Mackenzie Delta producers, natives fail to agree on gas pipeline

By an OGJ Online Correspondent

CALGARY, June 7 -- Mackenzie Delta producers failed Wednesday to get a deal with all Aboriginal groups on proposed plans for a natural gas pipeline from the Canadian Arctic to southern markets.

The producer group -- Imperial Oil Resources Ltd., Shell Canada Ltd., and ExxonMobil Canada Ltd. -- said they would continue to work with Aboriginal peoples in the region to study pipeline development.

The producer group, the Aboriginal Pipeline Group (APG), and native leaders met in Hay River, NWT, June 6 to discuss a memorandum of understanding on how Aboriginal groups could participate in development, including taking an equity interest of up to one-third in a possible $3 billion (Can.) pipeline.

The producers said not all the Aboriginal groups represented at the conference were prepared to sign the proposed agreement, which outlines mutually acceptable arrangements under which a pipeline could proceed.

�We are encouraged by the support which was shown for the proposed memorandum, and we realize that work still needs to be done. We are breaking new ground, and the discussions are complex,� said K.C. Williams, senior vice-pres. of Imperial and spokesman for the producer group.

�We are prepared to take the time necessary to understand the reasons why some parties were not prepared to sign. We consider the support of the Aboriginal peoples of the North vital to any Mackenzie Valley pipeline development.�

Several Aboriginal groups questioned the terms of the deal proposed at the Hay River conference.

Winter Lennie of the Western Arctic Energy Corp. said native leaders should aim for 100% ownership of a pipeline and said that is essential to absolute control of what happens on their lands.

There were also calls to further evaluate a proposal by the Houston-based Artigas Resources Corp., which offers Aboriginals 100% ownership of a line with 100% debt financing.

Support from Aboriginal leaders was mixed with the Deh Cho First Nation saying that there should be no pipeline deal until land claim settlements are completed with Ottawa and others arguing that the time is ripe for northern development.

NWT Premier Stephen Kakwfi told Aboriginal leaders that a Mackenzie Valley pipeline could be delayed for 10 to 15 years if a competing pipeline from Alaska is developed first.

�If the Alaskans take that route, there will not be a need for Canadian gas for another 10 to 15 years,� Kakfwi said.

�If you hesitate, if you balk, set up all kinds of special conditions, your timing may be wrong.�

The producers have 5.8 tcf of proven reserves in the Mackenzie Delta. They are studying feasibility of a line to southern markets via Alberta with initial capacity of 800 MMcfd to 1 bcfd. They are expected to complete the study by yearend.

Aboriginal groups plan to hold discussions with Ottawa on financing assistance or loan guarantees for equity participation in a pipeline. They would also be expected under the deal to secure shipments of an additional 400 to 500 MMcfd from other companies for the pipeline.

Producers and APG have been working to define principles for a project in areas such as education, training, employment and business opportunities, land access, pipeline ownership, route selection, support through the regulatory process, environmental assessments, and abandonment.