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MGM was supposed to drill four wells this winter but scaled back to three due to delays to the Mackenzie Gas Project, MGM's vice-president of operations said. Pictured is one of three wells MGM drilled this winter. - photo courtesy of MGM Energy

SOMBA K'E/YELLOWKNIFE - Oil and gas drilling activity slowed to a trickle this past winter season, and at least one company and one community leader are pointing the finger at the Joint Review Panel - the seven-member independent panel appointed in 2004 by the Minister of Environment to write a report on the environmental and socio-economic impacts of the 1,400-kilometre Mackenize Valley pipeline.

Only one company, MGM Energy, conducted drilling in the NWT this year, but even MGM said it scaled back plans due to the uncertainty produced by the delayed JRP report.

"The project changed from four wells to three wells," said Gary Bunio, vice-president of operations for MGM.

MGM drilled three wells this past winter in the western Mackenzie Delta, 150-kilometres northeast of Inuvik, spending $68 million to $70 million.

The company originally planned to drill four wells at a total cost of $74 million but scaled back to three to conserve money in light of the delays to the pipeline, said Bunio.

The first well, completed on Jan. 20, drew natural gas, while no significant levels of hydrocarbons were present at the second or third well. The company was expected to pull out of the Delta by the first week of April, when oil and gas work typically wraps up in the North.

Between 80 to 85 per cent of MGM spending this year went to Northern companies, said Bunio.

Total project staff was about 200 people, about 40 per cent of whom came from the Mackenzie Delta and an additional 10 per cent were from the southern NWT.

In 2008, 17 oil and gas projects - which includes drilling and seismic surveys - took place in the NWT, compared to eight projects this year, according to the National Energy Board.

But the other company doing work in the NWT, Paramount Resources, was not drilling. Instead, Paramount spent $3 million doing care and maintenance work on five wells drilled between 1999 and 2001, all within various distances of Fort Liard.

Of Paramount's 2009 spending, $1.2 million went to Northern companies, said Terrence Hughes, regulatory and community affairs advisor for Paramount.

In 2008, Paramount drilled two wells in the area. Derek Lindsay, mayor of Inuvik, blamed the slowdown of activity on the JRP.

"There's so much reluctance for anyone to come up here and do any work because of the uncertainty. If we had some sort of tingling from the JRP as to what direction they're heading (in), then we'd probably see more activity or it would totally shut down," said Lindsay.

"They originally said they'd have a preliminary report by the end of this month; that doesn't seem to be a true statement at all because we haven't heard anything to solidify that."

Kodiak Energy was notably absent from the field this year. Last year it conducted seismic work at its Little Chicago site - along the Mackenzie River between Fort Good Hope and Inuvik - where it spent close to $4.5 million.

The Little Chicago project employed between 30 to 50 people serving as camp attendants, slashers, Cat operators, drillers and seismic geophone operators in 2008.

But the company was unable to raise money to stage further efforts this year, citing the lack of progress on the pipeline, said Glenn Watt, vice-president of operations for Kodiak.

"This winter season we weren't able to gain the support with our investors and the financial institutions that we needed to move the project forward," said Watt.

"Hopefully there can be some resolution on some of the outstanding issues with the pipeline ... like everyone else says. Maybe we can move forward there in the next winter season."

The JRP's new deadline for its final report - December of this year - won't give companies like Kodiak enough time to convince reluctant investors to pump capital into companies for next winter, said Lindsay.

"It's too late in the day," he said. ""I'm hoping that maybe something will spring loose this June at the Inuvik Petroleum Show."

In addition to slowed drilling activity, interest in exploring new parcels of land for oil and gas has cooled after two straight years of records bids.

Last year, BP Energy bid an unprecedented $1.18 billion for the rights to explore 202,380 hectares in the Beaufort Sea.

In 2007, Imperial Oil and ExxonMobil bid a then-record $585 million for the rights to explore 205,321 hectares of the Beaufort Sea adjacent to BP's parcel.

Last December, Indian and Northern Affairs posted its annual call asking interested parties to nominate lands for oil and gas drilling in the Central Mackenzie Valley and Beaufort Sea/Mackenzie Delta regions.

No nominations were received by the January 14 deadline.

"It's not a good sign," said Lindsay.

During a recent visit to MGM's third well, Lindsay said MGM has been asked by BP to do drilling work on the parcel it picked up last year.

However, MGM could not be reached to confirm the deal.