The saga of Canada’s Mackenzie Gas Project (MGP), a lengthy struggle marked by challenges from environmental and aboriginal groups and escalating costs, continued last week in Yellowknife, NWT, where activists accused the project’s backers, including Imperial Oil Ltd., of overlooking greenhouse gas emissions (GHG) and other potential impacts of the project.

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. Estimates for MGP production, gathering and pipeline installations jumped this spring to C$16.2 billion (US$14.5 billion) — more than double the C$7.5 billion (US$6.8 billion) forecast when regulatory applications were filed in late 2005 and nearly quadruple the original C$4.5 billion projection when work began on the scheme in 2000.

Environmental and social activists have said regulators should block the MGP and place a moratorium on pipelines in northern Canada because of the effect the projects will have on the environment. At hearings held in Yellowknife last week by Canada’s National Energy Board, the World Wildlife Fund (WWF) and the Sierra Club renewed their arguments against MGP.

If constructed, the pipeline and associated development will harm migrating animals and their environment, while also elevating Canada’s GHG levels at a time when the country is trying to lower emissions, the groups said. A WWF spokesman said Canadian emissions are already 30% above target levels set in the Kyoto Protocol. The Sierra Club of Canada and Ecology North have said the MGP will increase carbon-dioxide emissions as much as putting 400,000 to 800,000 more cars on the roads of the Northwest Territories, an area where only about 20,000 personal vehicles are currently registered. In addition to the effect on the general environment, WWF officials said the project will have a detrimental effect on marine mammal, caribou and Grizzly bear populations and the aboriginal populations that depend on them.

MGP supporters say they are looking out for the best interests of both the Northwest Territories economy and its environment. Imperial Oil, the lead sponsor of the Mackenzie Delta Producers Group (which includes ConocoPhillips Canada, Shell Canada Ltd. and ExxonMobil) has signed a comprehensive social-economic agreement with the government of the Northwest Territories. The agreement outlined commitments in specific areas including employment requirements and policies, hiring and procurement priorities for Northwest Territories and aboriginal people, oil and gas training, transportation and infrastructure impacts, cultural preservation, safety and security, access to gas and a monitoring advisory board for the life of the project.

The joint review panel hearings, originally scheduled to close by the end of 2006, will continue at least until October and the panel will continue to accept written comments until Nov. 21.

The Mackenzie pipeline and other projects proposed for northern Canada have been stalled by protests from environmental and aboriginal groups, leaving natural gas producers to try and find ways to satisfy requirements of the Canadian constitution and high court rulings to consult natives on projects and accommodate their environmental, economic and cultural interests (see NGI, May 21; Jan. 8). Prospects for the MGP appeared to recede in June when the Canadian government prolonged negotiations with the sponsors (see NGI, June 12). ExxonMobil CEO Rex Tillerson also cast doubt on the project in May after telling company shareholders the gas pipeline was “not economic at the current costs” (see NGI, June 4). Even Imperial Oil has cast doubt on the project’s future, with company officials calling the MGP’s economics “not robust” (see NGI, April 16). In July, Imperial Oil and three other companies seemed to signal renewed optimism for the MGP when they announced that they had acquired exploration rights for a parcel in the Canadian portion of the Beaufort Sea (see NGI, July 23).

If the producers now involved in exploration efforts prove successful in tapping into the estimated 30 Tcf of gas reserves in the Beaufort Sea they will need a gas pipeline to transport the results to market, if increased interest in the Beaufort Sea’s potential brings results. Right now that question is on hold since a federal court judge blocked the start of a drilling program by Shell Offshore Inc. Shell had received Minerals Management Service (MMS) permission to begin a three-year exploration effort to gauge the potential of the Sivulliq prospect in the Alaskan portion of the Beaufort Outer Continental Shelf (see NGI, July 16), but before it could get drilling underway in August, a federal judge called a halt based on challenges by environmental groups that the MMS’ environmental review had not been adequate. The judge will hear the case in December (see NGI, Aug. 20).

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