Calgary (Jun 19/06) - Rising construction costs prompted Imperial Oil to "pause" talks on royalties with the federal government.

That word came this past Wednesday from Randy Broiles, senior vice-president of Imperial's resources division, during a question and answer session at a Canadian Association of Petroleum Producers symposium in Calgary.

And according to a report in the Globe and Mail newspaper, Broiles also suggested the company is considering shipping components for facilities near Inuvik by sea, rather than having them barged down the Mackenzie River.

At issue, said Imperial spokesperson Pius Rolheiser, is the cost of building the proposed Mackenzie Valley natural gas pipeline.

"Until we have greater clarity, it's difficult to have meaningful discussions," said Rolheiser.

Imperial, lead company on the project, is working on new cost estimates, expected to be complete later this fall.

It's widely believed costs will rise above the current official estimate of $7.5 billion.

"The global economy is affecting everything," said Rolheiser. "There's upward pressure on costs for steel, labour, fuel. We're doing significant work to address the cost challenges."

Rolheiser said the pause in discussions with the federal government on royalties and other fiscal items doesn't mean work on the pipeline is halted.

He said access and benefits agreements have been reached with "four of the five" major First Nations groups.

Talks continue with the Dehcho First Nations, said Rolheiser, although he said he didn't know how often negotiations are being held.

"We're encouraged by the tabling of a federal (land claim) offer."

He reaffirmed the company's willingness to meet with members of the K'asho Gotine First Nation in Fort Good Hope and clarify questions on a proposed agreement, but it is not willing to renegotiate that deal.

Rolheiser said the Gwich'in have signed and ratified its agreement while there's an agreement in principal with the Inuvialuit, and the agreement with Sahtu First Nations in Tulita and Deline are "fully ratified."