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Mackenzie Valley Pipeline Project's Costs, Environmental Impact Trimmed

An engineering review has shaved about 4% off forecast costs of the proposed Mackenzie Valley Pipeline and reduced its environmental footprint, the sponsors have told Canada's National Energy Board.

A series of adjustments netted savings of C$178 million (US$153 million), says a filing submitted as the NEB and the northern environmental Joint Review Panel hold planning conferences for public hearings expected to begin early in 2006.

"Marginal" savings on tolls are forecast but no precise figures are disclosed. Detailed information on pipeline issues remains a disputed area in preliminary exchanges of written evidence, with prospective users of the system in procedural duels over confidentiality sought by the ownership consortium of Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada.

The pipeline, forecast to cost C$4.8 billion (US$4.1 billion) when construction applications were filed a year ago, accounts for 68% of the Mackenzie Gas Project's total price tag of C$7 billion (US$6 billion).

Production, gathering and processing facilities on the Mackenzie Delta were forecast to cost C$2.2 billion (US$1.9 billion).

The design changes chiefly dropped one compressor station and shortened the pipeline's length by 26 kilometers (16 miles) to a new total of 1,194 kilometers (746 miles). Requirements for construction camps and roads were also reduced.

Even minor modifications potentially save time as well as money because Canada's Northwest Territories remains a hotbed of aboriginal resistance and environmental criticism. Roving hearings by the NEB and the review panel are expected to visit all significant territorial population centers take much of 2006, with a long lineup of northerners gearing up to make statements to the agencies in between lengthy appearances by expert witness groups.

Following a November decision by the sponsor consortium to press ahead after a seven-month pause to negotiate consent from a majority of aboriginal communities, the arctic project is again being relied upon as a supply source in official gas market forecasts.

An advance summary of an annual fall state-of-the-industry review by Natural Resources Canada predicts the Mackenzie project will be built and eventually increase its initial delivery capacity by about 40%. The federal energy department's forecast anticipates average deliveries of 1.6 to 1.7 Bcf/d. The plan calls for the line to open at 1.2 Bcf/d and then increase delivery capacity with additions of compressor power to a maximum 1.9 Bcf/d.

The federal energy department also echoes fall projections by the NEB suggesting the arctic is no longer the biggest potential source of new Canadian gas supplies. The role of leading hope has been turned over to coalbed methane, still a fledgling play in Canada but growing rapidly.

By 2020, Ottawa's energy economists predict western Canadian unconventional production (as coal seam gas is often officially known north of the U.S. border) will be one Tcf per year, or two-thirds greater than annual arctic deliveries of 0.6 Tcf. The Canadian officials also predict Alaskan gas will flow to southern markets by 2020, at a rate of 1.9 Tcf per year.

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