Energy Ink

Alaska pipeline development doesn’t bode well for NWT project

Will Stephen Harper throw the Mackenzie Valley pipeline a lifeline?

Guest Post

May 24, 2011

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As everyone returns to the office after the Victoria Day long weekend, supporters of the star-crossed Mackenzie Gas Project (MGP) are left to wonder what the future holds for the $16.2 billion proposed pipeline scheme now that BP plc and ConocoPhillips have announced they are dropping out of the race to build an Alaska natural gas pipeline.

What does a couple of Big Oil companies giving up on their plans to build a pipeline have to do with the fortunes of a project proposing to ship natural gas from the Northwest Territories’ Mackenzie Valley to southern markets?

Plenty, I would argue. While it might not be the same pipeline project, it’s still the same issue – Arctic gas – and the sight of two large multinational oil and gas companies running away from developing a pipeline to ship Alaska gas south can’t be comforting for the MGP’s proponents.

Also not comforting is TransCanada Corp’s continued lack of enthusiasm for the MGP – demonstrated by president and CEO Russ Girling’s comment that low natural gas prices and competition with huge North American natural gas reserves makes the economic case for building the Mackenzie Valley pipeline “very difficult.”

You can roll your eyes about the Girling quote if you want – now that the BP/ConocoPhillips pipeline proposal has been scuttled, TransCanada is left to pursue an Alaska natural gas pipeline all by itself. But remember the Calgary-based pipeline company has financially backed the Aboriginal Pipeline Group – an MGP proponent – to the tune of several millions of dollars. TransCanada obviously would prefer that its Alaska line be built before the Mackenzie, however, if it thought there was economic case to be made for the MGP, wouldn’t it be a bit more positive about it? TransCanada will never recoup the money it’s provided the Aboriginal Pipeline Group if the MGP isn’t built.

With the NWT’s diamond industry in decline and the more northerly regions of the territory looking for any economic activity they can get their hands on, the MGP is viewed by business and political leaders in the NWT as a post-diamonds lifeline. But the project’s prospects look pretty poor right now and the only way this line looks like it will get built is if lead proponent Imperial Oil Ltd. can reach a “fiscal arrangement” with the federal government.

Will Prime Minister Stephen Harper, fresh from receiving a four-year mandate from voters, be in the mood to provide some financial support for a pipeline the oil and gas industry no longer views economic? With BP and ConocoPhillips getting out of the Arctic pipeline race, you have to wonder if Harper is ready to make that gamble with taxpayers’ money – even with a majority government.

More posts by Darren Campbell

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