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Canadian Government Pledges C$500 Million to Tribes to Jumpstart Mackenzie Pipeline

An agreement announced last Monday among federal and provincial governments and five Indian tribes -- that includes a C$500 million payment by the Canadian government -- may be the lynchpin that finally makes the stalled multi-billion dollar Mackenzie Gas Project more than a pipe dream.

The governments of Canada, the Northwest Territories and representatives of the Gwich'in, Kahsho Got'ine, Inuvialuit, Tulita/Deline and Deh Cho tribes agreed on a socioeconomic fund that calls for the Canadian government to pay C$500 million over the next ten years to address the socioeconomic impacts on communities in the tribal lands the pipeline will cross.

Contributions to the fund will depend on project milestones being met. The money will be turned over to the provincial government to parcel out. Parties have agreed to work together to resolve outstanding technical issues related to the fund.

Deputy Prime Minister Anne McLellan, who is chair of a federal cabinet pipeline committee, said the agreement recognizes the division of responsibility between government and the producers sponsoring the project. The producers are accepting obligations to help aboriginal communities participate in the development with education, training, employment and business opportunities. The government money will be aimed at larger issues that tripped up project negotiators last spring such as support for health care, policing and cultural preservation, McLellan and government spokesman Ken Moreau said.

In an interview McLellan said details of the program remain to be worked out by a "working group" of aboriginal, territorial and federal officials, and the particulars are bound to vary depending on the community involved. She said the money may take the form of a single northern development trust fund or as several funds set up for each of the principal aboriginal groups.

"We as a government are sending a very clear signal that we believe in this project, and that benefits must accrue to the communities of the Northwest Territories," the deputy prime minister said. "Now it's up to the gas producers."

The agreement with the five tribes is one of a number of events affecting the project in the last 10 days. An agreement was announced last week between the Canadian government and the major holdout, the Deh Cho (see NGI, July 18), and a policy statement was issued by the Northwest Territories government declaring if the Mackenzie Delta reserves "are not developed now, they likely will not be developed for many years to come and potentially might never be." (see NGI, July 11).

Government leaders see the key to the project's success as getting it online before the proposed Alaska pipeline and potential new LNG imports to the continent. The target now is for 2009 to 2010, but that timetable is slipping. Pre-construction work was halted in April because of the lack of agreements with the Indian tribes, and project sponsors told the National Energy Board last week they would have to postpone public hearings on the project for at least two months.

Hearings had been planned for late summer or early fall. Now the producer sponsors, Imperial, Shell Canada, ConcoPhillips Canada and ExxonMobil Canada, have told the NEB they will be able to let them know a new date by late August or early September. All this is just the latest chapter in a project that was first proposed more than 30 years ago.

The battles to be fought in the hearing process include the more typical arguments over access, tolls and tariffs. Independent producers operating in the Mackenzie Delta area already have urged the NEB to ensure "equitable, fair and open access" to the proposed pipeline. Paramount Resources Ltd., which has large exploration interests in the central Mackenzie Valley, production in the southwestern Northwestern Territories and growth ambitions across the Canadian North, has insisted that open access to the Mackenzie delivery system must include a liquid-byproducts line as well as the main gas delivery system.

Paramount and drilling partner Apache Canada, along with Mosbacher Operating, and the Mackenzie Explorers Group, which includes Anadarko Canada, BP Canada, Chevron Canada, Devon Canada, EnCana, Nytis Exploration and Petro-Canada, have complained the project over-emphasizes the interests of the project owner group (see NGI, July 4).

The potential gas to be tapped by the 1.8 Bcf/d capacity pipeline from the Canadian Arctic, 800 miles to a connection with the northern end of TransCanada PipeLine Ltd.'s Nova grid in Alberta, is currently rated at up to 61 Tcf, although it is pointed out that in the absence of a pipeline, northern Canada remains sparsely explored. Eventually several thousand miles of gathering lines also will be required. The cost of the project is estimated at C$7 billion.

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