Imperial Oil Resources says it has no intention of cutting a separate deal with aboriginal groups threatening to block the $7-billion Mackenzie Valley natural gas pipeline project over unresolved land claims and other outstanding issues with the federal government.

But a prominent native leader and the former premier of the Northwest Territories warns that oil and gas producers, all levels of government and aboriginal communities in the North “are close to losing this project” if Ottawa doesn’t come to the table with a fair deal soon.

Calgary-based Imperial Oil, which is leading the consortium of oil and gas producers to build the Arctic gas pipeline, remains concerned that long-standing disputes between the federal government and some aboriginal groups in the North could stall or maybe cancel the project – even if regulators approve it.

“There’s no question it’s a concern for us,” says Imperial Oil spokesman Hart Searle.

File photo by Larry MacDougal, Business Edge
Former N.W.T. premier Stephen Kakfwi looking for ‘fair share.’

“But I can tell you quite clearly that we are not going to negotiate (separate deals with aboriginal groups),” he said in an interview.

“It’s not our land,” Searle added. “We can’t negotiate something that we don’t control or own. We have no authority to do so.”

Stephen Kakfwi, former premier of the N.W.T. and now a consultant to aboriginal communities in the North, says aboriginal support for the Mackenzie project is starting to fade.

“I think we stand to lose the project if the federal government continues to not pay attention,” Kakfwi told Business Edge at Insight Information’s Far North Oil & Gas Forum held in Calgary earlier this month.

Kakfwi said he and other native leaders have been trying to convince Ottawa for nearly 30 years that aboriginal governments in the North deserve a fair share of the revenue and royalties to be generated by pipeline through the Mackenzie Valley. “We have tried to get a revenue-sharing agreement and we have made zero progress,” he said.

The federal government, the biggest financial winner from the project, is expected to reap about $23 billion over 30 years, Kakfwi told forum delegates. “Not one cent of that is going to go to aboriginal governments . . . and I find that unacceptable.”

In comparison to Ottawa’s $23-billion share, the Aboriginal Pipeline Group in the North – which has the right to one-third ownership of the project – will receive just over $21 million a year for 20 years. That payment will rise to about $125 million a year after that, when the group’s project loans will be paid off.

Kakfwi, a consultant to the community of Fort Good Hope in the N.W.T., said residents there are losing confidence in the project and, without a revenue-sharing agreement, “they are not prepared to support a pipeline.”

He also pointed out that the federal government has yet to contribute funding for a ‘protected areas’ strategy, agreed on in the 1970s, which would protect some federally owned lands in the North from industrial development.

Ottawa’s share amounts to just $9 million over five years, Kakfwi said, yet the government has yet to provide the money to implement the strategy.

Imperial Oil’s Searle says there’s no question the uncertainty around resource revenue sharing and other long-standing issues makes the Mackenzie Valley project more difficult.

“From a project development point of view, the less uncertainty there is, the better.”

Imperial and the other gas producers in the project – ExxonMobil, ConocoPhillips and Shell Canada – have constantly encouraged and will continue to try to persuade Ottawa and aboriginal groups to negotiate a settlement to their outstanding issues, Searle said.

“But at the end of the day . . . there has to be some willingness on the part of governments and aboriginal constituencies to pick up the ball and try to advance it farther on some of these issues.”

Proponents of the Mackenzie project are also worried that their pipeline could be delayed or perhaps never be built if the much-larger $20-billion U.S. Alaska Highway pipeline gets built first and floods the North American market with natural gas.

Those worries were underscored last week when the U.S. Senate passed an $18-billion US package of fiscal incentives for the Alaska Highway pipeline, including loan guarantees and accelerated depreciation of the costs of line.

The Mackenzie project is also facing two lawsuits from the Deh Cho aboriginal group in the southwest N.W.T., through whose traditional territory about 34 per cent of the pipeline will cross.

Imperial Oil, on behalf of the producers’ group, will have to negotiate land access and benefits packages with all of the aboriginal groups affected by the pipeline, including the Deh Cho.

But Searle says that there are no plans to reroute the line to avoid Deh Cho land. “I’m not aware of any such work. And I think the cost would be prohibitive.”

Yukon Premier Dennis Fentie agrees the federal government’s “absence and inability to address their obligations and responsibilities in an acceptable way” is hurting investment, not just in the Mackenzie and Alaska Highway gas projects but in the entire resource sector in the North.

“It also reduces our ability to engage with industry,” he said at the forum in Calgary. “It chases huge investment dollars out of the country to other areas of potential.”

Fentie said his government is negotiating bilateral deals with aboriginal groups to keep the private sector interested over the short term in the Yukon’s natural resources, and also to put pressure on Ottawa.

“But if we want to consider the long-term, sustainable approach to developing resources, the federal government has to live up to its obligations to aboriginal people in the North,” Fentie said.

(Mark Lowey can be reached at mark@businessedge.ca)