An abrupt defeat has been dealt to an attempt to stunt Canada’s Arctic natural gas pipeline and production project before it has a chance to grow.

The federal and Northwest Territories governments rejected a plan for breaking up the Mackenzie Gas Project into stages requiring separate approvals and said they expect to have a decision on the plan by September. The governments’ rejection clears up a potential aboriginal and community relations nightmare in northern Canada’s famously complicated regulatory scene.

The staging plan was built into recommendations of a federal, territorial and aboriginal Joint Review Panel (JRP) that held parallel socio-economic hearings to the National Energy Board (NEB) economic, safety and engineering inquiry.

Tendered as a compromise among fractured native communities, the JRP scheme called for limiting the MGP to deliveries of 830 MMcf/d or the total covered by currently firm transportation service contracts with sponsoring producers Imperial Oil, Shell Canada, ConocoPhillips Canada and ExxonMobil Canada.

Under the JRP’s proposed approach, separate approval would have been needed for ramping up deliveries up to the pipeline’s initial installed capacity of 1.2 Bcf/d with gas from other Arctic producers. Yet more approvals would be required for using built-in expansion potential to 1.9 Bcf/d by low-cost additions of compressor power.

In a statement rejecting the JRP proposal, the federal and territorial governments said they “consider this to be an inappropriate constraint on development.”

Along the pipeline, the Deh Cho Dene straddling the southern 40% of the 1,200-kilometer (750-mile) route fought to hold up the project as a bargaining chip in land claims negotiations that remain far from completed. In the northern stretches of the Mackenzie River Valley and on the Mackenzie Delta, the Inuvialuit, Gwich’in and Sahtu Dene have claims settlements, own one-third of the pipeline as the Aboriginal Pipeline Group, and actively support gas development.

Although federal Environment Minister Jim Prentice and Indian Affairs and Northern Development Minister Chuck Strahl said the national government will honor the spirit of the JRP’s elaborate report, they and territorial Premier Floyd Roland announced that they can adopt only 10 of the panel’s 176 recommendations as written. The accepted proposals are practical and focused on tangible issues such as environmental protection and cleanup during and after construction.

The JRP annoyed industry and mostly pro-gas development government leaders by taking 25 months to write its elaborate report after a repeatedly extended 22-month marathon of northern hearings. The national and territorial governments signaled there will be no repetition of that case of epic regulatory procrastination. After a further round of confidential consultations with the JRP on the fate of its recommendations, the governments said they will communicate their final conclusions to the NEB in time for it to stay on its promised schedule of a project approval decision in September.

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