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Mackenzie pipeline gets cabinet, energy board go-ahead

Near Fort Simpson, the staging area for the building of the Mackenzie Valley natural gas line


The Mackenzie Valley natural gas pipeline has cleared its last major regulatory hurdle.

On Thursday, the National Energy Board issued a certificate of public convenience and necessity for the long-delayed line, after receiving approval by the federal cabinet. The NEB gave its own nod to the project in December, capping a protracted regulatory process that began in October of 2004.

Now it's up to the project's backers to decide whether to build the 1,196-kilometre line, which would cost $16-billion and provide an outlet for Arctic gas reserves discovered decades ago.

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But the high cost of the project, along with the discovery of huge new volumes of natural gas in more southerly parts of the continent, have raised growing doubts over whether the pipeline will be built any time soon.

Its backers are Imperial Oil Resources Ventures Ltd., the Mackenzie Valley Aboriginal Pipeline Limited Partnership, ConocoPhillips Canada (North) Ltd., Shell Canada Ltd. and Exxon Mobil Canada Properties.

Some have argued that the federal government should financially support the Mackenzie project, treating it as a nation-building exercise that would open up the North to development, and a long-term bet on the future of Arctic resources.

Pipeline company TransCanada Corp., which has backed the aboriginal pipeline group that owns a one-third stake in the line, has also argued that despite newly discovered supplies, Mackenzie will be needed to fill the sharp annual output declines that all natural gas wells experience.

But companies that would have to foot the bill for the project have been more muted.

Earlier this week, Joe Marushack, the Canadian president for ConocoPhillips, called Mackenzie a "pretty tough project" given "gas prices where they are."

And while a construction decision must be made by 2013, the NEB approval is not the final step in clearing the way for the project. Companies must still receive 6,000 individual permits for various aspects of construction before they can proceed.

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They also intend to step up unresolved talks with Ottawa on fiscal support for the project.

"We will be negotiating with the federal government on what's the next step to move that project forward, and what sort of fiscal arrangements are necessary," Mr. Marushack said.

Loan guarantees would "certainly be helpful," he said.

But even if the near-term prospects for the project remain doubtful, many in the industry continue to hold hope that the Mackenzie pipeline, as well an even bigger Arctic gas pipeline proposed in Alaska, will one day be needed.

"Long-term, I'm optimistic that some day we'll see those projects come forward," Mr. Marushack said.

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