The Canadian government has opened a new round of financing discussions for the Mackenzie Gas Project (MGP) with a blunt reminder that no public money is available to the faltering proposal.

Federal Industry Minister Jim Prentice delivered the statement as an initial response to undisclosed proposals from the Arctic pipeline project group led by Imperial Oil Ltd. and including Shell Canada, ConocoPhillips Canada, ExxonMobil Canada and the Aboriginal Pipeline Group (APG).

“The government of Canada has no interest in owning any portion of the project or in subsidizing petroleum companies,” said the minister. “It must be a private sector investment driven by commercial considerations.”

Prentice also repeated that the industry must demonstrate that the project will pay off for the Northwest Territories and its aboriginal communities rather than become a further drain on the federal treasury that now covers costs of public services in Canada’s Arctic. “It must result in tangible benefits for northerners and Canadians in general. Participation of the Aboriginal Pipeline Group must remain an aspect of the project,” the minister said.

Preparations for the talks sparked a revival of speculation that some combination of the federal government, an enlarged APG and TransCanada PipeLines Ltd. is prepared to take over the Arctic gas development (see NGI, Dec. 10). Prentice dismissed previous flurries of such speculation as simply misunderstanding the federal attitude, especially under the Conservative regime in Ottawa.

TransCanada has also indicated it is not demanding to take over leadership of the project.

Recurrent speculation about a federally subsidized takeover is rooted in calls for help by pro-development interests in the territorial government and the aboriginal group, which holds a one-third interest in the proposed Mackenzie Valley Pipeline. TransCanada is financing the aboriginal group with cash advances for operations in the form of a loan to be repaid only if the pipeline is built.

Neither side in the talks set a target date for overhauling the project into an economically improved form. Completion of the MGP has been officially delayed for at least three years until 2013, after revised estimates raised forecast construction costs to C$16.2 billion from a previous C$7 billion.

The latest forecast for regulatory approvals sets the decision date back to mid-2009. Although the National Energy Board and a parallel environmental joint review panel of federal, native and territorial authorities have finished evidence hearings, further preliminary reporting and argument stages remain far from complete.

The proposed MGP pipeline would ship as much as 1.9 Bcf/d across 750 miles from the Mackenzie Delta south to the Beaufort Sea Coast. However, the project has suffered delay after delay, with its fate tied to efforts of the producer consortium. Earlier this year Imperial said the economics of the pipe were “not robust,” and the group has since been renegotiating MGP’s options with the Canadian government (see NGI, Sept. 3; April 16).

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