20-05-03 Native leaders in the Northwest Territories are putting the final touches on a historic agreement with TransCanada PipeLines that would give the Aboriginal Pipeline Group one-third ownership of a $ 4 bn Arctic natural gas project. APG chairman Fred Carmichael said lawyers are combing through a draft document that runs more than 40 pages, and final approvals could be in place by mid-June, in time for a signing ceremony at the Inuvik Petroleum Show.
In an opening act, Calgary-based TransCanada has approved initial financing for the native group's one-third portion of the $ 210 mm "projection definition phase," Mr Carmichael said. "We now have the $ 70 mm for the predevelopment phase of the project, with no risk to the aboriginal people," he said. "The $ 70 mm is made available by TransCanada and, I'll go this far, it's backed by the producers."

The Mackenzie Delta Producers Group is led by Toronto-based Imperial Oil. The main goal, Mr Carmichael said, is for Inuvik-based APG to obtain another $ 1.2 bn or so in financing from TransCanada and other lenders. "We're working on getting it finalized. We want to make sure that we're really covered. The legal beagles are working away, trying to finish. Once that's done and it's all fine and delivered, we will make a public announcement."
Mr Carmichael said that in broad terms, aboriginals will have strong input into how the Mackenzie pipeline project unfolds. "I'm trying my best to speed it up so we can make the announcement at the Petroleum Show. Be patient and wait."

Hundreds of industry delegates and exhibitors have registered for the two-day trade show and exhibition in Inuvik that starts June 18, including officials from TransCanada. If there are any legal snags in the draft document, the backup plan calls for APG to sign the final papers at the end of June, Mr Carmichael said.
TransCanada spokesman Glenn Herchak said that because natural gas supplies are so tight in North America, there's room for two major Arctic pipelines, with the Mackenzie line likely to be completed in 2008, and the rival Alaska project coming on-stream perhaps three years later. "Regardless of which one would proceed before the other, there's a need for both. They can be developed in a time frame that is complementary."

Mr Herchak said the pipeline company is "pleased with the progress to date" on getting the Mackenzie plan off the drawing board and into the construction phase. There had been industry speculation that native leaders would be willing to reduce APG's ownership interest, but Mr Carmichael said that's not in the cards.
"We will never give up the one-third stake. Under the present agreement, we have the ability to go much higher than one-third if we choose to or should it be available at a later date." A financing pact between APG and TransCanada would clear the way for proponents of the Mackenzie pipeline to file a regulatory application by the end of this year. It will likely take 24 to 30 months to receive regulatory approval.

If the Mackenzie pipeline starts being scrutinized by regulators next year, the project would have a big head start on the $ 20 bn Alaska pipeline proposal, which is on hold until subsidies can be arranged in the United States. Imperial has received a copy of the TransCanada-APG draft document, and the integrated oil company is reviewing it, said Imperial spokesman Pius Rolheiser.
"We are not a party to these direct negotiations, but we're encouraged that they [APG] appear to be making progress toward securing their share of funding. Our intent is to certainly continue working co-operatively with them to help them secure funding."

Besides Imperial, the other members of the Mackenzie producers group are ConocoPhillips Canada, Shell Canada and ExxonMobil, all based in Calgary. The Mackenzie route would be a 1,300 km gas pipeline from the Inuvik region to north-eastern Alberta.