Fred Carmichael was a young commercial pilot eager for business in the North when Thomas Berger issued his landmark report in 1977 that recommended a moratorium on development of the proposed Mackenzie Valley gas pipeline.
Back then, Mr. Carmichael was frustrated by the opposition of his Gwich'in community to the pipeline, and by the insistence of Mr. Berger, then a B.C. Supreme Court judge, that no project should commence until aboriginal people in the North had the wherewithal to participate.
The Gwich'in leader is now chairman of the Aboriginal Pipeline Group (APG), a Calgary-based, native-owned corporation that is partnering with four major oil companies on the current proposal for a $16-billion project that would not only pipe natural gas south, but bring development north.
APG members – including the Gwich'in, the Inuvialuit and the Sahtu – are eager for the pipeline benefits to flow to their impoverished people, but there is an increasing sense of foreboding that an opportunity is slipping away.
“People are getting tired of waiting,” Mr. Carmichael said.
“It all comes down to the almighty dollar, and when the producers see that they can make a good return, then things will happen. And until they do, it's not going to happen.”
Regulatory delays and rising costs first contributed to the gloom over the fate of the pipeline. Now, there are growing doubts about whether, given the large increase in natural gas reserves in North America, the producers will commit to the northern mega-project without the provision of massive government subsidies.
Booming shale gas production and increase global supplies of liquefied natural gas have swamped the recession-dampened market, driving prices to seven-year lows.
Pipeline proponents led by Imperial Oil Ltd. say they are undeterred by short-term conditions, and remain committed to the pipeline.
Still, the stunning development of huge shale gas deposits further undermines the case for the Mackenzie project, which was already seen as vulnerable to competition from LNG and gas from Alaska. Mackenzie would deliver 1.2-billion cubic feet per day at a cost of $16-billion – roughly a quarter of the Alaska's project capacity but at half the cost.
“For this thing to go, the government is going to have to step forward with great wads of cash – many billions of dollars,” said Simon Mauger, manager of gas services for Calgary-based Ziff Energy Group.
“No cash up front, no deal, no pipeline.”
Ottawa is now negotiating with the partners – which include APG, Imperial Oil, ConocoPhillips Co., Royal Dutch Shell PLC, and Imperial's U.S. parent, Exxon Mobil Corp. – on a fiscal framework that would include federal support for required infrastructure, such as highways and wharves on the river, and attractive tax benefits.
Northerners were looking to Prime Minister Stephen Harper's recent trip to the territories for a signal of Ottawa's commitment to ensuring the project proceeds after the long-delayed report from a joint review panel is delivered at the end of this year. Instead, Mr. Harper gave it scant mention, even as he touted his government's commitment to northern development.
“One would have thought that if there had been some optimistic talks about the pipe, people on both sides – federal and territorial – would have been speaking out about it,” said Doug Matthews, industry consultant and former director of minerals, oil and gas for the NWT government.
The territorial government hopes to win national support for the pipeline, arguing the federal subsidies are critical to opening up a new energy frontier and weaning northerners off transfer payments form the south.
Northwest Territories Industry Minister Robert McLeod meets in St. John's Monday with his federal, provincial and territorial counterparts, and will be looking for support from his colleagues.
