partner in five drilling rigs with Calgary contractor Western Lakota Energy Services. But the Dene Tha' claimed they were wronged because they were excluded when the NEB and a dozen territorial and Arctic native authorities formed the environmental joint review panel.

The Alberta natives were right, the judge ruled in ordering the panel to stop all hearings that in any way touch on Dene Tha' interests until the community is brought into the process in a way that recognizes their aboriginal heritage. The positive side of the decision is a route that the judge proposed out of the impasse and will be considered by further court proceedings in Vancouver, Fogarassy said. The idea is a Canadian first and has potential to mature into an improvement for all future projects in native areas, he added.

The potential breakthrough is a recommendation to appoint a "chief consulting officer" when a project raises aboriginal rights issues, he said. The special agent would be appointed in the planning stages of a project. A consulting officer would be akin to a chief negotiator in a land claims case, with power to make all involved focus on issues raised by industrial plans.

The Dene Tha' ruling said: "A striking feature of this case is that while many government departments, agencies and boards were involved, no one seemed to be in charge or at least responsible for consultation with First Nations." Passing the buck has to stop, the judge warned. "It is necessary to fix some minister or person with responsibility, whose actions are subject to accountability in meeting the duty to consult," the judge wrote.

"The Crown -- the government -- needs to play a more effective role," agreed Kim McCaig, operations vice-president of the Canadian Energy Pipelines Association. "We really do want regulatory certainty so we can understand how the process is going to work and we can make informed economic decisions," McCaig said in an interview.

"This is not just a Mackenzie project issue. In the broader (industrial development) context we're going to continue to have uncertainty until we figure out how to do this aboriginal consultation -- all of us, whether we are in industry, governments or the communities."

The federal government got the message. While appealing legal aspects of the court ruling, Indian Affairs Minister Jim Prentice announced the appointment of Tim Christian, a former University of Alberta law dean and veteran aboriginal rights negotiator, as chief consultation officer for the Mackenzie project in the Dene Tha' region.

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