Yellowknife (Oct 30/06) - An independent report commissioned by a Yellowknife advocacy group suggests the proposed Mackenzie Gas Project can still be profitable without public subsidies.

"Using the current available cost figures, the rate of return to the proponent companies is 29 per cent per year," said Jim Johnson, author of the report, ordered by Alternatives North. "Even if you assume capital cost increases of 30 per cent, the rate of return sill averages 21.5 per cent per year for a full-blown development scenario."

Alternatives North spokesperson Kevin O'Reilly said the group is, "Not against the pipeline," but added the report showed there was no need to subsidize the project.

Throughout National Energy Board and Joint Review Panel hearings on the $7.5 billion pipeline, there has been vocal opposition from Alternatives North and others to any public subsidies directed towards the completion of the project.

Lead pipeline proponent Imperial Oil Resource Ventures Ltd. rejects any assertion it has asked the Canadian government for subsidies.

"Therein lies our major issue with this study, the premise that we're asking for subsidies," said Pius Rolheiser, Imperial spokesperson. "What we're really talking about is the fiscal framework that the project would operate under."

Rolheiser went on to say that with the huge upfront investment on a "frontier basin opening" project, the royalty regime structure Imperial wants is flexible.

"Royalties the government would take on would be lower until project reaches payout, then you revert to a higher regime," said Rolheiser, adding any return on the initial investment to build the three gas fields, gathering system and 1,200-kilometre pipeline would not come for at least five years.

Imperial has assured the National Energy Board it would present a revised cost and schedule analysis by year's end.

To date, proponents, NEB, JRP and intervenors have been using data from Imperial's 2004 Environmental Impact Statement to assess the pipeline project.