.

Home page

Text size

E-mail this page

INUVIK - The last active driller operating in the Mackenzie Delta has announced it will dramatically cut back on operations next winter, eliminating more than 100 seasonal jobs.

The announcement means trouble for the oil and gas industry in Inuvik.

Drillers work an MGM Energy rig outside Inuvik this past winter. MGM has announced it will significantly scale back activities in the Delta next year, a cut that will severely impact the economy of Inuvik, say several people from the community. - photo courtesy of MGM Energy Corp.

MGM Energy Corp. said the continued delays of the Joint Review Panel (JRP) - the independent body charged with assessing the socio-economic and environmental impact of the $16.2 billion Mackenzie Gas Project (MGP) - has made it virtually impossible to raise capital from potential investors, forcing to the company to cut back on further spending.

The JRP, convened in 2004, originally committed to completing its report in 10 months. After several delays, the report is now expected in December of this year.

The process won't stop there. If the JRP gives the project the green light, the National Energy Board must then submit its own decision. The federal cabinet will give the final seal of approval.

"People ... are not prepared to take anything on faith anymore," said MGM President Henry Sykes of wary shareholders. "They want to see concrete, meaningful progress towards a pipeline."

Last week, MGM sent a letter to all contractors who did work at MGM's three wells north of Inuvik this past winter, informing them about the company's future plans.

MGM spent between $68 million and $70 million on this year's wells, employing 200 people on any given day (staff work on rotation), with 40 per cent of total workers coming from Inuvik.

One locally-based company, Northwind Industries - which does roadwork and construction for MGM - generates more than 80 per cent of its annual revenue from MGM, said owner Kurt Wainman.

He added his company spent $5 million purchasing loaders, graders, Snowcats and water trucks for the MGM job, which employed 120 Northwind employees last winter.

"That's a big chunk of work out of me," said Wainman. "It's unfortunate that this pipeline has to take so long because that's what MGM is leaning on, as well."

If MGM does anything at all next winter - and no decision has been made yet - it may spend between $15 million to $10 million drilling two wells on Inuvialuit-owned land near Inuvik, but with significantly less staff, said Sykes.

"If $70 million gets you 200 people a day, then $15 million probably gets you 20 a day," he said.

Nellie Cournoyea, CEO and chair of the Inuvialuit Regional Corporation, said Inuvik has no other industry comparable to oil and gas in terms of the money it pumps into the community.

"It's a desperate situation for the contractors that do that type of work," she said.

"If there's no action up here, the contractors won't get work, people won't be able to go to work. Their spending ability reaches out to the retail community and the hotels and everything else gets drastically reduced accordingly."

Sykes, while respectful of the JRP's role as an independent body which must make its decision free of industry pressure, nevertheless said he doesn't buy the JRP's assertion, frequently repeated, that it cannot comment on the reasons for its delays.

"The JRP can say that they're an independent body, and they certainly are, but it wouldn't compromise anyone's independence to actually explain to the world what it is they're doing," he said.

Inuvik is set to host its ninth annual petroleum show next month.

Mayor Derek Lindsay said attendance - both among exhibitors and delegates - will likely be down this year, although registration as of press time was still on par with this time last year.

In addition to trying to get federal representation at the show "to get some answers about the JRP," Lindsay said he's tried to focus "a good portion of the conference on the regulatory (process) and try to get influential and people-in-the-know as speakers."

The show will include a talk entitled "Lessons Learned from the MGP Review Process."

"It will be a source of much discussion," said Lindsay.