A cautionary pipeline tale for B.C. from N.W.T.
Financial Post
Claudia Cattaneo Mar 15, 2012
First Nations members from B.C. protest against Enbridge’s proposed Northern Gateway oil pipeline in Calgary last May. David Ramsay, the Northwest Territories’ Minister of Industry, Tourism and Investment, advises British Columbia to find a balance between development and the environment.
While Canadians seem more concerned than ever about the costs and risks of pipelines, the Far North is feeling the pain of not having one.
With the Mackenzie Gas Project on ice because of low natural-gas prices, the Northwest Territories is searching for other ways to fuel its economy, while dealing with the human toll resulting from lack of opportunity.
As N.W.T. leaders met in Calgary this week to take stock of Arctic oil and gas activity, or more precisely the lack of it, they had this advice for Northern B.C. communities trying to kill the proposed Northern Gateway project: Be careful what you wish for.
For decades, the Mackenzie Valley gas pipeline from Inuvik to Alberta faced many of the hurdles that are troubling the Northern Gateway oil sands pipeline today: unsettled aboriginal land claims, worries that development would alter traditional ways of life, warnings about the environmental impacts, concerns that the pipeline’s fuel would be used to support the growth of Alberta’s oil sands. Most of these issues have been resolved, opponents have moved to new causes, and the N.W.T. is eager to get started on the $11-billion-plus project.
But it’s too late. Natural-gas prices have slumped so much they don’t justify the investment. Oil companies that pushed hard to get the pipeline built, that a decade ago were eager to ramp up exploration and production in the Mackenzie Delta, are busy with new plans.
Today, it’s the $5.5-billion Northern Gateway that is getting all the attention. Companies want it badly to export Alberta oil to markets in Asia. But once again, aboriginal and green organizations are targeting the regulatory process, stirring political opposition, warning about the risks to the environment of oil spills and of oil sands growth.
What’s less talked about is the risk of scaring away investment — and how tough it is to get it back when industry momentum moves elsewhere.
That’s what’s keeping David Ramsay, the N.W.T.’s Minister of Industry, Tourism and Investment, very busy these days.
“We have been struggling, to be honest with you,” he said on the meeting’s sidelines, referring to the N.W.T.’s economy. “In the Beaufort Delta there is not a lot happening right now.”
His advice to B.C.: Find a balance between development and the environment rather than push opportunity away.
“We are trying to find a balance in the N.W.T., too,” he said. “We need the jobs and the opportunities. And we need to get our resources to market, and that is what we intend to do.”
Meanwhile, the territory is looking for ways to fill the investment void — a proposed $1.9-billion Mackenzie Valley highway to improve the mobility of goods and labour, a proposed $60-million fibre-optic network to improve communication, and an emerging oil shale play in the Central Mackenzie Valley that is generating some activity and could promote the expansion of an existing oil pipeline from Norman Wells to Alberta.
The campaign to build the Mackenzie pipeline continues.
“We are going continue to put a brave face on and keep moving forward and getting the message out there about how important the Mackenzie Gas Project is, not only to the N.W.T. but to the entire country,” Mr. Ramsay said.
But that could be a long way off. Businesses in Inuvik are closing and lack of opportunity today is hitting its youth hard.
“One of the lessons learned from not having the Mackenzie Gas Project is that our suicide rates are probably as high as they have ever been,” said Peter Clarkson, the city’s former mayor and now director of regional operations for the Beaufort Delta for the N.W.T. government. “If you don’t have hope for the younger generation, they despair.”
In his view, B.C.’s aboriginal leaders should look at the benefits of the Northern Gateway project rather than at the risks and take the long-term view.
“The challenge for all leadership has got to be to look at what is it that people will be doing in five, 10, 30 years,” he said. “You may not make all the right decisions, but you need to make decisions now and invest in long-term, sustainable things.”
The Mackenzie pipeline, proposed four decades ago, received regulatory approval a year ago after a lengthy regulatory review. Proponents are close to nailing down fiscal terms with Ottawa to make the project more attractive.
But it needs natural-gas prices of $6 to $7 per thousand cubic feet to move ahead — about three times today’s levels. One of the project’s partners, Royal Dutch Shell PLC, put its interest up for sale last year. The other partners are Imperial Oil Ltd. with parent Exxon Mobil Corp., ConocoPhillips Co. and the Aboriginal Pipeline Group (APG).
Bob Reid, president of the APG, the aboriginal enterprise that owns one-third of the project, said hope remains. While gas prices are low today, they could be a lot higher by 2020, justifying construction.
B.C. First Nations should seize the opportunity while it’s available and adopt the APG model for Northern Gateway to make it work for them, he said.
Builder Enbridge Inc. has offered 40 First Nations and Metis communities along the pipeline corridor a 10% equity interest. The APG, which represents four First Nations affected by the Mackenzie pipeline, owns 33%, is a full partner, sits on the project’s board and helps make the rules.
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