Iqaluit (Sep 04/06) - Iqaluit's Co-op society has a bit of a problem.

The organization wants to build a $13-million hotel/retail project at the intersection of Niaqunngusiaq and Airport roads. But the land is contaminated with gasoline and falls within the 450-metre setback from the city's sewage lagoon.

That means territorial health laws prohibit the operation of food retailers and hotels within that radius.

So the society is looking to pull off a land swap with the city so it can break ground on the project.

"It's in the process of drafting a letter to city staff asking for the deal. There are lots of options," said co-op president Mary Ellen Thomas. "I have no idea what (city staff) are going to come back with."

Michele Bertol, the city's director of planning and lands, said she can't remember the last time the city did a land swap with anyone, though that doesn't mean it can't happen.

The site, once home to the Bayshore Hotel, is now off limits for human occupancy, according to territorial health regulations.

Bertol said that means the city can't issue a development permit for the project.

"The city is aware of the regulations and has a responsibility for enforcing them," she said.

In the meantime, the co-op, which boasts roughly 400 members, is starting an investment drive, selling preferred shares to raise cash.

It's also concentrating on business at the airport gas bar, which recently introduced a four per cent discount on gas for hunters.

"Since we can't go one way, we'll go another way," Thomas said.