Much-delayed Arctic pipeline environmental study expected this week, years late

The Canadian Press ~ The News
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Even at noon, Inuvik's weak December sun never seems to light the Arctic community brighter than twilight - no longer night, not quite day.
It's a little like how businessmen have been feeling about their own prospects in the Mackenzie Delta community after seemingly endless delays in a project they've pinned their hopes on - the Mackenzie Valley gas pipeline.
"Everyone's hoping for a positive announcement and away we go," says Kurt Wainman, who's got a yard full of heavy equipment sitting idle just waiting for some nice, juicy oilpatch work.
Sometime this week, a little of Wainman's limbo will lift.
More than three years after its original deadline, the long-awaited Joint Review Panel will finally table its report on the pipeline's environmental and social effects.
That report will then be combined with a National Energy Board's report on the project's engineering and economics. The package will go before the federal cabinet, which can accept or reject its recommendations.
Doubts are gathering around the increasingly expensive pipeline as new U.S. natural gas sources threaten markets for Mackenzie gas and depress its price.
And although some feel the review panel's report will revive momentum behind the $16-billion, 1,200-kilometre project, the final decision is still a ways off.
"There's a series of things that make a project go: No. 1 in importance is economics," says Bob Hastings, an energy analyst at Canaccord Capital in Vancouver.
"Other things that can impact the project are politics, environment and need. But at the end of the day, what I focus on is the need and the economics."
The Mackenzie project was born in 2000, when four major energy companies began a formal feasibility study on linking Alberta's pipeline network to large gas fields in the Mackenzie Delta area capable of producing 1.4 billion cubic feet of gas daily.
Many northerners welcomed the project, seeing it both as a "basin-opening" opportunity for the energy industry and as a springboard to a new economic dawn in the Western Arctic. Aboriginal groups, hoping for a share in that boom, took a one-third equity share in the proposal.
Gas prices reached the unheard-of price of nearly US$10 per 1,000 cubic feet that year and the cost of the project was estimated at a reasonable $4 billion. It seemed it couldn't miss.
In 2001, the federal and territorial governments teamed up with aboriginal organizations for a process that was supposed to shorten the usual time for environmental review by a year.
But it was 2004 before project leader Imperial Oil (TSX:IMO)filed its application for the project. By that time its cost had ballooned to $7 billion.
Delays began to set in when the Joint Review Panel ruled that the environmental assessment Imperial provided in its application was too sketchy. Imperial caused further delays when the panel was forced to wait for project updates.
The panel finally began hearing from the public on Feb. 14, 2006, in Inuvik's community hall. It was the first of 26 such hearings. They were held everywhere from the High Arctic community of Sachs Harbour to Edmonton.
The hearings sometimes resembled community group therapy sessions as much as policy debates, but they were so popular the panel was forced to add more. The cost of the hearings ballooned from about $6.3 million to more than $16 million. Meanwhile, the Federal Court ruled in November 2006 that Ottawa didn't consult an aboriginal group along the southernmost stretch of the pipeline's route, a ruling that took four months to sort out.
The panel's deadline was extended by five months, then another seven months - with an extra year to digest, compile and write a report out of hundreds of thousands of pages of transcripts.
Now, as the report comes out, the project's cost is estimated at $16.2 billion. Natural gas, now coming from huge shale fields in the United States, is worth about half what it was a decade ago.
"There is a lot of gas out there now that was not expected when this project was conceived," says Hastings, "so even if they say, 'Oh yeah, you can build it,' it's not something that'll make all the stocks fly up. Just because you can, doesn't mean you will."
Others are more optimistic.
First Energy Capital analyst Stephen Paget says even a conditional approval would remove a huge unknown.
"The possibility that the pipeline may not be permitted does exist," he says.
He also points out that Imperial's corporate parent, Exxon Mobil, recently made a $31-billion bet on natural gas when it bought out American gas producer XTO Energy.
"The proponents appear to remain positive on gas and its prospects," says Paget.
Russell Newmark, CEO of E. Gruben Transport, the largest private-sector employer in the Mackenzie Delta, gives the pipeline about even odds of being built.
"I think there's more reason for optimism than conventional wisdom seems to give it," he says.
No one knows how long shale gas fields will last, he points out, and those developments come with environmental issues.
Environmental concerns surrounding the pipeline, such as wilderness conservation, are well on their way to being worked out, says Rob Powell of the World Wildlife Fund.
"Some excellent progress has been made," he says, noting several large areas have been given interim protection from development.
However, some of that temporary protection starts expiring as early as next October, and he wants the panel's report to make sure it's extended.
"We would expect to see the principle of conservation first reflected in some manner."
And some environmental groups, such as the Sierra Club, don't want the pipeline built at all. They argue its gas would simply go to fuel the environmentally questionable oilsands.
For its part, Imperial's public stance hasn't changed since the project was first proposed.
"Despite the current economic downturn and the impacts that it's made on the North American gas market, we're of the belief that demand for North American energy and gas will continue to grow," says Imperial spokesman Pius Rolheiser.
But most are already looking past the review panel's report that took so much time to write.
"It's not going to be any kind of deal-breaker," says Newmark.
The real action, most agree, will move to the back rooms in Ottawa where proponents and politicians will wrangle over if - and how - the federal government will get involved with the pipeline.
Proponents "will be looking at the government for a deal if and when the review panel has a positive conclusion," Paget says.
What kind of deal is anyone's guess, he adds. Although Ottawa has ruled out direct ownership, royalty breaks or infrastructure funding are possible.
Wainman just wants them to get on with it. After three years of twilight, he just wants the sun finally to rise.
"We can't be just hanging around any more. We're just hanging around to go broke."

Organizations: National Energy Board, Canaccord Capital, TSX Federal Court North American First Energy Exxon Mobil E. Gruben Transport World Wildlife Fund Sierra Club

Geographic location: Arctic, Inuvik, United States Mackenzie Valley Ottawa Vancouver Alberta Sachs Harbour Edmonton

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