With the aboriginal partners simultaneously urging on the corporate sponsors and demanding better deals, the Mackenzie Gas Project is vowing to hit its target date of 2009 for completing the C$5 billion (US$3.7 billion) Canadian arctic production and pipeline project.
Efforts are under way to file regulatory applications by summer in order to make a scheduled 2006 start on construction, said Randy Ottenbreit, northern development chief with senior Mackenzie project partner Imperial Oil Ltd.
Industry and Northwest Territories officials predict the filings will be timed to coincide with the annual Inuvik Petroleum Show in June, a major community event on the Mackenzie Delta.
Support by the aboriginal majority in the territories, described by Imperial as a must for the project, is strong at the level of the top leadership. “We cannot afford to lose this window of opportunity,” said Fred Carmichael, chairman of the Aboriginal Pipeline Group, a coalition with a one-third share in the proposed Mackenzie Valley Pipeline. “We can no longer make a living from the land.”
Even a native group whose unfinished land claim negotiations threaten to disrupt the schedule, the Deh Cho of the southern territories, circulated a message that they aim to participate in the project.
Deh Cho Pipe Co. announced creation of a website (www.dehchopipe.com) to promote plans to build a pipe coating plant in Hay River in partnership with Socotherm Group of Italy. The native firm said it wants to work on the proposed Alaska pipeline as well as the Mackenzie project.
Close co-operation will be required, industry leaders told a well-attended aboriginal oil and gas ventures forum staged by Insight Information Co. “The Mackenzie pipeline is by no means a sure thing,” said Jeff Rush, business development vice-president of TransCanada PipeLines Ltd.
TransCanada PipeLines CEO Hal Kvisle told reporters in Washington DC last week he is more pessimistic about the eventual development of the much smaller, technically easy Mackenzie Valley project than he is about the larger Alaska gas pipeline (see Daily GPI, April 20). “Discussions range from going well one day of the week to hitting roadblocks and log jams at other times,” said Kvisle. “It’s a long and slow process and access to land, access to right-of-way and local benefits issues are the Achilles heal of this [Mackenzie] project.”
While TransCanada has a small interest in the Mackenzie project, it is the main sponsor of the Alaska pipeline. Many analysts have predicted that the 800-mile, 0.8-1.9 Bcf/d Mackenzie Valley project would into service a full five years sooner than the 1,800-mile, 4-6 Bcf/d Alaska project, but conflicts with and among the Aboriginal land-holders have delayed the Mackenzie line.
Canada’s arctic gas project has to compete for investment in a big league, said Rob Hunt, senior vice-president of Akita Drilling Ltd., which has a string of territorial rig partnerships with native communities. “The oil and gas business is perhaps more global than ever before,” Hunt said. He warned “the money’s going to go elsewhere” unless Canada has efficient regulatory and political processes that approve projects in reasonably quick time. “The producers and the people who control the purse strings are here to deliver shareholder returns.”
The Mackenzie consortium of Imperial, ConocoPhillips Canada, Shell Canada Ltd. and ExxonMobil Canada is encouraged by recent acceleration of an environmental inquiry by the territorial Mackenzie Delta Environmental Impact Review Board, Ottenbreit said in an interview.
But the 2003-04 winter work program of nailing down a pipeline route remains incomplete because the project was unable to obtain access permits to land contested between the Deh Cho and the federal government, he reported.
About 40% of the route affects traditional Deh Cho territory and the industry should accept that the aboriginal deserves to be in charge of granting such permits, said Fort Simpson Chief Kenya Norwegian, head of the Deh Cho First Nations Pipeline Working Group.
But the Mackenzie group cannot take sides between the native community and the federal government, Ottenbreit said. Consultations continue with the Deh Cho on industrial issues but not on the land claim. “We do not believe it’s appropriate for us to get involved,” the Imperial executive said. “We will recognize any agreements reached in the Deh Cho process.”
Carmichael, who is also president of the Gwich’in Tribal Council on the Mackenzie Delta, appealed to other aboriginal communities to listen to the industry side of the gas project and resist temptation to cause potentially fatal delays by holding out for impossibly high benefits or making development a political issue.
The pro-development leaders above all call for realism among aboriginal communities that remain strongly inclined to try recapturing old lifestyles.
A commercial pilot who grew up trapping fur on the Mackenzie Delta around his native Aklavik, Carmichael said he is a passionate supporter of the arctic pipeline because it became obvious to him on his northern aircraft travels that traditional hunting livelihoods were fading into history.
He recalled in his youth, aboriginal families only visited settlements for Christmas, Easter and summer holidays and spent the rest of the time trapping, hunting and fishing at myriad northern lakes. Nowadays, the lifestyle has reversed and most northern natives only go out on the land for vacations, he said.
“I want our people to come out from bondage and having to live on the government and social assistance,” Carmichael said.
His Aboriginal Pipeline Group predicts it will earn annual profits from the Mackenzie project of up to C$21.2 million (US$15.7 million) after construction loan payments during its first 20 years of gas deliveries, then up to C$125.8 million (US$93 million) per year when the operation is debt-free. As for the gas producers holding the majority interest, aboriginal revenue forecasts depend on expectations for the capacity of the pipeline. The Mackenzie group currently expects to start out at about 1.5 Bcf/d then increase deliveries to 1.9 Bcf with additions of compressor power.
Of four aboriginal settlement districts along the pipeline route, two that occupy the majority of its length are still rife with questions about the project’s environmental and social effects, and especially its benefits.
Targets of heightened scrutiny include the part-ownership deal made by leaders of the Aboriginal Pipeline Group, who come from the northern-most districts of Inuvialuit and Gwich’in where the gas production is, and who stand to gain most from the development.
After initially joining the pipeline group the Sahtu are asking questions along with the Deh Cho, who stayed out of the aboriginal investment consortium as a result of unresolved land claims along their southern reaches of the Mackenzie River.
Like the Deh Cho but for different reasons, Sahtu land authorities refused to grant pipeline planners access permits for route studies during the 2003-04 winter work season.
A Sahtu member of the territorial legislature, Norman Yakeleya, said leaders of the district’s five communities will start a series of formal meetings on April 28 to review the entire gas project.
Unresolved issues include the ownership and corporate governance structure of the Aboriginal Pipeline Group, its internal profit-sharing arrangements, land access compensation, and resource-revenue sharing between the territorial and native governments, Yakeleya said. The Sahtu are not afraid to stop the gas project if they discover a version more favorable to them can be developed even if that takes years, Yakeleya said. “So what? We’re not going to starve. We’ve really got nothing to lose.”
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