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Native Holdouts Pressed to Support Mackenzie Pipeline

After throbbing drums, wailing fiddle reels and whirling dancers provided a stirring opening in Inuvik Jan. 25 to Canadian northern pipeline hearings, a pro-development regional majority wasted no time in telling the reluctant minority to get in step.

The last native holdouts against the C$7 billion (US$6 billion) Mackenzie Gas Project have been told by peers who back it to use their right to buy into it for a bargain price by June 30 or lose their reserved piece of the action.

As the National Energy Board opened a scheduled year of hearings on the development, the Aboriginal Pipeline Group demanded the commitment from the reluctant Deh Cho First Nations in the southern Northwest Territories.

After five years of negotiations on the biggest native investment in Canadian history, one-third ownership of the proposed Mackenzie Valley Pipeline, group chairman Fred Carmichael said in an interview he sent a letter to the Deh Cho telling them they are running out of time.

"This project is going to go, I think, with them or without them," said Carmichael. He recently won reelection as president of the Gwich'in Tribal Council in Inuvik on a campaign platform pledging support for the Alberta-based gas industry's plan to grow an arctic arm.

The first reaction from the holdouts was irritation. "We don't accept deadlines on anything," Deh Cho Grand Chief Herb Norwegian retorted. "That's the attitude we get from imperialist oil companies."

But Norwegian did not rule out buying into the project by June 30. He indicated a deal might be done, on one condition. The federal government must act first by showing new willingness to break a months-old deadlock in land claims and self-government negotiations with the Deh Cho, he said.

The Deh Cho do not oppose environmentally sound development and a settlement with Ottawa would enable them to take pieces of the action, Norwegian said. "We might be able to fast track a lot of these issues," Norwegian said.

"What we're firm on is to make sure we can sustain ourselves and that we are the ones who benefit directly in our territory. If that happened, the Deh Cho would be right in the forefront."

Canada's newly elected Conservative government promised to encourage northern gas development during the winter national election campaign. Territorial leaders collected written pledges of support in principle from the Tories and New Democrats as well as the defeated Liberals during the campaign.

The action set the stage for cooperation on northern development from all the parties that have to work together to advance issues through Parliament under the minority government returned Jan. 23.

While work in Ottawa on political and aboriginal aspects of the project was expected to pause while the new regime appointed a cabinet and settled into its role, northern political veterans pointed out the Tory election victory could turn out to be a plus. Two of three northern land claim settlements that made it possible for the project to advance this far were made by previous Tory governments. Claim settlements are based on approaches that appeal more to Tories than Liberals -- decentralized government and self-reliance, the northern veterans observed.

Native participation is a cornerstone of the pipeline, project manager Randy Ottenbreit told the energy board. "We assessed fairly early on that aboriginal support was required."

The native pipeline partners, who along with the Gwich'in also include the Mackenzie Delta Inuvialuit and the central Mackenzie Valley Sahtu, have since 2000 reserved a 34% ownership of the aboriginal corporation for the Deh Cho. Partnership shares are sized to match portions of the pipeline route in each community.

The Deh Cho can close the deal for a nominal C$59 (US$50) by exercising their option to buy corporate birth papers or "units" for a legally symbolic price as founding stockholders until June 30, group president Bob Reid said. The price will jump if the target date is missed because the native company's next step will be to raise its C$1.5 billion (US$1.3 billion) share in pipeline construction costs from a banking and investment syndicate expected to include a score of financial institutions, Reid said.

Construction fundraising must be finished by the time the NEB approves the project in mid-2007, Reid said. "We need a solid ownership structure and strong corporate governance. You can't go into a major financing still negotiating who's in the partnership."

Although a late entry by the Deh Cho after the money deals close is conceivable, Reid said it would not be easy. "It's not impossible but it's going to be expensive and complex."

Other investors have shown interest in picking up the Deh Cho share, Reid said. Unlike production field parts of the arctic megaproject, the pipeline is virtually a guaranteed money-earner because its shipping tolls and revenues will be fixed as utility services regardless of gyrations in gas prices.

Rather than a politically inspired deadline rooted in old northern aboriginal rivalries, the call for a Deh Cho decision is just business, Reid said. "I hate to say it like this, but it's time to phone or get out of the booth. We really need to have them on board for business reasons."

The demand for action by June 30 was friendly, he emphasized. Carmichael's letter tells the Deh Cho "we really want you to join your brothers and sisters in the rest of the Mackenzie Valley."

Profits of C$20 million (US$17 million) a year will go to the Aboriginal Pipeline Group as soon as arctic gas starts flowing then grow to C$120 million (US$102 million) after construction costs are paid, Carmichael predicted. The initial profits will double if the newly elected Conservative government in Ottawa honors a loan guarantee pledge made by the defeated Liberals, he added.

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