A major hydroelectric expansion project in the Northwest Territories is being put on hold because it is not viable at this time, says Premier Floyd Roland.

Roland announced Wednesday that Dezé Energy Corp.'s proposed Taltson River hydroelectric dam expansion is not working out as planned.

The Taltson hydroelectric expansion project has faced opposition over its proposal to run power lines across the Lockhart River. (CBC)

Roland told MLAs in the legislature that a review of the project's business model has revealed that "we need to adjust our course."

Earlier on Wednesday, Dezé Energy asked the Mackenzie Valley Environmental Impact Review Board to "pause" an environmental assessment of the project.

Dezé Energy, a joint venture formed between the Northwest Territories Energy Corp., the Akaitcho First Nation and the N.W.T. Métis Nation, says it needs more time "to address gaps in the current business case" for the Taltson project, according to a news release.

Mines won't buy hydro

The joint venture has wanted to run power transmission lines from an expanded Taltson dam, located 56 kilometres northeast of the Alberta-N.W.T. border, to the territory's three diamond mines.

Dezé Energy wants to supply the mines with hydroelectricity, in the hopes of reducing their diesel use.

But Roland conceded that the mines are not exactly keen to buy hydroelectricity from the Taltson project.

"Recent discussions with the diamond mines clearly indicate that their collective mine life and commitments to buy power cannot, on their own, support financing and construction of the project at this time," Roland said in the legislature on Wednesday afternoon.

Both Roland and Dezé Energy said they had hoped the Taltson project would finalize power purchasing agreements, secure the regulatory approvals it needs, and make construction plans in time for the 2012 winter ice road to be in place.

"Given current project timelines, this objective is no longer achievable," Roland said.

Power lines an issue

A major unresolved issue with the Taltson proposal was where Dezé Energy should run the transmission lines.

The original proposal to run lines across the Lockhart River, by the eastern arm of Great Slave Lake, was met with strong opposition from Dene living in the area.

The Lutselk'e Dene First Nation said the transmission lines would run through a pristine area that they consider to be sacred.

But Dezé Energy has said alternative routes that have been proposed would cost much more to execute than the Lockhart River proposal.

In August, the Mackenzie Valley Environmental Impact Review had recommended that the Taltson project be approved, but the regulatory body made no decision on the transmission line route.

Federal Indian and Northern Affairs Minister John Duncan ordered the board to go back to the drawing board and resubmit its recommendations once a route has been decided on and properly assessed.