Mackenzie Valley pipeline project officially one for the history books

The joint-venture proponents behind the Mackenzie Valley Gas Project have ended their partnership, bringing to a close the dream of a Mackenzie Valley pipeline, and its potential wealth effect.

'This pipeline was really just a pipe dream. We gambled on it and a lot of people lost'

The sun has set on the Mackenzie Gas Project after Imperial Oil announced the joint-venture partnership behind the more than $16 billion project had dissolved. (Canadian Press)

The much-anticipated but long-doubted Mackenzie Valley pipeline project has gone out with a sigh.

On Friday, Imperial Oil posted a press release to its website announcing the project's proponents had dissolved the joint-venture partnership driving the Mackenzie Valley Gas Project. The joint venture included Imperial Oil Resources Limited, ConocoPhillips Canada, ExxonMobil Canada and the Aboriginal Pipeline Group.

By 2016, when the National Energy Board approved an extension of the project's deadline to begin construction in 2022, the estimated cost of the project had grown to more than $16 billion. According to Friday's press release, current natural gas prices do not justify the project, originally approved by the NEB at the end of 2010 after six years of review.

Merven Gruben, mayor-elect of Tuktoyaktuk, the small N.W.T. coastal community with much to gain had the 1,200-kilometre pipeline stretching from the Mackenzie River Delta to northern Alberta been built, said he only learned of the project's demise on Wednesday. He took the news in stride — "We all knew that was coming" — but said it was a sad day for many.

Merven Gruben stands on the new Inuvik Tuktoyaktuk Highway, for which his transport company was a major contractor. 'This pipeline was really just a pipe dream,' he said. 'We gambled on it and a lot of people lost.' (Mackenzie Scott/CBC)

"We had a lot of high hopes, we even built a new hotel in Inuvik, the Mackenzie Hotel, in the hopes [the pipeline] was going to take off," Gruben said.

The hotel struggled in the beginning but had since found its legs, unlike others who invested in the hopes of a pipeline, he said. "So many other businesses didn't succeed."

"This pipeline was really just a pipe dream," Gruben said. "We gambled on it and a lot of people lost."

​He said he remembers when the project really began to take shape in 2000, adding that the project's review panel took too long approve the work.

"It was just a farce the way they wasted their time doing all these studies and all these meetings all over the North," Gruben said. "They wasted so much money and time. By the time they said it was a go, it was too late ... all the [natural gas] prices had gone down."

Delayed by who?

Imperial Oil spokesperson Gordon Wong told CBC he could not immediately say what natural gas price point would have made the project viable. But he said the joint venture partners had not anticipated the length of time it took for the project to receive approval from the NEB, and then final approval from the federal government.

"Our initial estimate for the timing for the regulatory process was somewhere between 22 and 24 months," Wong said.

"We filed for regulatory approval in October 2004 and we received final regulatory approval in 2011. I'll leave it up to you to decide if that is a reasonable amount of time for a significant capital investment project."

N.W.T. MLA Kevin O'Reilly says the end of the project may have been a godsend. (Alex Brockman/CBC)

Process was not the problem, according to Kevin O'Reilly, the MLA for Frame Lake. He followed the project closely in his previous work for Alternatives North, an N.W.T. social justice group.

"I'd blame the poor planning that the proponents themselves had undertaken and the amount of time they had taken to respond to information requests from governments, from Indigenous governments, from NGOs and so on."

The delay — if it meant the failure of the project — may have been a godsend, he added.

O'Reilly says the growth in ready supply of gas from other, cheaper, North American sources means the Northwest Territories could have been left with a half-completed project stalled in the face of a market that no longer justified it.

"Thank goodness this project did not go ahead. The companies [involved] would be looking to the taxpayers, no doubt, to bail them out," he said.

'Disappointing day'

Some in the region remain hopeful the six trillion cubic feet of onshore natural gas resources in the Mackenzie Delta will someday benefit the region's economy.

Duane Smith, chair of the Inuvialuit Regional Corporation, points out the project certificate remains in effect until 2022.

"I mean I have to remain optimistic," Smith said.

Duane Smith, chair of the Inuvialuit Regional Corporation, remains optimistic. (Mackenzie Scott/CBC)

"I just hope that Canada as a government recognizes the valuable resources that we are sitting on in this region and the potential it provides for the economy of this country as well as to the people of the region."

Theresa Redburn, Imperial Oil senior vice-president of commercial and corporate development, acknowledged the sense of defeat some in the North may feel.

"We recognize this is a disappointing day for the people of the North. This is a disappointment to Imperial and the other members of the joint venture, as well," Redburn said in the company's press release.

Gruben's construction company was a large part of the recently completed $300 million Inuvik Tuktoyaktuk Highway, which was partly conceived to bolster the viability of petroleum resources in the Beaufort Delta region.

Gruben said he expects his and neighbouring communities will now turn their attention to what he said are proven petroleum assets in the region, including a natural gas well drilled just off the new highway that could fuel Mackenzie River Delta communities for "100 years."

He said the possibility of a deep water port in the region could unlock oil and gas potential, especially once a moratorium on offshore drilling ends.

"This isn't going to stop us," he said. "We're still going forward."

'Important future source of energy'

Wong could not immediately say what the joint venture partners had invested into the project so far. He also could not say what would come of any project-related leases in the region.

"Imperial believes that the North remains an important source of future energy, given the right economic and regulatory conditions," Wong said.

The proposed route of the Mackenzie Valley Pipeline. (CBC)

"As conditions change, we'll remain engaged with local communities where appropriate and we'll try to maintain the positive relationships we've built with those communities."

Imperial Oil is also a joint venture partner in a Beaufort Sea exploration drilling program 180 kilometres northwest of Tuktoyaktuk. The project remains on hold after being postponed indefinitely by the proponents in 2015, and for the duration of a 2016 five-year moratorium on oil and gas exploration in the Beaufort Sea.

With files from Mackenzie Scott


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