Mackenzie Valley pipeline project not dead: Imperial

Last Updated: Thursday, May 31, 2007 | 7:07 PM ET

CBC News

A spokesman for Imperial Oil says work on the proposed Mackenzie Valley gas pipeline is ongoing, despite comments Wednesday from Exxon Mobil CEO Rex Tillerson suggesting the project will be shelved.

'Is this an economically challenging project? Absolutely. Is the project dead? Absolutely not.'—Imperial Oil spokesman Pius Rolheiser

Speaking at the company's annual general meeting in Dallas on Wednesday, Tillerson said it may abandon the long-delayed pipeline project if the Canadian government does not foot part of the bill.

Exxon Mobil holds a 70 per cent stake in Calgary-based Imperial Oil, the lead proponent for the pipeline project. Imperial spokesman Pius Rolheiser would not address Tillerson's comments directly, but told CBC News late Wednesday that the project is going ahead.

"Is this an economically challenging project? Absolutely. Is the project dead? Absolutely not. We remain committed to it. We believe that it can be a good project," Rolheiser said.

"We're continuing to work our discussions with the federal government on a fiscal framework. We're continuing to work the regulatory process. We're continuing to work benefits and access agreements with communities along the pipeline route. So we very much remain committed to doing the work."

According to a report in the Globe and Mail, Tillerson said the $16.2-billion cost of the 1,200-kilometre natural gas pipeline is not viable without enough royalty and tax breaks from Ottawa to give project sponsors a decent rate of return.

He said the project has become too expensive because of the high inflation rates that have plagued oilfield construction projects, as well as the high price of steel and regulatory delays.

A spokesperson for Indian and Northern Affairs Minister Jim Prentice said his office has not received any information suggesting the pipeline project is off. Prentice declined to comment until he sees a transcript of Tillerson's comments.

Demand for Arctic gas not going anywhere: minister

Northwest Territories Industry Minister Brendan Bell said while Tillerson's comments were the strongest indication to date that the project is facing a serious financial crisis, he remained confident that the pipeline will be built.

"I think the demand is strong; we don't see that going anywhere. There's a need for Arctic gas on a number of fronts [and] I think it will happen," Bell told CBC News on Thursday.

"It's just about what governments are prepared to do to facilitate the project. We've never advocated for direct subsidies to the pipeline proponents, but there are other ways to help make this project more economic."

In the House of Commons on Thursday, Western Arctic NDP MP Dennis Bevington urged the federal government to become a partner in the pipeline project — an idea Prentice already rejected earlier this month.