INUVIK - The future of a $16-billion project to carry natural gas from the Beaufort Delta to southern markets may be more of a pipe dream following rumours Ottawa may not go forward with its investment.

Winter seismic work and drilling activity is performed on behalf of the Mackenzie Valley Pipeline Producers Group a few seasons ago. - photo courtesy of Imperial Oil

A recent National Post article, which cites unnamed sources, states that Jim Prentice, environment minister, took "a major financial assistance package to a Cabinet committee last week" which included a proposed federal contribution to construction costs of the Mackenzie Valley Pipeline. The article states that due to the costly price tag - a value of taxpayer dollars the government isn't willing to make public - the proposal was rejected.

Frederic Baril, spokesperson for Prentice, said the minister has made it "quite clear" in the Post article that there "has been no decision made" on the funding, but does not deny the allegation the funding package was rejected.

"Cabinet discussions are subject to absolute confidentiality and when the government has something to announce on the issue, we will announce it," Baril said. "Our discussions on the fiscal framework continue with Trans Canada Pipelines, the Aboriginal Pipeline Group and the Proponents of the anchor fields."

Pius Rolheiser, spokesperson for Imperial Oil on the Mackenzie Gas Project, said discussions with the federal government remain ongoing in an attempt to "nail down a fiscal framework."

"I certainly can't comment on a discussion that may or may not have taken place in Cabinet," Rolheiser said Tuesday. "From the proponents perspective, we remain very much committed to the project and we're working diligently on a number of fronts."

In the legislative assembly on Tuesday, Premier Floyd Roland, fielding questions on the readiness for the Joint Review Panel report on the pipeline from Weledeh MLA Bob Bromley, said they were unaware of any rejection by the cabinet committee and were looking into the Post's report. Bob McLeod, Minister of Industry, Tourism and Investment, reiterated what Roland said.

"I'm still optimistic and as I said before, Arctic Natural gas is still required," McLeod said during a break in the session. "When you look at the United States government they are committed to seeing the Alaskan pipeline going forward and have increased their support.

"They're showing they have the political will to see a pipeline go ahead and we're waiting for our government to show the same will."

Western Arctic MP Dennis Bevington said he tried to speak to Prentice on Tuesday, but the minister declined to meet with him, adding the rejection is just speculation at this point, which he said is part of the problem.

"We don't know what the minister has offered up," Bevington said of the secrecy behind the negotiations to build the 1,220 km pipeline from the Beaufort Sea to Alberta. "I don't know if it's been accepted by industry. He wouldn't have gone to cabinet unless the industry accepted it."

Nellie Cournoyea, Inuvialuit Regional Corporation CEO and chair, said she had no cause for concern, as the corporation found no one in the federal government who knew anything about it. "I called all the right people, and nobody knows anything," said Cournoyea.

Nothing new could be said for the status of the project, she said. "We are waiting for the panel review to come up. That's the best we could do," the CEO said. "We hope it comes out in December like they promised."

Gwich'in Tribal Council President Richard Nerysoo said he was dismayed at the prospect that aboriginal leadership could be left out of key decisions on the project.

"Are they interested in playing that long term partnership role in developing Canada's north with aboriginal and northern leadership? That's the question people have to ask," he said.

"It's disappointing. There's all kinds of valid reasons why a pipeline should be built. It's a transportation system. The corridor should be a part of the national vision in the North. For the government not to take seriously the importance of that is a bit distressing," said Nerysoo, adding that he hoped the government would not drop a project that would improve the economy of Canada "as a whole."

"I understand the arguments and the rational that people have with regard to the cost of the existing price of natural gas today," said Nerysoo. "But you have to take the long view. This country wasn't built on a short term vision, it had some leaders in the country who had vision and took the risk and a chance, whether it was building the national railway or the Trans Canada Highway. Those initiatives take courage. In this case we need the support of our government that's going to see this project through, that's in the long term interest of Canada."

In Fort Simpson, Lionel Nadia, president of the Fort Simpson Chamber of Commerce, said that he was unaware of the federal government's concerns over the cost of the pipeline.

The chamber would like to see the pipeline move forward, said Nadia. The project would be beneficial for the chamber, local businesses and the village, he said.

As of Tuesday, natural gas was fetching $4.50 per 1,000 cubic feet on the New York Mercantile Exchange, a strong recovery from its seven-year low of below $2 reached earlier this year.

- with files from Mike W. Bryant, Andrew Rankin and Roxanna Thompson