It’s official and in writing. The Canadian government does not want to own a northern pipeline — and especially not one with a serious enough risk of losing money to make private investors hesitate.
Indian Affairs and Northern Development Minister Jim Prentice fired off a letter explaining Ottawa’s position on the Mackenzie Gas Project (MGP) to the National Post in Toronto. The newspaper has repeatedly (and alone) published scoops, attributed to unidentified “sources,” about a federal takeover of the project (see Daily GPI, May 21).
“Our government is not considering ownership of the Mackenzie Gas Project, and I have conveyed this message directly to the proponents,” Prentice said in the letter, which the Post published Tuesday. “Any suggestions or speculation that this may be the case are inaccurate, misguided and originate from ill-informed sources.”
The letter also conveyed a political message to the target market of the Post. The paper — created in the late 1990s by Conrad Black, an embattled media baron now on trial for fraud in Chicago over use of proceeds from a subsequent sale of the operation — is an expanded version of Canada’s old Financial Post. Currently printing excerpts of a Black biography of Richard Nixon, many have said that the paper is pitched at the political right and Canadian wielders of corporate might.
The message is that the Canadian government, while under fire on the Post‘s editorial page for allegedly lacking ideological purity, is a Conservative administration. Prentice is spreading the word as a Calgary lawyer who is a close associate of Prime Minister Stephen Harper and heads a cabinet committee on northern resource development.
“As I have stated on numerous occasions,” Prentice wrote, “the federal government has absolutely no interest and no role in directly subsidizing a private sector project. These issues have not been under discussion by the government, either with the [MGP] proponents or aboriginal groups. What is true is that the proponents are actively reviewing the competitiveness of a northern gas pipeline. Driven by the escalating cost estimates of the project, the proponents are assessing the competitiveness of a pipeline in relation to other options.”
At spring regulatory hearings on the MGP in Edmonton, project senior partner Imperial Oil emphasized northern supplies must be competitive with ocean tanker imports of liquefied natural gas (LNG) to North America. Canadian industry planners are starting to take into account an array of LNG terminals in varying development stages on the Atlantic and Pacific seaboards of Canada.
At the MGP’s new cost estimate of C$16.2 billion (US$14.6 billion) — nearly quadruple initial estimates of seven years ago — the sponsors have postponed completion until 2014 at the earliest and Imperial has taken to calling the project’s economics “not robust.”
The consortium — Imperial, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada — has at no time appealed for government financial help. Such appeals, and possibly the Post‘s repeated scoops, come from other factions that are keen supporters and minority partners — the Aboriginal Pipeline Group and the Northwest Territories government (see Daily GPI, May 21). APG, which represents three of four native communities along the northern pipeline route, has virtually since its birth in 2000 sought federal government loan guarantees so it can finance its one-third ownership and construction cost share in the proposed Mackenzie Valley pipeline.
Prentice wrote, “Our position, which we have clearly communicated to the proponents, is that the project would make economic sense as a ‘common carrier pipeline’ and could generate a rate of return consistent with other common carrier pipelines.”
The northern development minister said “the project has the potential to make an important contribution to sustained economic activity for northerners and all Canadians, and to strong and healthy aboriginal and northern communities. But it must make sense in terms of its economics and as public policy.”
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