Imperial Oil said Wednesday it was recalculating the price tag on the Mackenzie Valley natural gas pipeline in light of soaring construction costs. 

Imperial Oil senior vice-president Randy Broiles said total costs for the proposed pipeline would likely exceed the previous estimate of $7.5 billion.

The proposed Mackenzie Valley pipeline would stretch 1,220 kilometres
(CBC)

That estimate was made by Imperial 18 months ago. With costs of labour and materials rising, some analysts predict the cost could ultimately be as high as $10 billion. The first estimate for the project pegged its cost at $5 billion.

Megaprojects already underway to develop northern Alberta's oilsands have already put enormous pressure on skilled labour rates. Statistics Canada reported last week that the average hourly wage in Alberta was rising at an annual rate of 7.3 per cent — twice the national average.

Broiles said the company will have a better handle on the project's cost by the fall. He also warned that rising costs could delay the pipeline's scheduled startup date of 2011.

A consortium led by Imperial Oil wants to build a 1,220-kilometre pipeline along the Mackenzie Valley in the Northwest Territories to southern markets.

Imperial's Broiles said the current cost uncertainty has led Imperial to put fiscal talks with Ottawa on hold. Those talks were dealing with royalty and tax rates, among other issues.