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Proposed Mackenzie Gas Line Likely, Says ExxonMobil President

The president of ExxonMobil Corp. said Canada's C$7 billion ($5.9 billion) Mackenzie Valley natural gas pipeline will "ultimately get across the finish line," likely before the rival gas line in Alaska. His comments were mirrored in statements last week by a former chair of the Aboriginal Pipeline Group (APG).

The gas line, as proposed, would carry about 1.9 Bcf/d of gas to Alberta pipelines, which then would be routed to Canadian and U.S. markets.

Following a speech to the Canadian American Business Council, Rex Tillerson told reporters Tuesday that Imperial Oil Ltd., in which ExxonMobil owns a 69% stake, is nearly ready to request public hearings for the Mackenzie line proposal. Imperial is leading a consortium of producers in building the Canadian pipeline, including Shell Canada Ltd., ConocoPhillips and the Aboriginal Pipeline Group.

On Thursday, Nellie Cournoyea, CEO of the Inuvialuit Regional Corp. said the pipeline consortium has been "negotiating" on benefits agreements "and "I guess the best I can tell you right now is we are very close and we really expect on Nov. 18 there's going to be a positive announcement."

Cournoyea, who was speaking to the Calgary Chamber of Commerce, is negotiating with Imperial to resolve the access and benefits arrangements for native tribes that will be affected by the pipeline. She also is the former chair of the APG and a former premier of the Northwest Territories.

Tillerson's and Cournoyea's comments coincide with a deadline set by the National Energy Board (NEB) last month. The NEB is planning a pre-hearing planning conference in the Northwest Territories in early December to provide information on the possible hearing process for the Mackenzie project. NEB informed Imperial it had until Nov. 18 to announce whether it was ready to proceed to the public hearing stage. If Imperial does not inform NEB of its intentions by that date, the conference will be postponed, NEB said.

Tillerson's positive comments mark a drastic change from statements by Imperial CEO Tim Hearn earlier this year, when Hearn criticized Canadian regulators for dragging their feet (see NGI, April 25). At that time, Imperial halted field work on the Mackenzie project, citing unforeseen demands by native groups and the slow regulatory process.

However, Tillerson praised the cooperation since then among the producers, aboriginal groups and the Canadian authorities, citing the progress made over the past few months. Among other things, Ottawa has since committed to spending about C$500 million over 10 years to address social needs among Northwest Territories' aboriginal groups, which were concerned about the pipeline's effects on the region.

Tillerson also downplayed concerns about possible shortages of steel and manpower, should both the Alaska and Mackenzie pipes be built at the same time. ExxonMobil CEO Lee Raymond discussed progress on the Alaska line in another forum (see related story). Even though finding enough supplies may be difficult, "there is sufficient manufacturing capacity out there," Tillerson told the Toronto Globe and Mail. "It will likely have to come from multiple sources to supply both the steel for Mackenzie and subsequently for the Alaska pipeline as well."

Meanwhile, in a letter to Raymond, the Sierra Club said the Mackenzie pipeline will create more environmental damage than the proposed Alaska gas line, and said the Canadian line also will increase greenhouse gas emissions.

"The Alaska pipeline would be much longer than the Mackenzie Valley pipelines and carry three times as much gas, but is likely to cause less ecological damage," the Sierra Club directors Elizabeth May and Carl Pope said in a letter to Raymond. "It may be the lesser environmental evil." The Mackenzie route, they noted, includes more intact forest and tundra.

Also, while the Alaska pipeline would directly supply gas to U.S. markets, the Mackenzie route is expected to increase Alberta's oilsands production, said the letter. "Alaska gas could conceivably serve to reduce North American greenhouse gas emissions by displacing the use of coal and oil, whereas Mackenzie gas used to produce tar sands oil would result in large increases in Canada's greenhouse gas emissions."

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