Oil Sands Truth: Shut Down the Tar Sands

N.W.T. pushes federal government to back Mackenzie pipeline

N.W.T. pushes federal government to back Mackenzie pipeline

By Rebecca Penty, Postmedia News July 18, 2011

CALGARY — Ottawa needs to ink a financial deal with backers of the Mackenzie Valley natural gas pipeline project by the end of the year, the Northwest Territories' Bob McLeod said following the exit of Royal Dutch Shell PLC from the partnership.

McLeod, the territorial industry minister responsible for energy, said those proposing a $16.2-billion resource development and pipeline linking natural gas from the Arctic Circle to markets in Alberta and the United States need the federal government's assurance it will backstop the long-delayed project before 2012 for it to go forward.

"We're continuing to urge the Government of Canada to engage with the pipeline proponents to negotiate a fiscal framework that would allow the construction to proceed," McLeod said Monday at Calgary's Springbank airport, after touching down from a tour of the oilsands with his federal and provincial counterparts ahead of meetings in Kananaskis Country west of Calgary.

He said the Mackenzie Valley consortium wants a deal similar to the $18 billion in loan guarantees to which the United States government agreed in 2004 for the Alaska pipeline.

McLeod, echoing the position of project leader Imperial Oil following last Friday's news Shell put its pipeline stake and natural gas lease interests up for sale, said companies need a guarantee from Ottawa before committing to another two years of engineering and geotechnical work for the project, ahead of a final investment decision.

Shell Canada — the Dutch firm's Calgary-based subsidiary — is now trying to sell its Mackenzie Delta gas assets and stake in the proposed pipeline.

Imperial Oil, ConocoPhillips, ExxonMobil and the Aboriginal Pipeline Group are still committed to the project, which would develop natural gas fields in the Mackenzie Delta near Inuvik and export the resource via a future 1,196-kilometre pipeline system along the Mackenzie Valley.

On Monday, Shell Canada spokesman Larry Lalonde said in an email the company has offered a "broad group of prospective purchasers" information on its assets.

"Shell still believes the project is important for Canada." Lalonde said, not elaborating on the firm's decision to get out.

Imperial Oil says it is in the process of re-engaging talks about a fiscal framework, a financing arrangement the federal government has so far publicly rejected, arguing the project must stand on its own merits.

In January 2009, before discussions were suspended amid a regulatory delay, the Mackenzie Valley partners and federal government tried to hammer out a multibillion-dollar infrastructure deal, through which Ottawa would put up cash to help build airstrips, roads and other infrastructure in the remote region.

But McLeod said a majority government in Ottawa and the infrastructure commitments bodes well for a package of federal loan guarantees.

"We're fully expecting that to happen."

Federal Natural Resources Minister Joe Oliver, speaking to reporters at the airport, wouldn't comment on the status of talks, noting the Mackenzie Valley project is a "private sector" decision.

He admitted the proposed natural gas development and pipeline — first conceived in the 1970s and conditionally approved by the National Energy Board last December — have been mired in delayed regulatory reviews.

"One of the subjects we'll discuss over the next couple of days is improving the regulatory system, so it's less duplicative, it's more fair, transparent, independent but takes into account the need for expeditious review," Oliver said of discussions at the annual energy and mines ministers meetings, split this year between Fort McMurray and Kananaskis Country.

"Because if these approvals drag on, they're clearly going to undermine the economics of the project and no one ends up benefiting," Oliver said.

The ministers, who first met on Saturday at the Calgary Stampede, were set to discuss a so-called Canadian energy framework Monday afternoon — hearing from various think-tanks and organizations on what that could include — and wrap up discussions Tuesday with talks on mining.

The Alberta government is pushing a more targeted national energy strategy but Oliver wouldn't agree on that wording, committing just to discuss broad collaboration on energy between Ottawa, the provinces and territories.

The federal minister, a former investment banker first elected in May, offered his take on the ministers' tour of the oilsands Sunday and Monday, which included visits to an in situ development, reclamation site and Canadian Natural Resources Limited's Horizon project, as well as flying over mining and in situ operations.

Oliver — who also vigorously defended the oilsands in a speech to the Calgary Chamber of Commerce Friday — said he and his territorial and provincial colleagues were impressed with how industry firms are developing the massive bitumen resource in a manner he called socially and environmentally responsible.

"They're clearly making the effort, they're putting money into technological advances which are reducing the carbon footprint," Oliver said.

"They're also working with the aboriginal peoples, as a big employer of aboriginal peoples, and they're reclaiming the land."

— with files from Dina O'Meara


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