Mackenzie pipeline needs federal cash: insiders

The Mackenzie Valley pipeline needs financial support from the federal government in order for it to go ahead, say project proponents and industry analysts.

The 1,200-kilometre natural gas pipeline being proposed in the Northwest Territories is expected to receive final approval from the federal cabinet as early as next week, CBC News has learned.

However, Ottawa is not expected to commit any public subsidy to the pipeline, although the project's proponents have long said the federal government needs to support the $16.2-billion megaproject.

"It is critical for us and for the government of Canada to get together here to work towards a fiscal framework to allow this project to go forward," Fred Carmichael, chairman of the Aboriginal Pipeline Group, told CBC News on Wednesday.

The Aboriginal Pipeline Group, which represents several aboriginal groups along thepipeline route, is part of a private consortium of companies led by Calgary-based Imperial Oil spearheading the pipeline proposal.

The consortium, which also includes Exxon Mobil Corp., ConocoPhillips and Royal Dutch Shell PLC, wants to build a pipeline from anchor fields in the Beaufort Sea,through the Mackenzie Valley in the Northwest Territories to the Alberta border, where it would link to southern markets.

Companies must decide by 2013

The proponents have long argued that governments should be paying partners, since the pipeline would provide a huge economic boost to the North, and create thousands of jobs both in the Arctic and among Canadian suppliers across the country.

After years of regulatory review, the National Energy Board approved the Mackenzieproposal last month. However, the board attached 264 conditions that the pipeline proponents must comply with.

One of those conditions gives Imperial Oil and its partners until the end of 2013 to decide whether to actually go ahead with building the pipeline.

"Permitting work and fieldwork this is all work that needs to be done in addition to the approvals from the National Energy Board before we could be in a position to make an investment decision," Imperial spokesman Pius Rolheiser said.

"There's a significant amount of work between where we are today and where we need to be to make an investment decision, and [an] appropriate fiscal framework is a key part of that."

Little federal support, analyst suggests

But Doug Matthews, an oil and gas analyst based in Calgary, said the federal government is failing to sell the Mackenzie Valley pipeline to Canadian taxpayers.

"I think there's very little support, certainly within the federal government, for significant financial injections into this project. And that's just too bad," Matthews said.

"The federal government probably hasn't been there on this project for quite some time. You're hard-pressed to think back to a cabinet minister really going public with strong support for the Mackenzie gas project."

Even if Ottawa does not commit a lump sumto the Mackenzie pipeline project, it could provide support in the form of loan guarantees or tax breaks.

Carmichael said a government loan guarantee would make a big difference, since hiscompanywould need to borrow up to $6 billion if the pipeline goes ahead.

"We need to get this money at the lowest possible interest rate in order to give a greater return to our shareholders," Carmichael said.

Whatever the federal government plans to offer or not offer to the Mackenzie project, Matthews said Canadians should be involved in the decision, in a way similar to the waythe U.S. government determined financial support for a major gas pipeline project in Alaska.

"All the federal government support for the Alaska project was debated in public at the Senate or at the House [of Representatives]. People could weigh in and at the end of the day, the deal was brokered," he said.

"One has to assume that Ottawa just thinks the taxpayers are just too stupid to understand this stuff and they'll just look after it on their own."