Ian Doig, Doig’s Digest
December 2010 - Entitled “Foundation for a Sustainable Northern Future,” the governments of Canada and the Northwest Territories released on November 15th their final response to the Joint Review Panel’s (JRP) report dated December 30, 2009, dealing the Mackenzie Gas Project. Now that response has been forwarded to the National Energy Board (NEB) so it can complete its decision-making process that has been held in limbo since its hearings were completed on April 22, 2010.
But, attempting to save problems down the line, the NEB is giving the intervenors registered to this never-ending GH- 1-2004 process, one more kick at the can. These parties (numbering over 125) have been given the chance, until early December, to register their comments on the joint governments’ response.
But the NEB can’t be performing this decision-making chore with much confidence, realizing that its last basin opening effort was a failure. Thirteen years ago the NEB was part of the regulatory decision-making process that approved the Sable Energy Offshore Project on the Scotian Shelf. However, it’s now apparent that the development well be shut down after only 14/15 years, well short of its expected 25-year life.
The JRP report containing 176 recommendations represented the unanimous report from the seven-person body, which includes a sitting NEB board member. However, this in essence lead to a turf war this past summer when it became known that the governments didn’t like many of the proposals and wanted to enter into confidential discussions to modify some of the more troubling ones – especially the one that has the JRP holding that all 176 recommendations were to be taken together and that the governments couldn’t pick and choose which ones they like and discard the rest.
The governments’ scorecard this past summer for the 176 recommendations was as follows: the governments
proposed to accept or accept the intent of 87 of the 115 recommendations within their respective jurisdictions; 60 of the recommendations were directed to the NEB, one recommendation was directed to the Government of Alberta. The governments of Canada and the Northwest Territories would not accept the remaining 28 recommendations, of which 21 are determined to be outside the JRP’s mandate.
Now that scorecard has got even skimpier. In their last month’s 127-page response, the governments accepted only 11 of the 115 recommendations that fell under their jurisdictions. Another 27 recommendations were discarded because they were specific to other jurisdictions or agencies. The governments rejected a number of the JRP’s recommendations dealing with environmental protection. They were deemed to be outside its mandate. Also turned aside were the references dealing with annual progress reports dealing with environmental protection measures.
So now it is expected that the NEB will be releasing its decision later this month. Mercifully, it will put an end to the public hearing process that commenced five years ago on January 25, 2006, to deal with applications filed on October 7, 2004.
In reading the governments’ response, you were left with the impression that it was written without much conviction about a happy ending. As they practiced for Christmas dinner by carving up the JRP’s recommendations, they did so with too many ‘ifs’ and ‘possibilities.’ It seemed as though they thought that this turkey was already overcooked.
As it has been the Mackenzie Gas Project’s Achilles heel from the start, timing is mystifying for Imperial Oil Limited. The company claims that it can be in a position within three years (by late 2013) to make a final decision on whether to proceed with the $16.2 billion ($2006) development. That would mean a 2018 start up. However, at the final NEB get-together in Yellowknife in mid-April, the company requested the NEB place a sunset clause in its Certificate of Public Convenience and Necessity that will expire on December 31, 2016. This would move the start up to 2021.
Then again there is an irony attached to Imperial Oil’s original time schedule, which called for the project to be on stream in 2009. For if that completion date had been met, market conditions would now have the pipeline shut down with force majeure notices being the main production item. Canada’s new Environment Minister, John Baird, authored the November 15th release. Mr. Baird took over the portfolio on November 4th, after Jim Prentice announced he was retiring from politics to take a position with the CIBC.
Up until then, Mr. Prentice had been the lead minister on the Mackenzie Gas Project file. It’s now apparent that the formation of the JRP back on August 18, 2004, by the Federal Minister of the Environment,
the Mackenzie Valley Environmental Impact Review Board and the Inuvialuit Game Council, was a failure.
Statistically, after 47 months of work since it commenced its formal hearing process on February 14, 2006 and 25 months after its hearing process ended on November 29, 2007, the JRP’s scorecard reads that only one out of every 16 of its recommendations were accepted – a success rate of 6.25%.
Or to use another measuring stick, on the tombstone of this seven-member panel will read the inscription: “in the 45 months between February 14, 2006 and November 29, 2009, this group chalked up a success rate of one recommendation for each 4.1 months of effort.” This effort could have been taken from the preface of William Shakespeare’s “Love’s Labour’s Lost.” But rather than being a comedy, this turned into a tragedy.
As the momentum for the Mackenzie Gas Project evaporates, so does the number of federal bureaucrats assigned to the file. Ottawa has closed the Yellowknife office of the Northern Gas Project Secretariat and will shortly be doing the same with its Mackenzie Gas Project Office, also in Yellowknife.
Last month, the Mackenzie Gas Project Office in the federal department of Industry Canada was shut down. This nine-person group, all with fancy titles, will long be remembered for their lack of institutional knowledge on the file they were handling. The Office had no understanding of the useful points left over from the previous attempts in the 1970s and 1980s to bring natural gas out of the Mackenzie Delta and how these points could be incorporated into the file that was before them.
Likely, the true test is how little interest the Mackenzie Gas Project now receives. The only people that are paying attention are those who made bad investment decisions on poor advice and are hoping that Ottawa can somehow bail them out. It has become a proposed development that has traveled from hope to ashes in a decade. But after all this time and effort, one major question still remains unanswered: Why did the Mackenzie Gas Project applicants allow their three NEB export permits to lapse on October 31, 2000?
For on that date, Imperial Oil, Gulf Canada Resources Limited (now ConocoPhillips Canada) and Shell Canada Limited permitted the three Mackenzie Delta natural gas export licences they held for 5.1 Tcf, 3.2 Tcf and 0.9 Tcf respectively, under NEB Decision GH-10- 88, to wither on the vine as their sunset clauses ran out. These permits might not have been a perfect setting 10 years ago but they were a lot better than the chaos that now confronts the applicants. Lurking in the background and watching events unfold is TransCanada Corporation, who is now promising Canadian natural gas producers that it will live within, set disciplines. But at the same time it is wondering whether its financial backing of the Aboriginal Pipeline Group in the Mackenzie Gas Project hasn’t been money down the drain. Right now, the company’s venture into the Canadian North has cost shareholders $145 million (September 30, 2010) or $0.21 per share. With the financial community giving TransCanada a price-earnings (P/E) multiple of 16x, $3.36 or 9.2% of its current share price of $36.39 (November 26, 2010), a lot is riding on the Mackenzie Gas Project.
At the end, one question remains: By what means test do the parties to the Mackenzie Gas Project – applicants, regulatory bodies and the federal political apparatus – deserve to be handed the keys to build what was once referred to as the largest engineering project in Canadian history? They have all failed the qualification means test.
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