The zombie pipeline
The Mackenzie Gas Project isn’t exactly alive, but it ain’t dead yet either.
Story by Chris Windeyer
Photo by Patrick Kane
It hasn’t been a good year for the Mackenzie Gas Project. With North American market prices for natural gas stuck stubbornly under two dollars per million cubic feet, the federal government unwilling to budge on a richer package of loan guarantees to underwrite the project, and time running out before the proponents must decide whether to go ahead with construction, the odds of construction starting before 2020 may appear slim to none.
Quietly, some in Inuvik will say they are quickly despairing that the $16-billion pipeline will ever be built. Industrial work is drying up in the Mackeznie Delta and in March, the MGP downsized its office here. “From ‘99 to 2003 this place was screaming,” said one delegate at last month’s Inuvik Petroleum Show. “(But now) this is the most negativity I’ve heard about the pipeline.”
But do not, under any circumstances, tell that to Fred Carmichael, the longtime chairman of the Aboriginal Pipeline Group (APG), the consortium of Inuvialuit, Gwich’in and Sahtu Dene organizations that owns a one-third stake in the pipeline project. Even as this year’s petroleum show shifted in focus to the prodigious oil and gas reserves of the Central Mackenzie Valley and the Beaufort Sea, Carmichael gave a fiery, podium-thumping speech declaring in no uncertain terms that he thinks the Mackenzie pipeline must be built.
If the APG is guilty of anything, Carmichael says, it’s of playing too nice with the federal government, with which the pipeline proponents are locked in protracted negotiations over a fiscal framework and a loan guarantee package that would allow the project to finance itself at much lower interest rates. Why, he asks, is the federal government willing to provide sufficient financial backstops for the Northern Gateway pipeline to BC’s central coast—a project reviled by environmentalists and bitterly opposed by many of the First Nations along its route—but not for the MGP?
“The federal government has stated that Canada’s North is a fundamental part of our identity and economic future,” Carmichael told delegates. “Why not make the Mackenzie Gas Project, which has so much public support, a priority instead? I feel the Government of Canada should explain why it’s reluctant to provide an acceptable fiscal package for such a nation-building project.”
One possible reason could be that the federal government doesn’t want to be on the hook for a risky project, which the MGP is with current economics, and because the Northern Gateway pipeline is a way to get gas out of the flooded North American market, and over to Asia, where prices per million cubic feet remain around $17.
Enter Bill Gwozd, a walking antidepressant for pipeline advocates. The vice president of Ziff Energy arrived in Inuvik bearing reasons why the APG shouldn’t give up hope just yet (plus an encyclopedic memory and the ability to instantly recall which of hundreds of slides he needs to help answer a question).
Not only can Mackenzie gas advocates take solace in high Asian gas prices, which may make LNG tanker exports feasible, they can also look forward to “policy biases” from North American governments that are looking to phase out older coal-fired power plants. Depending on how hard a line governments take on coal, natural gas demand could grow between 2020 and 2045 by 50 to 300 per cent. Nuclear power remains unpopular following the Japanese tsunami. Much of North America is running out of space for new hydro developments. Governments and trucking firms alike are eyeing more filling stations for fleets of natural gas-fuelled 18-wheelers. Somebody, somewhere soon, is going to want this gas, says Gwozd.
Indeed, the theme from last month’s conference could be “bloodied but unbowed.” Optimism is endemic in the nascent Arctic energy industry: Better days have been just around the corner for decades. Or as Richard Nerysoo, president of the Gwich’in Tribal Council put it: “I don’t think the pipeline is dead as long as Fred Carmichael is alive.”