One unanswered phone call threatens to derail the planned $4-billion Mackenzie Valley natural gas pipeline.

Paul Bernier, vice-president of program delivery for the Canadian Environmental Assessment Agency, removed himself last week from reviewing the project. Smart move, given there’s a federal investigation into conflict-of-interest allegations involving his wife, Maureen Bernier.

Not so smart is the Berniers’ failure to immediately deny the allegations.

The Deh Cho First Nation in the N.W.T. alleges that Maureen Bernier holds an interest in a dozen mineral claims, staked in 1998 on land identified four and a half years later as the proposed pipeline corridor. The Dene group is threatening legal action to halt development of the 1,350-kilometre pipeline.

Territorial law prohibits federal employees from directly or indirectly buying or holding interest in N.W.T. land.

Seems to me that a spouse who holds mineral claims on what the Deh Cho calls “moose pasture” in the path of the pipeline certainly would meet the definition of an “indirect interest.”

This would be so especially if the other spouse was involved – as Paul Bernier was – in drafting the pipeline co- operation plan, to co-ordinate the work of all the agencies and boards participating in the environmental assessment and regulatory review of the project.

If the allegations are false, the Berniers need to swiftly, clearly and publicly refute them, not hide from reporters’ phone calls like they did last week.

If the claims are true, the Deh Cho are absolutely justified in demanding that the whole environmental and regulatory review process for the pipeline be scrapped and started again.

This project is too important, to the aspirations of the North’s aboriginal communities and to Canada’s energy future, to get bogged down because of either a perceived, or an actual, conflict of interest by a federal bureaucrat.

ROYALTIES ON WAY

Guess I’ll hold on to my crystal ball a while longer.

As predicted in my debut column in July, Alberta Energy has stepped in to compensate natural-gas producers affected by a regulatory shut-down of hundreds of gas wells in the Athabasca oilsands area.

The province has agreed to provide a deferred royalty package – which the industry estimates is worth $25 million a year – to compensate producers for 338 gas wells ordered shut in by the Alberta Energy and Utilities Board (EUB).

Paramount Energy Trust, one of the key gas producers in the area, says it expects to have approximately $160,000 a month in royalty deferrals, starting from the September 1, 2003, shut-in date.

Gas producers hope the government will agree to a final compensation deal by the end of this year. They argue they should be entitled to between $600 million and $800 million – representing the total value of the natural gas reserves in the 338 wells left in the ground.

The EUB ordered the shut-down of a total of 938 gas wells in the Athabasca area, contending that continued gas production will harm future extraction of bitumen, which has a much higher energy value. But 600 wells remain operating, pending completion of an EUB geological study to determine conclusively whether they, too, must be shut down.

Unless the EUB’s geologists have crawled way out on a ledge, expect most of these 600 wells to also be shut in.

No crystal ball is needed to see that the government’s final compensation tab will go way up.

THIRD-QUARTER CANDY

Strong international oil and gas prices trump the Canadian dollar when it comes to oilpatch earnings.

Nexen Inc., Husky Energy Inc., Shell Canada Ltd. and Imperial Oil Ltd. have all reported increased third-quarter profits despite the soaring loonie, which hurts producers because the bulk of oil and gas revenue is in U.S. dollars.

Shell’s profit of 85 cents per share, or $235 million, was up 59 per cent from a year earlier, although analysts expected $1.02 per share.

But investors who were disappointed with Shell’s underperforming $5.7-billion Athabasca Oil Sands Project – still in its first year and ramping up to full production – shrugged it off without punishing the company’s stock.

Husky Energy reported net earnings of 54 cents per share, or $243 million – an increase of 40 per cent compared with third quarter 2002. More impressive is that the company’s income has jumped 91 per cent, to $1.1 billion, in the first nine months of this year. Flush with cash, Husky is shopping for a $1-billion to $2-billion acquisition, president and CEO John Lau said.

Nexen’s net income increased 15 per cent to $1.38 per share over third quarter 2002.

In the coming months, the company will drill major exploration wells in the Gulf of Mexico, Yemen and offshore West Africa, president and CEO Charlie Fischer said.

Imperial Oil’s year-to-date profit set an all-time company record at $1.43 billion, almost double the nine-month profit of $757 million a year ago.

NEWELL PASSES BATON

Oilsands pioneer Eric Newell will retire on December 15, a day shy of his 59th birthday.

Newell, chairman and CEO of Syncrude Canada Ltd., has been chairman of Syncrude’s board of directors since 1994, CEO of the company since 1989, and served as its president from 1989 to 1997.

In 1995, as president of the Alberta Chamber of Resources, Newell spearheaded the creation of the National Oil Sands Task Force, which developed a comprehensive energy strategy for Canada.

Marcel Coutu, president and CEO of Canadian Oil Sands Trust, will become Syncrude’s new chairman. Charles Ruigrok, head of Imperial Oil Ltd.’s oilsands operation, will take over as CEO.

PSAC LOOKS AHEAD

Healthy earnings and lots of well drilling go together like a roughneck’s boots and hardhat.

Small wonder that the Petroleum Services Association of Canada (PSAC) is predicting 20,400 wells will be drilled this year – an all-time record total Canadian well count.

Last year, the industry drilled 15,818 wells.

The 2003 forecast is 25 per cent above PSAC’s original estimate in October last year. Driving the increase are consistently high oil and gas prices, intense drilling activity in the third quarter and a substantial increase in drilling for shallow gas.

Softening commodity prices in 2004 are expected to lead to a slight drop in overall activity.

PSAC forecasts a total of 18,965 wells will be drilled next year in Canada, including 13,835 in Alberta – down eight per cent from this year.