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Northwest Territories Blamed for Mackenzie Project Delays

Elected northern Canadian leaders have thrown cold water on the latest initiative in a decades-old industry quest for a clear regulatory path toward opening the Northwest Territories (NWT) to natural gas development at a businesslike pace.

Despite repeated and increasingly urgent warnings that the stalled Mackenzie Gas Project highlights severe regional weakness that jeopardizes hopes of ever generating significant arctic investment and employment, the territorial government has rejected a blueprint for efficiency.

After mulling a plan for imposing structure and order on a maze of northern regulatory authorities for 11 months, the NWT cabinet issued a response that in effect calls for more of the region's notorious old habits of further studies and marathon work on building an elusive consensus on improvement.

The reform scheme was proposed last May by Neil McCrank, now a senior Calgary lawyer after retiring from a long civil service career that included terms as Alberta deputy justice minister and chairman of the Alberta Energy and Utilities Board. His report on the NWT was commissioned by federal Indian Affairs and Northern Development Minister Chuck Strahl in late 2007, after the C$16 billion (US$13 billion) Mackenzie project slid into a limbo of awaiting a much-delayed regulatory approval decision amid softening gas prices and stubbornly high construction costs.

The northern governance apparatus is "a little bit of a rat's nest," a recent Calgary industry conference heard from a frustrated Bob Reid, president of the pro-development Aboriginal Pipeline Group, which holds a one-third ownership interest in the proposed Mackenzie Gas Project.

McCrank, whose credentials also include an engineering degree, laid out plans for overhauling a proliferating array of northern agencies into a clear, predictable structure akin to the law courts or Alberta's comparatively simple and brisk energy projects regulation. By his count, aboriginal land claim settlements since the early 1980s have spawned 17 regional regulatory authorities across the NWT.

The regulatory web is poised to grow by up to eight more agencies under three proposed additional claims settlements that are still under negotiation with northern Dene and Metis communities, McCrank said. At a recent Edmonton conference, he joked that the regulatory business is becoming the only healthy northern industry.

McCrank was only half-kidding. In his report for Strahl, whose national Conservative government is an enthusiastic supporter of northern gas development as a way to wean the NWT off heavy federal subsidies by building independent livelihoods, the Calgary lawyer recommended two improvement options.

As option one, the simplest and most effective alternative, he suggested turning decision making over to a single native agency with "quasi-judicial" or law court-like power and give it authority to make final decisions. As a side benefit, this approach would eliminate ever-present confusion owed to the federal cabinet's continuing reservation of rights to interfere and reverse any of the northern authorities' actions.

McCrank's second option is more complicated but also gentler on the old structure of separate community regulatory boards. He suggested preserving current native agencies as administrative bodies able to review industrial plans and make recommendations to his proposed single NWT regulatory tribunal, working like an appeal court. The local authorities would not have quasi-judicial decision powers and Ottawa would recognize the central aboriginal agency as "final recommender" of project approvals and conditions. To coordinate the process, McCrank suggested creating a northern counterpart to Ottawa's two-year-old steersman agency for industrial schemes in the rest of Canada, the Major Projects Management Office, known as MPMO for short.

Both McCrank's options include emphasis on "capacity," meaning training judge-like agency members and their advisory technical staff up to professional levels. This priority is rooted in recognition that it takes more than temporarily appointed local amateurs to deal with projects like the Mackenzie pipeline or the industrial spinoffs it is expected to spawn if it is ever built.

The NWT government's response, in a 36-page statement, makes it plain that territorial politicians in Yellowknife want no part of any scheme liable to annoy aboriginal communities and voters or paid members and staff of their regulatory agencies. The document replies in similar vein to previous official nudges from Ottawa toward reform, dating back to 2005, as well as to McCrank's proposals. Like Strahl's Tory cabinet, the previous national Liberal government had high hopes for a northern gas development breakthrough.

"Extensive restructuring is not required at this time," the territorial government insisted. Instead, there should be "targeted changes...to ensure the system operates as intended." A central theme of the land claims settlements is direct participation by communities in decisions on projects that affect traditional lifestyles. Northern Canadian customs also include an unwritten law that decisions require consensus rather than simple majorities. There are no political parties or ruling partisan majorities in the NWT legislature.

The Yellowknife regime maintains "regulatory improvement is an ongoing process. The details of the approach may evolve over time in response to additional research, changing conditions and engagement with the federal government, aboriginal government and stakeholders."

Creation of yet another agency -- a northern major projects management office -- is the only proposal by McCrank that the territorial government is prepared to entertain. The official Yellowknife reply to him said there could be "consent to the exploration of the concept of a MPMO for the north, to the extent that it is tailored to northern needs."

Those needs include keeping all options open for fulfilling two abiding northern visions of a happy future. The dreams are a "devolution" deal, whereby Ottawa formally turns over resource ownership and royalties to territorial authorities, and "future rapid increases in the level of resource development."

There are no predictions about when the high expectations might come true. There is, however, an admission that "if not properly implemented, the establishment of an MPMO would add an unnecessary layer onto the system."

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