Gas shortage? Time to get Mackenzie going

P E T E R F O S T E R

If there was one ray of hope from this week’s Energy Ministers’ meeting in New Brunswick, it was the acknowledgment of “the importance of relying on markets to guide consumer and investment decisions related to energy.”

Reliance on free markets has served the Canadian petroleum industry, the Canadian economy and Canadian consumers well in the 20 years since the Rube Goldberg structure of the National Energy Program was finally dismantled ( Thank you, Brian Mulroney). Nevertheless, market prices are painful at the moment. Meanwhile, the Canadian energy business remains riddled with conflicting regulations and political uncertainties.

Political pressure to “do something” is likely to assume boiler-bursting proportions this winter as Canadian consumers from coast to coast are hit with higher home heating costs due to soaring heating oil and natural gas prices, particularly the latter. But instead of moving rapidly to at least secure huge long-term natural gas supplies in the North, Ottawa, typically, is dithering.

The proposed Mackenzie Valley pipeline is the largest project of its kind in Canadian history. It offers not only access to the nine trillion cubic feet of proved and probable reserves already discovered on the Mackenzie Delta, but also promises to open up further exploration both on the delta and in the Beaufort Sea, and all the way down the Mackenzie Valley.

Both political squabbling and a regulatory morass are stalling this project, which is projected to cost more than $7-billion and provide thousands of jobs. Imperial Oil, the leader of a pipeline consortium that includes Shell Canada, ConocoPhillips and the Aboriginal Pipeline Group, has firmly declared that it wants these issues resolved before it moves ahead.

The consortium has already invested $350-million in the project, but last April, out of frustration with native demands, it stopped all on-site work. Although it has never been couched in such terms, this standoff is ultimately about the subversive concept of “Corporate Social Responsibility.” Native groups believe that Imperial and its partners should be taking on board obligations for housing, education and other elements of social development. Imperial has politely but firmly replied that it already pays hefty taxes to governments to take care of such “social” issues and doesn’t believe that it should be charged twice. More than that, it points out that it has no business doing governments’ work. The consortium is prepared to pay normal “access fees” for the use of aboriginal lands, to provide local employment and contracts, and to compensate for damage, but it is not an aboriginal development agency.

The other part of the problem is that the northern regulatory regime is a mess. A year ago, Ottawa’s External Advisory Committee on Smart Regulation described the northern regime as a “complex and unpredictable cobweb of regulations.” In April, Auditor General Sheila Fraser issued another scathing assessment of a regime that discouraged investment. She singled out the department of Indian and Northern Affairs, pointing out that it was “not adequately managing its responsibilities.”

Faced with growing discontent, the federal Liberals appointed a special Cabinet committee under Deputy Prime Minister Anne McLellan to deal with the northern pipeline issue. Instead of addressing the regulatory Gordian knot, the committee has taken the all-too-typical Liberal approach of throwing money at the problem. Both the Deh Cho, the one native group that has not so far settled land claims, and the territorial government of the Northwest Territories were bought off with big cash promises. Ironically, however, part of the Deh Cho deal was the creation of a Deh Cho Resource Management Authority, yet another potentially meddlesome bureaucracy.

Recently, Imperial again moved back — this time to November — a decision about whether the consortium will proceed with the pipeline application, which faces a further two years of regulatory hearings.

The Liberals’ attempt to buy off opposition may work if it is conditional on progress, but it may also have made some native groups more intransigent in their desire to “share the wealth,” that is, to move from hunter gatherers to coupon clippers in one fell swoop. This might suit grandstanding native leaders, but is likely — if past experience is any guide — to do little or nothing for the average aboriginal, who has been living in subsidized poverty since she was last “saved” from development in the 1970s by the Berger commission.

This week, Brendan Bell, the Northwest Territories’ Energy Minister, appealed to Ottawa to intervene in order to close the gap between the native groups and the pipeline consortium on access and benefits. But that still doesn’t address the red tape problem.

For its part, Imperial and its pipeline colleagues are reportedly seeking additional royalty concessions, a move which seems a little excessive when gas prices are hovering around $12 a thousand cubic feet. Still, this may be all part of the tough negotiating process. The Liberals would be well advised to seize the nettle and at least get the pipeline process moving again.