APXR-related MacKenzie Gas Pipeline News...:
Ottawa releases terms of possible participation in Mackenzie Gas pipeline
Bob Weber - Canadian Press - Friday, November 18, 2005
(CP) - Days before Imperial Oil (TSX:IMO) is expected to announce its plans for proceeding with the Mackenzie Valley gas pipeline, the company says the federal government has answered one of its two main concerns about the project.
A letter from Deputy Prime Minister Anne McLellan to Imperial vice-president Randy Broiles, released Thursday, has eased the proponent's worries about the pipeline's fiscal framework, said company spokesman Pius Rolheiser.
"Our concerns on fiscal terms have been largely addressed," he said. "We've certainly been encouraged by this development."
In the letter, McLellan lays out several options for Ottawa to improve the project's economics and ensure it goes ahead.
"Given the broad benefits of the project for all Canadians, and residents of the Northwest Territories in particular, and taking into account Canada's financial interests in the potential royalty revenues from this resource, the Government of Canada is prepared to consider supporting the (pipeline) on terms that Canada considers commercially reasonable," she writes in the letter released Thursday.
"The Government of Canada has also committed to work with you with respect to your request for fiscal enhancements."
Options under consideration include lower royalty rates during the first years of the project and higher rates down the road; taking payment in gas instead of cash and investment in one or more components of the project.
The letter also reassures Imperial over access to the land over which the pipeline would run.
"The Government of Canada believes that it would be in the public interest that no party should impede the timely access to land required for the project to proceed," it says.
Although communities in one section of the pipeline's route have begun voting on access and benefits agreements, three other sections continue to negotiate. In addition, the Deh Cho region in the southwestern N.W.T. hasn't even signalled its approval of the pipeline.
McLellan also says Ottawa will consider guaranteeing a loan allowing aboriginal groups to take a one-third share in the project.
"I can assure you that the Government of Canada will continue to give this issue serious consideration," she writes.
Although the project proponents have asked for $1.2 billion worth of "enhancements," McLellan ruled out any kind of direct payments.
Outside the House of Commons, McLellan emphasized any federal moves had to make business sense.
"We are willing to consider the request for fiscal enhancement but anything that we do has to be commercially viable and anything we do cannot be a subsidy," she said.
McLellan also sunk the idea of aboriginal governments collecting property tax on the pipeline.
Thursday's developments were widely welcomed.
"This is a major step forward for the project," said N.W.T. Industry Minister Brendan Bell. "The willingness to say this project is important for Canada - not only northerners but all Canadians, that's the monumental aspect of what's gone on here today."
Clive Mather, president and chief executive of Shell Canada (TSX:SHC), which also has a stake in the project, expressed optimism.
"I am a supporter of this project, I'm very clear about that," said Mather, who's company has set aside $45 million to move the pipeline through the regulatory process.
"We have made provision in the budget on the assumption that this project will go ahead."
It's been a good week for the pipeline proponents.
When Imperial announced last spring it was cancelling preparatory work on the pipeline, it cited uncertainty over fiscal terms and the lack of progress negotiating access and benefits agreements as the reason.
On Wednesday, the first four communities along the route began voting on access and benefits agreements. With Thursday's letter, the fiscal concern has also been removed.
On Friday, Imperial was expected to tell regulators whether it's ready for public hearings on the project so the National Energy Board could go ahead with a scheduled planning conference.
However, in a letter to the board on Thursday, the company asked for an extension until Nov. 23.
© The Canadian Press 2005
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