Yellowknife (July 31/06) - As companies looking to exploit gas reserves in the NWT battle over regulatory measures of the proposed pipeline, aboriginal shareholders find themselves caught in the middle.

At National Energy Board hearings in Yellowknife last week, Mackenzie Gas Project proponents and potential shippers sparred over tolls, tariffs and pipeline capacity.

Meanwhile, the result of those talks could affect the bottom line for the Aboriginal Pipeline Group.

With a one-third stake in the proposed $7.5 billion pipeline APG profits hinge on additional gas shipped south, over and above what the anchor fields - owned by proponents ConocoPhillips, Exxon Mobile, Shell and Imperial - will produce. The APG's share does not include the gathering system, liquid natural gas pipeline or processing facility.

"The shippers' interests and APG interests are aligned and our profits directly depend on the (Mackenzie) Explorer Group and other (shippers) to sign long-term contracts," confirmed APG president Bob Reid Thursday.

However, not a single shipper has signed on to transport natural gas south.

The explorer group - which represents Anadarko, BP, Chevron, Devon, EnCana and Nytis Exploration - is not pleased with the amount of available pipe capacity to accommodate its gas in the Mackenzie Delta and basin.

"The way the Mackenzie gathering system is currently designed really doesn't serve the needs of exploration industry," said explorer group spokesperson Jim Campbell.

As currently proposed, the gathering system is capable of handling 1.075 billion cubic feet per day; 830 million cubic feet per day is reserved for anchor field production and 245 for other gas.

Imperial's proposed tolls and tariffs regime was also challenged by Allan Hollingworth, representative for Paramount Resources, another potential shipper not part of the explorers group. It prefers a toll regime based on the distance gas is shipped.

However, Imperial wants two flat rates; one for gas shipped north of Storm Hills - located north of the Inuvik gathering system - and a second for gas originating south of that point.

Its rationale for this is two

fold. Without the 1,200 km pipe, Imperial argues, no gas could be shipped south and a pipeline in a "frontier" location comes with unique challenges and costs.

At the hearings, an Imperial official agreed with Hollingworth that those not funding the $7.5 billion pipeline, "Were getting a bit of a free ride." As for the current zero commitment from third-party gas producers, Imperial insists this has nothing to do with its proposed tolls.

"It's not because of the terms of the contract but because there's no sufficient confidence in their gas reserves," said Imperial's Heather Marreck.

As things stand, Imperial wants other shippers to commit to either 15 or 20 year contracts at an unspecified toll. A July 10 Energy Board ruling favoured Imperial's position of using both the Canadian Oil and Gas Operations Act (COGOA) and National Energy Board Act to regulate the project.

The explorers had wanted the Energy Board Act to regulate the entire pipeline.