Jason Unrau
Northern News Services
Monday, July 16, 2007
YELLOWKNIFE - Imperial spokesperson Pius Rolheiser says the energy giant remains committed to the Mackenzie Valley pipeline despite the fact that project cost estimates have more than doubled the original $7 billion price tag.
"There have been media reports suggesting we were looking at other options like the over-the-top scenario where we link with the Alaska pipeline or liquefied natural gas," added Rolheiser. "But we've tested our design base against alternatives and we feel the project as is before the National Energy Board (NEB) is the best approach to developing those specific gas resources."
In May of this year, Imperial and the federal government talked subsidies and while the government has denied it and Imperial would not comment on discussion, it has been reported that Ottawa suggested it take on an equity stake.
It has been more than seven years since talk of reviving the Mackenzie Valley Pipeline brought both hopes of prosperity and concerns about social and environmental consequences to the territories.
Since then, the Aboriginal Pipeline Group came into being; secured a one-third ownership of the transportation system; proponents Exxon, Imperial, ConocoPhillips, Shell and the APG did preliminary design work and made applications to the National Energy Board and other relevant boards. And now, after more than a year-and-a-half since NEB and Joint Review Panel began the hearings on the project, the process is expected to wrap up at the end of July.
To date, project proponents Exxon, Imperial Oil, ConocoPhillips, Shell and the APG said they've spent $600 million working through the regulatory processes. Imperial's March cost estimate revision pegged the project at $16.2 billion to build.
Bob Reid, APG president, said that while the project has become much more expensive, the increase would benefit the APG.
"Ironically, with the capital costs going up, for an investor that's a good thing, because our equity increases and we earn a return on the equity," he said.
To date, TransCanada Pipelines Ltd. has financed the APG $120 million and according to Reid, it will continue to do so, at no risk to the APG, until the project is either built or shelved. How the APG will recoup the loans is through tolls and contracts with the four producers who own stakes in the three anchor fields.
"In terms of our financing, that's not a problem," Reid said. "The long-term contracts that underpin our financing are in place."
But the pipeline has been shelved once already, after Justice Thomas Berger's Mackenzie Valley Pipeline Inquiry and report in 1977 recommended land claims in the NWT be settled before a project of this scope went ahead. Thirty years later, the pipeline is on the table again, but soaring labour and material prices have inflated and from the outset Imperial has admitted the project's economic viability was marginal.
Adding to concerns about the Mackenzie Valley pipeline's fate is the announcement by Alaska Governor Sarah Palin that the state is accepting applications to build a 5,600 kilometre North Slope gas pipeline. While North America's increasing demand for natural gas could eventually require both the Mackenzie Valley and Alaska lines, labour and materials demands would make it impossible to construct both simultaneously.
Regardless, the Mackenzie Valley pipeline is Imperial's to build or turn down and before any construction occurs the NEB must first rule on the original application. Both the APG and the GNWT have said a "sunset clause" is necessary for any pipeline project permits the NEB approves so if Imperial balks, the project won't wither on the vine.
"We're absolutely in favour of that," said Reid of the sunset clause. "There has to be a date established and the NEB, I think, intends to do that."
