By KRISTEN SHANE, Hill Times, February 14, 2011
Prime Minister Stephen Harper has quietly handed over Cabinet control of the massive Mackenzie Valley gas pipeline project from former environment minister Jim Prentice and his temporary successor John Baird to rookie Indian and Northern Affairs Minister John Duncan (Vancouver Island North, B.C.), without key stakeholders in the $16.2-billion pipeline project even knowing, say stakeholders.
Representatives of two of five of the project's proponents asked last week by The Hill Times said they weren't sure which federal Cabinet minister was leading the file.
"We've had no formal indication from the federal government," said Pius Rolheiser, speaking in Calgary, Alta., for Imperial Oil Ltd., the lead company of the consortium pushing for the project.
The Aboriginal Pipeline Group is another consortium member with one-third interest in the proposed pipeline project that represents several Northwest Territories aboriginal groups in the proposed pipeline corridor.
"We've been trying to find out. What we've been told is that the Prime Minister's Office has to issue a letter assigning responsibility. And that's the last we heard," said Mr. Reid Feb. 9.
Michelle Yao, Mr. Duncan's communications director, confirmed last week in an email to The Hill Times that Mr. Duncan is the minister responsible for the Mackenzie Valley gas pipeline project.
Of six opposition natural resources critics, project proponents and a lobbyist involved in work related to the project The Hill Times canvassed in the last two weeks, no one was sure it was Mr. Duncan.
Some assumed it was Canada's new federal Environment Minister Peter Kent (Thornhill, Ont.), who took over from Mr. Baird and Mr. Prentice in the portfolio that had previously included the Mackenzie Valley gas pipeline file. One said he had learned through government insiders that it was Natural Resources Minister Christian Paradis (Mégantic-L'Érable, Que.), a natural choice to be shepherding an oil or gas pipeline project as he is responsible for the National Energy Board. It is an arm's-length federal body that regulates Canada's interprovincial and international oil and gas pipelines and additions to existing federally-controlled pipelines, which fits the bill for the Mackenzie Valley pipeline.
"Minister Duncan or [Paradis]," said NDP natural resources critic Nathan Cullen (Skeena-Bulkley Valley, B.C.) in an email to The Hill Times two weeks ago. "No one is totally sure."
The pipeline project has been in the incubator for close to 40 years, after natural gas deposits were discovered in the Beaufort Sea area. Much local opposition contributed to the head of a public inquiry concluding in 1977 that any pipeline should be delayed a decade. Land claims had to be settled and the business climate right before Imperial Oil, ConocoPhillips Canada, Shell Canada, Exxon Mobil Corp. and the Aboriginal Pipeline Group finally teamed up to seek regulatory approval for a natural gas pipeline system that would cut a 1,200-kilometre route from the Beaufort Sea on the edge of the Northwest Territories and the Yukon, through the Northwest Territories to link into an existing pipeline in northwestern Alberta that would take the gas to southern markets.
In 2007, the proponents estimated it would cost $16.2-billion to plan, build, and run the proposed pipeline system, which would be designed to carry enough natural gas to supply about two-thirds of the six million Canadian households that used natural gas to heat their homes in 2009.
It passed its last big regulatory hurdle in December, when the National Energy Board approved the proposed project, but attached 264 safety, environmental, engineering and other conditions.
Mr. Prentice quarterbacked the project at the Cabinet table from 2006 to 2010, even as he moved from being minister of Indian and Northern Affairs to Industry and Environment. When he left government in November to become a high-ranking bank executive, the file was passed to Mr. Baird as interim Environment minister.
Since Prime Minister Harper (Calgary Southwest, Alta.) shuffled Cabinet on Jan. 4, news reports indicated the project had been orphaned. A minister still needs to present it to Cabinet for it to approve or deny of the NEB decision and issue an order in council before the project can get underway.
It is concerning that no minister had been named to take control of the file, or at least it wasn't communicated to stakeholders, said Mr. Reid.
"There's no question. We were a bit in limbo while the matter was being resolved by the federal government," he said. "The pipeline is so important to the North. From our perspective, it really is a nation-building project."
The massive project is expected to create jobs and economic development through the creation of new roads, bridges, and other infrastructure needed to sustain the pipeline.
