If you keep up-to-date with progress on the big pipeline projects on the table, I expect you’ve read some conflicting stories lately regarding the proposed Mackenzie Valley gas pipeline. You’ll know that the project has been on the cards since the 1970s and has been beset by delays and concerns over its environmental and economic costs. But have you heard the reports about the major financial assistance package that Canadian Environment Minister Jim Prentice took to a cabinet committee last week?; the one that was allegedly turned down over concerns about the project’s price tag? How about Prentice’s insistence only two weeks earlier that the Arctic gas pipeline had “never been closer” to fruition, in all its 40 years of life on paper? How about Prentice’s then reticence when asked about funding for the project, as he insisted it is a private-sector project that must stand on its own economic merit?
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Prentice denies that any decision has been made, stressing that the fiscal framework of the project is a work in progress, and an environmental review by a Joint Review Panel is due to be completed by year end. In January, Prentice announced Ottawa had offered the pipeline’s backers financial support for infrastructure and other costs associated with the project. To date, financial details of the offer have not been released.
Imperial Oil CEO Bruce March has expressed disappointment about the recent media reports that are casting doubt over the finances of the project and says he has heard nothing to suggest any changes to the financial package the federal government offered several months ago. Imperial, lead partner in the project, which also includes ConocoPhillips Canada, Shell Canada, ExxonMobil Canada and the Aboriginal Pipeline Group (APG), is proceeding as normal, according to March.
In the 1970s, the proposed pipeline, designed to transport gas 1200 km from the Beaufort Sea to market in Southern Canada and the US, was described as “the biggest project in the history of free enterprise”. The plan was to develop natural gas fields in the Mackenzie Delta of Canada’s Northwest Territories and deliver the gas to market through a pipeline system built along the Mackenzie Valley.
Then followed a 1977 report by Mr Justice Thomas Berger, the man charged with assessing the impact of the pipeline, which subsequently recommended that any pipeline development along the Mackenzie river valley be delayed at least ten years, over concerns that it would negatively impact the people of the Northwest Territories. The project lay gathering dust until 2004, when it picked up some steam again. A resurgence of interest in developing Arctic reserves, and increasing natural gas consumption, has meant the Cdn$ 16.2 billion project has stayed alive since then.
Now it must be pushed onwards: Inuvik Mayor Derek Lindsay doesn’t want to see any further delays - local business is counting on a pipeline to boost the economy. Prentice wants the project to proceed: he has called it “one of the most important in Canada’s economic history” and has extolled its benefits for opening up the Mackenzie Valley corridor, and in fulfilling the anticipated demand for natural gas in the future. Natural gas will also help Canada meet its greenhouse gas emissions reduction targets; Prentice will travel to Copenhagen in December to argue this point at an international climate change conference. Obstacles remain for Prentice, however. The abundance of cheap shale gas from newly-discovered US deposits, and the new technologies available to access it, are a threat to Arctic gas, not to mention the LNG imports that undermine its importance in the US energy mix. A glut of gas means that imperative for the Mackenzie project could dissipate.
The 1200 trillion ft3
of gas that resides in US natural shale deposits is enough to last a century: natural gas prices are down 30% since the beginning of the year. These facts are not helpful for those trying to get a Mackenzie pipeline built. Now, on top of this, the project’s backers, and shipper TransCanada (which is involved through its investment in APG), must be hoping that media rumours of a federal backtrack on funding are just that, and won’t harm a project that has been so long in the making.