CALGARY — The National Energy Board’s approval of the long-delayed Mackenzie natural gas pipeline has been heralded as both an economic boon to the people of the North and as an environmental blow to the region.
Northwest Territories Industry Minister Bob McLeod called the decision “an early Christmas present.”
“This is an important milestone for a project that could provide significant economic and environmental benefits for the Northwest Territories and for Canada,” he said.
The lead partner on the $16.2-billion project, Imperial Oil Ltd. (TSX:IMO) was similarly pleased.
“It’s a vital step. It’s a significant step. It’s a very positive step for the project,” said Imperial spokesman Pius Rolheiser.
“But it’s only one of a number of necessary steps that need to take place, milestones that need to be achieved before this project could become a reality.”
The federal watchdog said it has attached 264 conditions to the project’s approval in areas such as engineering, safety and environmental protection.
The next step is for the federal cabinet to approve the energy board’s decision, after which point the project’s backers would need to seek a number of other permits.
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, Imperial 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.
“It’s a good thing that the Mackenzie Gas Project is dead, because this decision is a real huge step backwards.”
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 its 176 recommendations were followed.
“On every single count where sustainability is relevant, (the NEB has) rejected it,” Hazell said.
For instance, the JRP recommended Mackenzie gas be used as a clean-burning fuel for power generation and not as a power source for oilsands operations, which have been heavily criticized for their environmental impacts.
In its report, the NEB said it is not its place to determine how the gas be used.
“Nevertheless, we believe that augmenting the Canadian supply of natural gas, a relatively clean-burning and efficient fuel source, is of benefit to the Canadian public. Greater gas supply in the market increases the potential that fuels with higher greenhouse gas outputs would be preferentially displaced,” the NEB said.
Hazell said the NEB’s logic strikes him as “completely bizarre.”
The board also declined to weigh the long-term cumulative impacts of the project.
“Nobody’s prepared to look beyond the end of their nose,” Hazell said.
There are also many questions around 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.
Imperial’s Rolheiser called Mackenzie a “significant vital supply source” for North America.
“Basically for gas in the Mackenzie delta to be viable, it needs to be cost-competitive. That’s our challenge,” he said.
“We’re talking about a project that would come on stream at earliest, late in this decade and would operate for 20-plus years following that. So we really need to look beyond current market conditions. We really need to take a long view here.”
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.