High costs, low prices lead consortium to cancel Mackenzie pipeline

Imperial Oil Ltd. has put the final nail in the coffin of a long-delayed project to build a natural gas pipeline through the Northwest Territories down the length of the Mackenzie Valley.

In a post on its website, the energy giant says the joint-venture partnership created to build the massive project has been dissolved and participants have decided not to proceed with the scheme at this time.

“Since work on the Mackenzie gas project was initiated in 2000, the North American natural gas market has changed significantly,” the post says.

“Mackenzie gas is currently not economically competitive with other sources of supply in North America due to a combination of factors, including high project costs and the continued growth of low-cost North American unconventional gas supplies.”

The joint venture, which included Imperial Oil Resources, ConocoPhillips Canada, Exxon Mobil Canada and the Aboriginal Pipeline Group, featured a major pipeline to transport natural gas from a port in the Mackenzie River Delta to markets in Alberta and British Columbia.

Many Aboriginal communities in the region supported the $16.2-billion project and formed the Aboriginal Pipeline Group, which would have received one-third of the total revenues, although the scheme was opposed by other Aboriginal groups concerned about unsettled land claims.

By the time the proposal was approved in 2010 following years of consultations and public hearings, energy companies had unlocked massive new natural gas reserves in the United States and Canada with hydraulic fracturing, pushing prices downward and making the project uneconomical.

Imperial successfully applied in June 2016 to extend the deadline for the development until 2022.

“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,” Theresa Redburn, Imperial’s senior vice-president of commercial and corporate development, said in the post.

“Imperial greatly appreciates the support of the communities along the pipeline right-of-way and believes the North remains an important potential source of future energy, given the right economic and regulatory conditions.”

The project was first proposed in the 1970s as an oil pipeline.

In the face of opposition, Thomas Berger, a justice with the Supreme Court of British Columbia, was assigned to consult with stakeholders and recommend the best way to proceed.

Berger decided more time was needed to make a decision. That pipeline project was delayed and eventually scrapped.