SOMBA K'E/YELLOWKNIFE - The Mackenzie Gas Project will begin operations in 2018 at the earliest, pushing back construction of the $16.2 billion pipeline to sometime after 2013, according to Imperial Oil and its pipeline partners.

Pius Rolheiser: Numerous permits needed for construction of pipeline will take a great deal of time. - NNSL file photo

In a timeline and supply and demand analysis sent to the National Energy Board (NEB) Monday, the proponents, led by Imperial Oil, wrote, "The project proponents believe that, by late 2013, they could be in a position to decide whether or not to proceed with the Mackenzie Gas Project.

"The resultant earliest possible start-up of the project would be 2018."

In March 2007, Imperial Oil told the NEB the earliest the pipeline could start up was in 2014.

In their latest submission, the proponents cited regulatory delays, lack of a fiscal agreement, project restaffing requirements and seasonal constraints as the primary reasons for the project's four-year delay.

As Pius Rolheiser, a spokesperson for Imperial Oil, told Yellowknifer, engineering studies on the pipeline were halted in 2006 due to the regulatory delays; resuming those will take time.

Rolheiser also pointed out that in addition to project approval from the National Energy Board – which is still expected to arrive this fall – there are numerous permits required for construction of the pipeline.

"It's literally 100 permits," said Rolheiser, adding that actual construction of the pipeline would likely begin "shorty after" a decision is made to construct.

The proponents – a group that also includes Royal Dutch Shell PLC, ConocoPhillips, Exxon Mobil Corp and the Aboriginal Pipeline Group – remain upbeat about future demand for natural gas and the pipeline's role as a supplier to U.S. and Canadian markets.

"Natural gas consumption is expected to continue to grow, led by the accelerating gas demand for power generation, and the gas requirements for oil sands bitumen production and upgrading," read the proponent's analysis.

"Obviously I don't think there are any businesses that are pleased to see further delays on this," said Patrick Doyle, president of the Yellowknife Chamber of Commerce.

"It's frustrating and it's certainly disappointing, (but) I certainly wouldn't write it off yet. The right time will come along eventually and it will come to fruition."

At the 2010 Deh Cho Business Conference in Hay River, the news was met by delegates with disappointment, if not surprise, said Merven Gruben, owner of E. Gruben's Transport in Tuktoyaktuk and an attendee of the three-day conference, which began today.

That said, companies hoping to eventually cater to the pipeline should already be diversifying their business portfolios, he added.

"We can't just rely on the pipeline," said Gruben.

Curt Wainman, owner of Northwind Industries in Inuvik, met the news with "a little shock."

Wainman's company has downsized staff and sold equipment in the last several months in response to dwindling oil and gas exploration occurring near Inuvik this winter.

Last year, MGM Energy – the last active driller in the Mackenzie Delta, and a major business driver for Northwind – announced it would not undertake any work this year.

"This time last year we had 100 guys working. Right now we've got maybe 15," said Wainman. "In the immediate future, right now, I'm just trying to figure out how to get through this winter, let alone eight years from now."

The proponent's submission to the NEB did not contain a revised project cost. Earlier this year, Alternatives North called on the proponents to revise their natural gas market analysis as well as the cost of the project, still set at $16.2 billion despite being issued more than two years ago.

The Joint Review Panel – the quasi-judicial body commissioned by the Minister of Environment to write a report outlining the potential environmental and socio-economic impacts of the pipeline – released its report last December, more than four years off its original target.

The NEB's final hearings on the pipeline are scheduled for April 12 to 17 in Yellowknife and in Inuvik from April 20 to 24.