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Pipeline approved

Construction must start in 2015, National Energy Board asserts; more than 200 conditions need to be met
Guy Quenneville
Northern News Services
Published Friday, December 17, 2010

SOMBA K'E/YELLOWKNIFE - The National Energy Board has spoken: the long-delayed Mackenzie Gas Project has its blessing.

With Thursday's approval, the proponents - led by Imperial Oil - can now move on to the next step: deciding whether or not to build the $16.2 billion pipeline.

"It's a good thing on the regulatory side," Mayor Gord Van Tighem said of the board's ruling. "Now it gets turned over to those that decide whether they want to build a pipeline or not."

Yellowknife, as the industrial hub of the NWT, stands to prosper from the construction of the 1,200-kilometre pipeline, should it proceed, said Van Tighem.

"It has overbearing benefits for the Northwest Territories, therefore it also benefits the capital city," he said.

When, or if, construction occurs is another story.

The NEB said its approval of the project is dependent on more than 200 conditions being met by the proponents, who also include Exxon Mobil Corp, ConocoPhillips and Royal Dutch Shell PLC.

That includes a requirement construction of the pipeline begin by the end of 2015.

Pius Rolheiser, spokesperson for Imperial Oil, said meeting that deadline could prove difficult if a positive fiscal agreement with the federal government is not in place.

"We would need to have sufficient confidence in a fiscal agreement with the federal government before we could make a decision to restaff the project and resume engineering work, permitting work," Rolheiser said from Calgary.

That work will take three years to complete, with several thousand permits needed before construction can begin. The company previously requested to have until 2016 to decide whether to proceed with building the pipeline.

The board's decision calls for the proponents "to file an updated cost estimate and report on their decision to build the pipeline" by the end of 2013.

Kevin O'Reilly, a member of Alternatives North, said the natural gas project faces "lots more hurdles" before 2013 rolls around.

"I don't think it's going to be going ahead anytime quickly," he said. "The proponents have three years in which to make a decision about whether they're going to go ahead or not. I just can't frankly see much changing in three years. I wouldn't be going to the bank on this project."

The Henry Hub spot price for natural gas - the price point for natural gas traded on the New York Mercantile Exchange - closed at US$4.02 per one thousand British thermal units (MMBtu) yesterday - considerably below the US$6 to US$7 price range experts say is needed to make the Mackenzie Gas Project economical.

By comparison, gas prices reached US$14 per MMBtu in 2006, when the Joint Review Panel began its public hearings.

At a press conference held Thursday afternoon at the legislative assembly, Bob McLeod, minister of Industry, Tourism and Investment, said he welcomed the board's decision.

"The National Energy Board has given the Northwest Territories an early Christmas present today in issuing a positive decision regarding the Mackenzie Gas Project," said McLeod. "This is an important milestone for a project that could provide significant economic and environmental benefits for the Northwest Territories."

That said, McLeod admitted to some concern about the six years the regulatory process for the pipeline has taken.

"I'm born and raised in the Northwest Territories and there was talk about the pipeline 40 years ago," he said. "I think it's taking too long. But I think this is the closest we've been to a pipeline, so we're very optimistic and pleased with the NEB."

In additional to spurring further oil and gas development in the NWT, the Mackenzie Gas Project is expected to create 5,700 jobs over the course of its construction.

- with files from

Nicole Veerman

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