Oil Sands Truth: Shut Down the Tar Sands

Mackenzie Pipeline saga to drag on despite Joint Review Panel approval

Mackenzie Pipeline saga to drag on despite Joint Review Panel approval
By Lauren Krugel (CP)

CALGARY — The Mackenzie Gas Project's supporters will usher in 2010 having passed a major milestone in what has been a long and often frustrating process.

But it's not time to uncork the champagne just yet.

There are numerous hurdles the backers of the 1,200-kilometre natural gas pipeline through the Northwest Territories must clear before a single segment of pipe can be laid.

A federally appointed panel weighing the environmental and socio-economic effects of the Mackenzie pipeline - most recently estimated to cost $16.2-billion - handed down a years-overdue report Wednesday.

The seven-member Joint Review Panel, appointed by the federal government in 2004, said the pipeline should go ahead - on the condition all of its 176 recommendations be met.

"While the issuance of the report is a significant positive, encouraging step, it's only one of a series of steps that's to happen," said Pius Rolheiser, a spokesman for Imperial Oil Ltd. (TSX:IMO), the lead partner in the project.

First and foremost, the project's proponents need to take the time to digest the 679-page report, and figure out what implementing the recommendations could entail.

They then have three weeks to submit comments to the federal National Energy Board, which will incorporate the JRP's recommendations into its decision.

NEB hearings are slated for April and are expected to conclude in September.

And that doesn't even mark the end of the regulatory process, said Canaccord Adams analyst Bob Hastings.

The project would still need to be examined by agencies that handle aboriginal land claims, territorial water and land boards and a host of federal departments.

"There are many, many 'next steps' before final approval that promise to delay final construction," he wrote in a note to clients Thursday.

If those approvals are met, there then comes the question of whether there is a business case for building the pipeline.

"If it gets all its approvals, it only will proceed if someone perceives it to be economic," Hastings said in an interview.

It's unclear whether Arctic gas can compete with other supplies that are further along in development and closer to market.

For instance, technological advances have allowed producers to cut the cost of pumping huge amounts of natural gas from what were once tough-to-access shale formations in Canada and the United States.

It is also uncertain how supplies of liquefied natural gas, which can be transported around the globe by sea, will affect the North American supply picture.

LNG makes the natural gas industry a global market linked by tanker ships instead of a continental one in which pipelines are the sole means of shipping the fuel to power plants and industrial users as well as to homeowners to help heat their houses in winter.

There are questions as to whether the gas fields in the Mackenzie area are big enough to compete with those other sources, said FirstEnergy Capital analyst Steven Paget.

"It could be an economic project, but this requires further development of the gas fields," he said.

"The more gas that is discovered, the more gas that is added to the project, the better the economics become."

Another uncertainty is to what degree the federal government could be involved.

Environment Minister Jim Prentice, Ottawa's point-man on pipelines, said nearly a year ago that the government would offer the project's proponents some financial support. That could include investment in infrastructure like roads, airstrips and barge landings.

Rumours circulated in the fall that a Cabinet committee had nixed the offer, but the project's key backers say negotiations are continuing.

Two companies involved in the project are standing by its economic viability.

"It's our view that despite the downturn, the North American energy and natural gas market will continue to grow," said Imperial's Rolheiser.

"The Mackenzie Gas Project potentially represents a significant vital new supply source that the North American Market is going to need."

Other producers involved in Mackenzie include Imperial's U.S. parent ExxonMobil Corp. (NYSE:XOM), ConocoPhillips (NYSE:COP) and Royal Dutch Shell PLC (NYSE:RDS).

The Aboriginal Pipeline Group, which acts on behalf of communities along the pipeline's route, also has an ownership stake.

Natural gas shipper TransCanada Corp. (TSX:TRP) is involved through its investment in the APG. It would feed the Mackenzie gas into its Alberta network.

In illustrating why Arctic gas will be needed, TransCanada chief executive officer Hal Kvisle noted in a recent interview that North America produces and consumes 75 billion cubic feet of natural gas every day.

Production declines 20 per cent each year, which means producers need to continuously scramble to fill the gap with new supplies.

"If we stop drilling in North America 75 bcf a day would turn into 60 (bcf) of supply within a year," Kvisle said.

"We actually do the largest gas development in the world every year just to maintain flat production."

TransCanada and ExxonMobil are both involved in an entirely separate natural gas pipeline in Alaska, which would be more than twice as long and pump out several times more cubic feet of gas per day.

If Alaska comes to fruition first, those supplies could satiate demand for several years, pushing development of Mackenzie out even further.

Copyright © 2010 The Canadian Press. All rights reserved.

http://www.google.com/hostednews/canadianpress/article/ALeqM5ghkDINba1bR...

Oilsandstruth.org is not associated with any other web site or organization. Please contact us regarding the use of any materials on this site.

Tar Sands Photo Albums by Project

Discussion Points on a Moratorium

User login

Syndicate

Syndicate content