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TransCanada CEO Pessimistic on Mackenzie Gas Project

Regulatory delays may kill the long-delayed Mackenzie Gas Project (MGP), TransCanada Corp. CEO Hal Kvisle said Wednesday.

Even with the Canadian government's decision last month to provide assistance to the project, the Far North natural gas pipeline project remains buried in bureaucracy, Kvisle told attendees at Cambridge Energy Research Associates' CERAWeek conference in Houston.

"I confess to some pessimism on the Mackenzie project, and it may well not proceed," Kvisle said.

The C$16.2 billion (US$13 billion) pipe would transport up to 1.9 Bcf/d of gas almost 1,200 kilometers (750 miles) along the Mackenzie River Valley to Alberta. There it would link to pipes that would carry gas to markets serving Canada and the Lower 48 states. For various reasons regulatory approval has been stalled for more than two years.

The on-again, off-again pipe was first proposed in the 1970s. In its current form, the MGP has been in planning and regulatory stages since 1999; 10 years ago the sponsors set a completion date of 2011. However, in December Canada's Joint Review Panel (JRP), one of two regulatory panels that has to approve the MGP before sponsors move forward, announced it would not complete a required report for about a year (see NGI, Dec. 8, 2008). The JRP had been expected to issue its findings early this year.

TransCanada has no stake in the proposed MGP, but it has the right to obtain 5% interest through its commitment to fund one of the project's sponsors, the Aboriginal Pipeline Group (APG). The APG has a one-third interest in the proposed pipeline; other MGP sponsors are Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada (which is majority owner of Imperial).

"I have great sympathy for the current government of Canada, which is doing everything it can to move the project forward," Kvisle told the morning crowd. "It inherited a mess that's been building up for a couple of decades."

The Canadian government in January pledged to provide support for the MGP by building "infrastructure" that would include roads and landing strips required for construction (see NGI, Jan. 26). Canada's Environment Minister Jim Prentice, who heads he cabinet committee responsible for the federal role in the proposal, stopped short of vowing, as he had previously, not to make the government a stakeholder. Prentice said the government's offer to the sponsors "includes a contribution to infrastructure and pre-construction costs and a sharing of risks and returns."

Prentice dismissed Kvisle's comments on Wednesday afternoon.

"I continue to be optimistic about the project," Prentice told reporters. "It's a very important project for our country."

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