Mackenzie pipeline approved, with conditions

CALGARY — The National Energy Board has given the green light to the Mackenzie Valley natural gas pipeline after a drawn-out regulatory process.

CALGARY — The National Energy Board has given the green light to the Mackenzie Valley natural gas pipeline after a drawn-out regulatory process.

“We have decided that the project is in the public interest. In reaching this decision, we have considered the social, environmental and economic effects and listened to the views of northerners and other parties,” a review panel wrote in a report released Thursday.

The federal watchdog said it has attached 264 conditions to the project’s approval in areas such as engineering, safety and environmental protection.

“The conditions require the companies to undertake a large number of activities and consultations. The National Energy Board will enforce these conditions should the companies decide to go ahead with the project.”

Northwest Territories Industry Minister Bob McLeod called the decision an “early Christmas present” for the North.

“This is an important milestone for a project that could provide significant economic and environmental benefits for the Northwest Territories and for Canada.”

The next step is for the federal cabinet to approve the energy board’s decision.

The proposed 1,220-kilometre Mackenzie pipeline would carry natural gas from near the coast of the Beaufort Sea in the N.W.T. to southern markets.

In 2007, lead partner Imperial Oil Ltd. (TSX:IMO) estimated the project’s cost at $16.2 billion. And even with the energy board’s decision, the pipeline’s future is by no means certain, since the company has said it won’t move on the project until at least 2018.

Stephen Hazell, who participated in the lengthy regulatory hearings on behalf of environmental group Sierra Club, likened the project to Monty Python’s famous dead parrot sketch.

“If it’s not deceased, it sure looks like it,” he said.

Just under a year ago, a federally appointed joint review panel published a long-awaited report on the environmental and socio-economic impacts the project could have on the region.

That nearly 700-page report came after months of hearings throughout the Northwest Territories and years of delay. It concluded that the pipeline’s impacts would not be significant — if every one of the panel’s 176 recommendations were followed.

Last month, the federal and territorial governments gave their feedback to the panel review. Of the recommendations that applied specifically to them, the governments accepted, or accepted the intent of, 88 and rejected 27.

Proponents call the Mackenzie pipeline a basin-opening project that would offer a much-needed economic boost to communities in the North.

But many question the economics, given the enormous volumes of lower-cost shale gas flowing from regions much closer to market.

TransCanada Corp. (TSX:TRP) and ExxonMobil Corp. (NYSE:XOM) — which are also involved in Mackenzie — are planning to build a much larger natural gas pipeline from Alaska’s North Slope.

The impact of climate change on the North has also been brought into sharper focus since the regulatory process began several years ago.

“In the course of going through these hearings, it’s become clear that climate change is happening big time in the North and it will have really major impacts on permafrost, which means it will have major impacts on the operation of all the 1,200-kilometre-long pipeline, much of which is in country that has no road access,” said Hazell.

Alberta Energy Minister Ron Liepert said the Mackenzie project would benefit the province. The liquids-rich gas would supply Alberta’s petrochemical industry and keep pipelines full, keeping costs down for producers.

But he acknowledged there are headwinds.

“Obviously with the supply that exists in North America today, and the price point, it’s probably going to be a challenging decision to make,” he said.

“It will be the proponents that will have to make the determination whether it’s economic and when it becomes economic.”

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