Energy Ink

NEB gives Mackenzie gas five years to flow

The national regulator approves northern pipeline with "sunset clause"

December 17, 2010

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The National Energy Board (NEB) has granted the Mackenzie Gas Project (MGP) five years to finish its plans, negotiate favorable financial policies with the federal government and start building its $16.2-billion Arctic production and pipeline scheme.

Over objections from critics and supporters alike, who urged the NEB to make the already delayed MGP fish or cut bait, the development approval handed down in December includes a liberal “sunset clause.” The certificate is valid until Dec. 31, 2015, when it will expire unless a start is made on construction. A “planning clause” calls for a new cost estimate and progress report on the decision to go ahead by Dec. 31, 2013.

The MGP has begun a three-year work program of re-staffing dormant project teams, selecting contractors, obtaining thousands of local permits for the Mackenzie pipeline’s 1,200-kilometer right-of-way, and compiling a new cost forecast.

The approval ruling says, “We are satisfied that that forecast growth in the North American market would be sufficient to absorb the expected gas volumes.” But whether the project will pay its way is another question.

“For the Mackenzie Valley Pipeline to be successful the natural gas moved through it would need to compete with other sources of gas supply in the North American market. In final argument some parties raised concerns that the evidence does not prove that Mackenzie gas could successfully compete. We note that it is impossible to know how markets and circumstances will change over time,” the ruling says.

“Economic conditions will inevitably change over that time as they have in the past several years. Supply and demand forecasts and gas prices will continue to change over time. We do not agree that these are reasons to deny the project. Our approval gives Mackenzie gas an opportunity to compete. Denial would block that opportunity indefinitely.”

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