"It feels worrisome to industry, certainly, and to a lot of the people both for and opposed to the pipeline, that the ball seems to be dropped," said Mr. Cullen. "When we put the question to government, it just gets passed around."
But for Imperial's part, Mr. Rolheiser said the mystery of the responsible minister "is not a source of significant concern for us." The company remains confident the federal government will give the project the importance it warrants, he said.
Its expectation was that Cabinet would review and render a decision "in due course," said Mr. Rolheiser. "We recognize that the federal Cabinet, the federal government, has a lot on its plate." There is no expected timeline, he said.
Mr. Reid said an order-in-council decision usually comes within four to six weeks after an NEB decision. It's been closer to eight weeks since the Dec. 16 decision, although Christmas, New Year's, and a Cabinet shuffle came in between.
In the 1970s, during the first incarnation of the Mackenzie project, Natural Resources and Indian Affairs ministers tussled over who really controlled the file; they both wanted it, recalled Ian Doig, an oil and gas industry analyst who writes an independent monthly industry newsletter Doig's Digest.
Now, "It's not a good news file," he said, "if it was, then people would be clamouring to take it over."
He doubted Cabinet would reject the project—a CBC news report last month quoted senior government sources as saying that it would get the okay—but said there are still a series of hurdles that doesn't make it an attractive file for a minister to snatch.
The big question is whether the proponents will want to sink more money into actually building the pipeline, if approved. The proponents will have to meet the NEB's 264 conditions and obtain various other permits for construction to be done along the pipeline corridor from other government bodies. Plus, with access increasing to shale gas deposits in North America, and already low natural gas prices, Mr. Doig said there's already high supply and low demand—not a good business climate in which to build a $16-billion pipeline, which he estimated could be even more, given that that figure is more than four years old.
If approved, the pipeline is not scheduled to be up and running until at least 2018, and run 25 years thereafter, said Mr. Rolheiser.
"It would be short-sighted in the extreme if we base our economic analysis on current conditions," he said. "The proponents continue to be committed to the project. [They] believe that it can be an economically attractive project."
The responsible minister would still also need to sit down with the proponents to hammer out a "fiscal framework" for the project, which typically covers items like taxes and royalties.
But Mr. Rolheiser insists the proponents are not seeking federal subsidies, something the CBC reported last month would not be coming anyway.
In any case, "It doesn't seem to be a file that's going to advance anybody's promotion inside the federal Cabinet," said Mr. Doig. "Normally, this would be advanced by the minister of Natural Resources. But he has really been a non-person in this file right from the beginning."
Natural Resources Canada, through Mr. Paradis, is responsible for other oil and gas pipelines such as the proposed Keystone pipeline slated to take bitumen from the Alberta oil sands to American refineries, and the Enbridge Northern Gateway pipelines that would transport oil and condensate to and from near Edmonton, Alta., to ship overseas from Kitimat, B.C.
The Prime Minister decides Cabinet ministers' responsibilities.
Ms. Yao, Mr. Duncan's spokesperson, said he is the lead minister for the Mackenzie Valley pipeline but not any others. When asked why the file switched from the Environment minister to Indian and Northern Affairs, she said, "[It] would be inappropriate to comment on decisions by Cabinet."
While Mr. Prentice was passionate about the project he followed for four years, offering federal financial support in January 2009 to cover expenses related to the long regulatory process and some infrastructure costs, Mr. Duncan is not seen to have experience on the file. Mr. Duncan became a minister, taking Indian and Northern Affairs last August.
"Appointing an Indian Affairs minister from North Vancouver Island to deal with a pipeline project that goes into Alberta seems like a poor fit," said Mr. Cullen. "I don't think he's familiar with the file. It's going to take him weeks and months to catch up if he ever does. I don't think it's a great sign of encouragement from the federal government. They've put a low ranking minister who's inexperienced on this question in charge of a $20-billion project."
While Mr. Cullen may not believe Mr. Duncan has experience handling the file, his department does, said Mr. Reid.
"For this...incarnation of Mackenzie, the pipeline project started out with the minister of INAC [Mr. Prentice]," said Mr. Reid.
"If it's landed with Minister Duncan, that's absolutely great, as far as we're concerned. We're very pleased to see that the pipeline has a home again," he said.