Mackenzie gas pipeline to get cabinet OK

After almost 40 years of conflict and controversy, the massive Mackenzie Valley gas pipeline project is expected to get final government approval as early as next week with one major caveat — no federal subsidies.

Senior government sources tell CBC News the federal cabinet will give a green light to the controversial $16-billion pipeline, possibly at its next meeting.

While government approval would cap four decades of studies and delays since the Mackenzie project was first proposed, the pipeline could remain a pipe dream for years to come.

Even with final federal approvals, the big issue now is whether the project still makes economic sense without hefty public subsidies the Conservative government is apparently unwilling to provide.

The 1,200-kilometre pipeline from the Beaufort Sea to northern Alberta is being proposed by a private consortium of corporations and aboriginal groups, headed by Imperial Oil.

Proponents of the project have long argued that governments should be paying partners, since the pipeline would provide a huge economic boost to the North, and create thousands of jobs both in the Arctic and among Canadian suppliers elsewhere across the country.

Question now: will it get built?

But one government official close to the project, speaking on condition of anonymity, says: "The question now is not whether it will be approved so much as whether it will get built.

"This is a private project, and the companies involved will have to decide if it is a viable project … if they want to spend the $16 billion."

The official said the federal government is willing to work with its provincial counterparts to provide some essential public infrastructure such as roads and airlinks in the North.

"These are things that governments do," the official said, "but we’re not going to be subsidizing the cost of pipe."

Officials from Imperial Oil and numerous energy analysts have recently raised cautionary flags about the viability of the project.

Question of balancing costs

The challenge of the Mackenzie pipeline, they say, is balancing its costs and expected returns against competition from other sources of natural gas in the North American market.

Those include so-called shale gas found in a number of U.S. states, and a proposed new Alaska natural gas pipeline.

Even if the Mackenzie consortium can overcome its substantial financial challenges, the way ahead is far from smooth.

The National Energy Board gave its blessing to the project in December, 36 years after the federal government set up the Berger Commission, the first of many exhaustive studies into the environmental, social and economic impacts of the pipeline.

But the energy board decision that is now before cabinet for final endorsement came with more than 250 conditions that would have to be met by Imperial Oil and its consortium partners.

After all that, the consortium would still have to obtain literally thousands of special environmental permits to construct specific sections of the pipeline.

Finally, the Mackenzie Valley pipeline project faces a more immediate and mundane challenge — finding a minister to present it to cabinet for approval.

For years, the federal minister responsible for moving the project ahead was Jim Prentice. When he quit politics in the fall, the pipeline project was apparently left orphaned at the cabinet table.