The 67-month regulatory trial of Canada’s Arctic natural gas development plan has ended in calls by its northern supporters for the industrial sponsors to fish or cut bait by making a decision on whether to build the production and pipeline system within three years.
Aboriginal leaders on the Mackenzie Delta, the Northwest Territories government and independent gas explorer MGM Energy Corp. urged the National Energy Board (NEB) to enact a proposed construction decision deadline of Dec. 31, 2013. During final arguments in Yellowknife and Inuvik that ended the regulatory hearings ordeal, the Mackenzie Gas Project (MGP) consortium — Imperial Oil, ConocoPhillips Canada, Shell Canada and ExxonMobil Canada — asked for an extended approval “sunset clause” granting three years of extra time for the decision until Dec. 31, 2016.
The tighter deadline would inject “much-needed certainty” into the MGP, said MGM Energy Vice President Nancy Dilts. She urged an end to delays that have become a hallmark of the project since it came together in 2000, rapidly drummed up one-third northern native ownership of the proposed Mackenzie Valley Pipeline by the Aboriginal Pipeline Group, and filed regulatory applications in October of 2004.
To MGM — the only northern gas explorer outside the sponsor group that has to date signed up for delivery service on the Mackenzie line by booking space for 200 MMcf/d — delay “has been a clear phenomenon during the course of this hearing process. Pens have been put back in drawers, shovels have been put down, and equipment and people in the North have been left to idle. One company after another has suspended exploration and investment in the North,” including MGM, “because of the uncertainty in timing relating to this project,” Dilts reminded the NEB.
“Absent a clear and defined period for construction to commence, work will not recommence to identify additional volumes for the pipeline,” the MGM Energy executive predicted. “No other alternate to the MGP for the economic recovery of the resources in the North will be considered, developed or proposed. Delay built into the sunset clause will only create further delay.”
The territorial government called for an approval sunset clause that would only grant the MGP extra time past 2013 if events beyond its control delayed construction preparations in the field. Otherwise the consortium would have to file a fresh application to set any new target dates.
The project sponsors say extra time will be needed to allow for a review of approval conditions when the NEB hands down its ruling, an event scheduled for September, and especially for fiscal negotiations on royalties, taxes, potential guarantees or credits and other cost issues with the Canadian government. But on-again, off-again talks have been held with squads of officials led by senior cabinet members of two Ottawa regimes — a Liberal administration until 2006, and since then a Conservative government.
Nellie Cournoyea, an Aboriginal former territorial premier who is a key figure in Delta society as chairman of the Inuvialuit Regional Corp., agreed with Dilts that it is hard to contemplate prolonging the northern economic suspense further. “Throughout the entire period within which this project has been under consideration by both proponents and regulators, it has been one delay after another delay,” Cournoyea told the NEB. “There are those that feel these delays have been justified, and those that feel they are but excuses for a lack of planning, commitment or capacity by the parties involved.”
Cournoyea did not say whether she subscribes to the forgiving or less kind interpretation. But she added, “The Inuvialuit clearly recognize that following all the hearings, the meetings, the reports, the recommendations, the approvals and the setting of terms and conditions, ultimately the decision to construct a Mackenzie Valley Pipeline will be a business decision based on risk versus reward.”
In an updated feasibility report prepared for the final hearings, the MGP consortium kept its cards well hidden by predicting that the North American gas market will absorb Canadian Arctic gas but insisting that only the partners can make confidential business decisions on odds that the mammoth project will be profitable. The last disclosed cost forecast put a price tag of C$16.2 billion on the MGP, split about evenly between Delta production installations and the 1,200 kilometer pipeline to northern Alberta. Skeptical Canadian industry analysts observe that while labor and materials costs have dropped sharply in the three years since the forecast, gas prices have fallen faster and new shale supplies from fields much nearer markets cast a long shadow over the future outlook.
The economic clouds are seen clearly by the Delta Aboriginal nations, which have used 1980s land claim settlement funds to develop far-flung Canadian industrial interests in fields from airlines and river shipping to contract drilling and equipment manufacturing. But Fred Carmichael, a 75-year-old Gwich’in leader and chairman of the native pipeline investment group, urged the NEB to understand why Arctic communities are tired of being kept in suspense by the MGP and the national government.
In urging all concerned to get on with regulatory and commercial approvals Carmichael delivered an eloquent thumbnail description of Delta history, expectations and the role of Canadian Arctic gas.
“I grew up on a trap line, and went from piloting a dog team to piloting an airplane in 1954. I have witnessed great changes: some good, some bad. What has been most difficult for me to watch was our way of life and our people changing from being proud, independent self-sufficient people with our own hunting-trapping economy,” Carmichael said.
“I witnessed this loss in the late ’60s and ’70s, which was due mainly to southern influence such as the anti-fur movement. And today some of these activists are denying us the opportunity to become self-sufficient without offering us any viable alternatives,” Carmichael said.
Cournoyea likewise urged environmental armchair critics of the gas industry to mind their own business: “To those physically distant and economically comfortable special interest groups that would deny us this opportunity…we say go home and look after your own backyards.”
Carmichael said “we have become dependent on a southern industrial way of life, but with no industry or long-term plan for economic stability for people of the North. Because of this many of our people, through no fault of their own, are now dependent on the social welfare system. For over 40 years we have been wandering in the wilderness, looking for a way once again to become economically self-sufficient and to regain self-respect and pride for our people today and for future generations. We see the Mackenzie Valley Pipeline project as the first step.”
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