NGI The Weekly Gas Market Report
Pipelines and producers are showering unanimous praise on a pledge by the Canadian government to prevent a repetition of the regulatory ordeal delaying and possibly aborting the Mackenzie Gas Project (MGP).
In the new federal budget for 2007-08, Finance Minister Jim Flaherty committed C$60 million (US$50 million) to creation of a regulatory coordination agency to be called the Major Projects Management Office (MPMO). The new MPMO will have a mandate to cut the average time for reviewing large developments in half to two years from four. The assignment is to ensure all agencies and government departments involved clearly identify issues and focus on resolving them.
“That is a really vital to move forward,” said Greg Stringham, vice president of the Canadian Association of Petroleum Producers.
Corporations on the supply side of the market are not the only potential winners, suggested David MacInnis, president of the Canadian Energy Pipeline Association.
“This will mean more timely job creation,” he said. “Governments will get their tax revenue sooner, and consumers will enjoy the moderating influence that moving additional supply to market will have.”
Too bad the MPMO comes too late to help the MGP’s arctic natural gas production and pipeline scheme recover some momentum, added Stringham.
Within hours of Flaherty’s budget address to the House of Commons in Ottawa, the MGP’s environmental and socioeconomic Joint Review Panel announced yet another extension of its roving hearings.
The decision added at least four months to the process, with panel officials saying it could run into the fall to complete reviews of unsettled matters ranging from the project’s effects on aboriginal rights to technical aspects of environmental engineering. When hearings started in February of 2006, the panel set a completion target date of the end of last year. The date was postponed to this spring, and no definite target is being set any more.
The panel grew out of an agreement orchestrated by the National Energy Board. In the MGP’s early days the NEB attempted to play a coordinating role for 13 agencies involved in approving significant industrial developments in Canada’s Northwest Territories.
The effort succeeded at the organizational level. But making a practical difference stayed notoriously difficult in the Canadian North due to rivalries and differing attitudes among federal, territorial and aboriginal jurisdictions. The difficulties were compounded by claims, occasionally escalating into lawsuits, that groups including northern Alberta aboriginal communities were wrongly excluded from the regulatory cooperation.
The regulatory marathon has played a considerable role in potentially crippling cost increases announced earlier this month by the MGP as well as postponement of the project’s completion date for at least three years until 2014 at the earliest.
In filing the new estimates at the NEB, senior project partner Imperial Oil said they cover key ingredients including “steel, construction equipment, fuel and labor. Costs for these components are very different today than a few years ago, when the previously filed project costs were estimated.”
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