The Canadian government has set up the starting gate for the Mackenzie Valley natural gas pipeline race by activating a northern regulatory agency and opening a door to providing indirect financial assistance for the project.

Federal Indian Affairs and Northern Development Minister Robert Nault trekked west to the Canadian gas industry capital of Calgary from Ottawa to announce the moves, declaring “we’re open for business and we want an application.” Nault made an initial commitment of C$10 million (US$6.5 million) to open a Pipeline Readiness Office in the Northwest Territories capital, Yellowknife, and to support a host of aboriginal and territorial agencies that will participate in a collaborative review of pipeline proposals.

The federal minister also made it plain that while the Canadian government will neither subsidize a project nor pick the route, it stands ready to help northerners fulfill their shares in the development once the economic decisions are made.

Nault said he will travel to Washington, DC, later this month to explain Canada’s arctic pipeline policy to U.S. authorities. The Canadian government’s policy continues to oppose direct subsidies of any northern gas development on either side of the international border. Nault said that opposition especially includes resisting proposals by Alaska’s congressional delegation to create floor prices for northern gas, a scheme he described as still live and liable to be reintroduced at any time.

Nault said, “The Canadian government remains route neutral. Market forces must decide where and when a pipeline will be built.” He predicted that injecting other forces, such as political desires to create jobs along an Alaskan route, would “warp” the development by causing inefficiencies and potentially loading the costs on taxpayers. “A secure and viable source of energy is one that passes the test of market forces,” Nault insisted.

He said the choice of Yellowknife as the location for the new agency — as opposed to the Yukon Territory’s capital of Whitehorse, closer to an Alaskan route — reflects the location of most Canadians affected by northern gas development and involved in its regulation rather than any overt preference for a Mackenzie project.

The minister pledged that the Canadian government will stay out of the commercial negotiations under way between the Northwest Territories Aboriginal Pipeline Group and the Mackenzie Delta producer consortium of Imperial Oil, Shell Canada, ConocoPhillips and ExxonMobil. “It’s not the role of the federal government to intervene as a third-party.”

However, Canadian government responses to proposals that may be generated to carry out any agreement on a Mackenzie Valley project after the economic decision is made will be a different matter, Nault indicated. “We’ve not ruled out where the government will participate,” the minister said. “Without seeing exactly the proposal, I couldn’t tell you the role of the government.”

The aboriginal group, an alliance of First Nations that dominate the Northwest Territories population and stretches from the Beaufort Sea to the southern Canadian provinces, has made it plain it will seek help. Since agreeing in principle with the Delta producers to take on about a one-third interest in the C$4-billion (US$2.6-billion) Mackenzie Valley pipeline project, leaders of the native coalition have repeatedly stressed that they will need government backing, such as loan guarantees, to carry out the commitment.

Nault stressed that although he cannot make any promises to the natives until they commit to the deal on a business basis, the federal government already stands prepared to help on other fronts. He said Ottawa always has been willing to backstop more traditional economic support measures such as native employment training and joint ventures to bring aboriginal businesses into construction and contractor roles, and “infrastructure” support including roads and municipal services.

“We have an obligation to deal with a booming economy and the stresses that will bring.” The minister said the Canadian government expects to clarify its role after receiving a report on requirements for the project which is due soon from its special gas development envoy to the north, former National Energy Board chairman Roland Priddle.

Nault also said federal representatives hope to make rapid progress on a political front affecting arctic gas, negotiations on “devolution” of natural-resource ownership, revenues and jurisdiction to territorial authorities.

A “framework” agreement in principle on province-like constitutional status for the Northwest Territories could emerge as early as this summer from discussions where the federal side is represented by former Ontario premier David Peterson, Nault said. Territorial leaders, including Premier Stephen Kakfwi, describe devolution as a critical ingredient of northern Canadian gas development because it would give them the resources and authority to make arrangements with the industry without lining up for attention and money in Ottawa.

Nault predicted a Canadian northern pipeline application could be received within a matter of weeks. The Delta producers and the aboriginal pipeline coalition are wrapping up a C$250-million (US$166-million) “definition stage” of refining a proposal into a suitable state for regulatory filings. The effort includes discussions with prospective builders of the transportation route such as TransCanada PipeLines and Enbridge Inc.

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