Critics of the proposed Mackenzie Valley pipeline are calling the federal government's offer of financial help to backers of the Northwest Territories project a conflict of interest.

Federal Environment Minister Jim Prentice made an offer Monday to Imperial Oil and its partners in the $16.2-billion Mackenzie gas project to contribute to some of the project's infrastructure and pre-construction costs, including expenses related to the long regulatory process that the project is undergoing.

The fact that Prentice is offering financial help to the project while it's still in the regulatory stages puts the government in a conflict of interest, said Peggy Holroyd, Arctic program director with the Pembina Institute.

"How can we trust that the government is going to make a fair and objective decision if they've already committed several times publicly that they're going to support the project?" Holroyd said.

Prentice — who is also the federal minister responsible for pipelines — would not give specifics about his offer, only that the government wants to help share the project's "risks and returns."

"It's a real contrast to what the same minister said about a year ago, when he said that the government of Canada was absolutely not considering a subsidy or state ownership in the project," Kevin O'Reilly, a member of the Yellowknife social justice group Alternatives North, told CBC News on Tuesday.

In 2007, Prentice denied reports that Ottawa was looking at buying a stake in the Mackenzie gas project consortium led by Imperial Oil.

"Any plan has to be a free-enterprise-based model for the Mackenzie Valley pipeline," Prentice said on May 18, 2007, when he was Indian and northern affairs minister.

Should have waited for reviews: analyst

Imperial Oil and its partners in the consortium, including Exxon Mobil Canada, Shell Canada and the Aboriginal Pipeline Group, propose building a 1,220-kilometre natural gas pipeline through the Northwest Territories to markets in Alberta and the rest of North America.

The pipeline project remains in a lengthy regulatory process, with the proposal currently under an environmental and socio-economic assessment by the Joint Review Panel.

It is also under review by the National Energy Board, which has to give a final recommendation to the federal cabinet in order for the pipeline project to go ahead. It is presently awaiting the Joint Review Panel's report.

Oil industry analyst Ian Doig said the federal government's offer to the Mackenzie Gas Project does not necessarily create a conflict of interest, but said it would certainly put the National Energy Board in a precarious situation.

"Say they come forward with their report and said 'No, you know, this isn't an economic project,'" Doig said in an interview Wednesday.

"That's one of the mandates that they have."

Doig also cautioned there could be court action if the National Energy Board does approve the pipeline project.

Prentice should have waited for approval from the Joint Review Panel and the National Energy Board before backing the project with pledges of money, not just because of optics, but because any conditions that regulators may impose on the pipeline could increase costs.

N.W.T. minister pleased by support

Western Arctic NDP MP Dennis Bevington accused the federal government of giving a "blank cheque" to oil and gas companies, and questioned what kind of help the government plans to provide.

But the news from Ottawa this week came as a relief to the N.W.T. government.

"I'm very pleased with the announcement," said Bob McLeod, minister responsible for energy initiatives.

"It's the first sign that the project is actually still active and could be going ahead."