Mackenzie pipeline gets a boost

Nathan VanderKlippe
Globe and Mail
30 December 2009

Joint Review Panel concludes northern project should go ahead – but at a deliberate, sustainable pace

A decades-old northern dream has taken a major step ahead after the panel that was assigned to review the Mackenzie Valley natural gaspipeline concluded that it should go forward.

The Joint Review Panel, which has spent the past half-decade assessing the project, has concluded the $16.2-billion project “would deliver valuable and lasting overall benefits and avoid significant adverse environmental impacts.”

But in a 679-page report, the panel lays out a number of measures designed to slow the pace of Arctic development the pipeline could spur, in hopes of avoiding undue ecological and social pressures. In a step that is likely to be controversial, it presses the federal government to keep Canada's natural gas – not solely that flowing from the Arctic – away from projects like the oil sands.

Released Wednesday afternoon, the report does not give formal approval for the pipeline to go ahead – that power lies with the National Energy Board, which is expected to rule in September – but its positive findings are a significant boost to the project. It “is obviously a very positive development,” said Pius Rolheiser, spokesman for project lead backer Imperial Oil Ltd. (IMO-T)

The report includes 176 recommendations aimed at diminishing the pipeline's impact, but concludes that the pipeline will “provide the foundation for a sustainable northern future” – one that would be better with the major project than without it.

One of its major conclusions is that the pace of Arctic development must be tempered in an effort to avoid “cumulative effects” from multiple projects.

An unbridled approach to Arctic gas exploration could be detrimental to the area, the panel found, warning that unless work is carried out at a sustainable pace, the pipeline could bring activity “so large and so rapid as to outstrip the capacities and resilience of northern people, firms and governments.”

The panel found that the Mackenzie line would not adversely affect fish, but says broad regional plans must be created to limit activity that could hurt animals like polar bears, caribou, beluga whales and migratory birds.

It recommended the NWT conclude a revenue-sharing agreement with the federal government, since the territory will shoulder much of the pipeline's infrastructure and related costs but, under current funding structures, “would receive little of the revenue share directly.”

The panel discarded arguments that the pipeline should be blocked on grounds that it would be used to feed clean natural gas to the oil sands.
It did, however, recommend that the federal government establish a “preferential use of natural gas” that would see gas used to replace, rather than boost, “more carbon-intensive and polluting fuels.” That could mean keeping natural gas away from the oil sands, and instead using it to replace coal-fired electrical generation.

“To us that was really the most interesting recommendation there,” said Sierra Club of Canada executive director Stephen Hazell, who called it “a good idea.”

The report's length and complexity kept many of the project's backers from making specific comments Wednesday. Still, Fred Carmichael, the chairman of the Aboriginal Pipeline Group, said it “sounds very, very positive.”

The pipeline group owns a one-third share in the project. The project's corporate backers include Royal Dutch Shell PLC, (RDS.A-N) ConocoPhillips Canada, (COP-N) Exxon Mobil Canada (XOM-N) and Imperial Oil Ltd., which has led the consortium for the past decade. Together, they have proposed a project that would bring a new age of industrialization to one of Canada's most untouched regions.

The 1,197-kilometre line would bring up to 1.2 billion cubic feet a day of natural gas from onshore basins near the Arctic coast to the northern edge of Alberta, where it would connect to the province's distribution system.

Though the pipeline dream has stoked fears of cultural and environmental damage, it has also raised hopes among many northerners who yearn for the economic independence it could help to bring.

The seven-member review panel took three years longer than expected to deliver its report, at a total cost of $18.7-million.

Yet in many ways, the most contentious decisions remain to be made. The primary one will come from industry itself, which has to choose whether to build a massive new pipeline whose necessity has been called into question by abundant new North American natural gas supplies from massive shale reservoirs.

Another open question surrounds federal funding for the project. Ottawa has spent nearly a year in negotiations with the pipeline's corporate backers on a fiscal support package. Those talks have yet to conclude, raising questions about Ottawa's willingness to commit big dollars to the pipeline at a time it is spending tens of billions on stimulus measures – and raising fears in the North that the pipeline will fail, bringing about an “economic doomsday.”

Environment Minister Jim Prentice, who has overseen the Mackenzie process, was not available for comment Wednesday. An Environment Canada official said the ministry would not respond until it has completed “the necessary analysis and consultation.”

Industry has compared the pipeline to the western railway and the St.
Lawrence Seaway, arguing that federal support has always been needed for such nation-building exercises.

If the federal government steps in to help, “the Mackenzie story is going to be a great story for Canada for a long time,” said Hal Kvisle, chief executive officer of pipeline builder TransCanada Corp.

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