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Mackenzie Sponsors Postpone Hearings Despite Positive Deal with Deh Cho

July 18, 2005
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Although one hurdle has been cleared from the path of the C$7 billion Mackenzie Valley natural gas pipeline, many remain, project sponsors emphasized last week following an economic development deal signed by the Canadian government and the Deh Cho First Nations. The deal resolved one of the major issues preventing development of the long proposed project.

The Deh Cho filed two lawsuits last September against the federal government, charging that they had been unfairly excluded from the pipeline review process. About 40% of the proposed pipeline would travel through the Deh Cho region, which is located in the southwestern part of the Northwest Territories. Provincial, federal and Deh Cho officials have been working together for several months to resolve the problems.

The federal government first offered a settlement in May, which was unanimously but conditionally approved by the Deh Cho chiefs and elders. Last Monday, Canada agreed to provide the native tribe with C$21 million (US$17 million). The total includes C$6 million (US$4.8 million) to participate in Mackenzie project regulatory reviews and C$15 million (US$12 million) to take advantage of gas industry business opportunities.

The money may eventually be deducted from future compensation by a land claim agreement now under negotiation. The lawsuit settlement also pledges that the future land claim deal will give the native community a new Deh Cho Resource Management Authority, a say in oil and gas exploration, and a watchdog role over the pipeline's environmental and economic effects.

Now, Canadian officials will work with the Deh Cho on a larger agreement on land claims and self-governance, separate issues which could take several years to resolve.

"We're relieved that the whole thing is finally done," said Deh Cho Grand Chief Herb Norwegian told the Toronto Globe and Mail.

Although the Deh Cho issue is settled regarding the Mackenzie pipe, work is still at a standstill. Imperial Oil Ltd., which is leading the efforts on the pipe, halted most of the work in April, citing slow regulatory progress and financial demands. Since Imperial called a halt to the work, other producers and business groups have complained about other issues, including open access. Nevertheless, the deal with the Deh Cho is a step in the right direction.

"It's encouraging," Mackenzie Gas Project spokesman Hart Searle said after federal Indian Affairs Minister Andy Scott announced the deal with the Deh Cho community along the southern 40% of the proposed northern pipeline.

"Certainly the halt to this one legal action is a hopeful sign. But that's just one piece of a bigger picture that still needs work," Searle said. Remaining obstacles include a second aboriginal protest lawsuit, by the Dene Tha' in northern Alberta, and unfinished negotiations on land access and economic benefits agreements with native communities across the Northwest Territories.

Deh Cho Grand Chief Herb Norwegian affirmed that is still a long way from being out of the woods as a result of the lawsuit settlement. "It does not mean the Deh Cho First Nations support the pipeline," Norwegian said. "We still have some very difficult negotiations ahead with the oil companies that want access to our lands."

While Canadian Finance Minister Ralph Goodale predicted over the weekend that the US$15 billion Alaska project will come second in the international race to tap northern gas, the Mackenzie group has yet to set a new schedule.

Field operations on the US$5.6 billion Mackenzie project were suspended in April until land access, benefits packages and an orderly northern regulatory process could be established. The pipeline completion target, originally 2009 or 2010, showed signs of slipping even before the consortium called time out. The negotiating effort continues including work towards a "common" or standardized agreement with communities along the 800-mile pipeline route, Searle said.

The Mackenzie consortium of Imperial, Shell Canada, ConcoPhillips Canada and ExxonMobil Canada was expected to clarify its plans last week, but told the National Energy Board (NEB) on Thursday that hearings on the project will have to be delayed for at least two months.

In a letter to the NEB, Imperial said the project would not be ready for hearings that were planned for late summer or early fall. "There are a number of outstanding issues that still need to be resolved prior to taking that next step," wrote project regulatory affairs manager Sandy Martin, an Imperial executive. The consortium hopes to be able to tell the NEB when the development will be ready for hearings in late August or early September, Martin added.

The board said it will be able to start proceedings about two months after receiving notice that the project is prepared for the final stage of the regulatory review. Preliminary exchanges of written evidence continue.

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