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Federal-Provincial Authority Issue Clouds Mackenzie Project

Canada's beleaguered Arctic natural gas development plan has ignited a classic constitutional law debate on federal versus provincial jurisdiction over pipelines -- and pleas by project sponsors and supporters to create a special, separate dueling arena for the lawyers.

When the feuding factions met Thursday in Calgary to work out rules for the contest, the National Energy Board (NEB) was reminded that it already decided not to let constitutional wrangling prolong the regulatory review of the Mackenzie Gas Project.

The decision was made two years ago, after attorneys for northwestern Alberta's protesting Dene Tha' aboriginal community made their first formal regulatory motion attempting to turn the Arctic production, pipeline and environmental proceeding into a landmark case in constitutional law.

The NEB ruled it did not have to determine, before reviewing the northern scheme, whether it should also seize power to approve the development's southern-most 60 miles of "connecting facilities" inside Alberta to the top of TransCanada PipeLines' Nova provincial gas-gathering grid. A project division of labor, credited to cost as well as jurisdictional considerations, assigned construction of the link to TransCanada and approval to the Alberta Energy and Utilities Board (AEUB).

Without venturing into the thorny legal thickets of Canada's constitutional division of power between the federal and provincial governments, the NEB said it stood ready to respond if some legal development made it take responsibility for the Alberta pipeline connection. A Mackenzie project approval would only need to include a condition requiring permission to build the Alberta link from the appropriate authority whatever that turned out to be, the NEB said. Effects of the overall project on the Dene Tha' would be considered by the parallel environmental and socioeconomic Joint Review Panel of federal, Northwest Territories and arctic aboriginal authorities, the NEB added.

In preliminary written submissions to the NEB on the second Dene Tha' attempt to open the constitutional can of worms, the Alberta Department of Energy indicated the province stands as determined as ever to defend its jurisdiction. If the NEB decides the Dene Tha' motion for a jurisdictional review has enough merit to be considered, Alberta says it will move a counter-motion for the issue to be transferred to the AEUB where TransCanada has filed a construction application for the southern-most link in the proposed Mackenzie pipeline.

Project sponsors Imperial Oil, Shell Canada and ConocoPhillips Canada and TransCanada, urged the NEB to set up a separate proceeding for the constitutional quagmire if it finds there must be a resolution.

"Adjudication of the Mackenzie Gas Project application should not be held hostage by the adjudication of the (Dene Tha') motion or any subsequent actions that are related to it," TransCanada said.

Two years after their first attempt to turn the northern pipeline regulatory review into a landmark constitutional law case, the Dene Tha' have won a procedural ruling by the Federal Court of Canada. The court's trial division held the Alberta natives were wrongly treated by being made to participate in the case only as interveners and excluded from a role in forming the panel and setting its agenda.

The federal government promptly appointed a special commissioner to look into Dene Tha' concerns. At the same time federal lawyers are appealing aspects of the decision that suggested the panel's report will be incomplete until the Alberta natives are accommodated, making it impossible for the NEB to make a final decision on approving the entire arctic project.

The Dene Tha' say any panel findings regarding their interests cannot be enforced on the AEUB. About two years of formal consultations between the aboriginal community and TransCanada -- including money to pay the natives' participation costs and expert consultants -- failed to make peace.

The dispute involves one of the murkiest areas of Canadian law. On the surface the issue looks simple. In theory, pipelines or other such public works are federal concerns when the services cross provincial or international boundaries. But Canadian practice is a patchwork of inconsistencies arising as much from history and custom as legal theory.

British Columbia's Westcoast gas-gathering grid, for instance, comes under NEB jurisdiction and always has. Yet development of Nova's Alberta network and its tolls have been matters left in the hands of the AEUB since the birth of the Canadian gas industry. Offshore of Canada's East Coast, oil and gas production are governed by joint federal-provincial agencies, while pipelines crossing provincial or national boundaries are regulated by the NEB..

Exactly what the Dene Tha' hope to achieve is no clearer than the rest of the case. Some objectives are straightforward and have been pursued in the formal consultations with TransCanada.

The northwestern Alberta natives have asked for part-ownership of the connecting facilities and some form of tax-like levy on the 60-mile stretch of pipe. Although those demands have been rejected, there is speculation that new negotiations could develop.

But the case raises larger, less tangible issues including Dene Tha' hopes for recognition of claims to undefined rights over a vast area of Alberta, British Columbia and the southern Northwest Territories, which lies outside their treaty land reserve but they regard as a traditional hunting ground. The case also raises issues of status and stature, with the Alberta natives pressing for recognition on a par with the Northwest Territories aboriginal communities participating in the arctic pipeline review.

The Dene Tha' are on their own in the dispute. The northern native settlements affected by the gas project -- the Inuvialuit and Gwich'in on the Mackenzie Delta and the Sahtu and Deh Cho in the Mackenzie Valley -- are notably absent from the proceedings, making no submissions or public comment of any kind.

The NEB gave no hint of which way it is leaning on the case. Board counsel only set a target of the week of Jan. 15 for drafting a written summary of positions taken at a Jan. 11 conference of counsel involved in the dispute, to be followed by further comments from the lawyers by Jan. 19.

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