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Mackenzie faces new setback

Governmental panel postpones release of environmental report till 2009

CALGARY -- The Mackenzie gas pipeline has been slapped with a new significant regulatory setback, delaying the $16.2-billion project by at least a year and highlighting the increasing roadblocks facing companies seeking to develop major oil and gas projects.

The joint federal and provincial panel evaluating the environmental impact of the giant pipeline now won't publish its report on the Mackenzie project until some time next year. The panel, known as the Joint Review Panel or JRP, had been scheduled to publish the review - which is needed for the project to go forward - in October.

The setback is the second big regulatory blow this week for Imperial Oil Ltd., which is taking the lead in developing the Mackenzie pipeline and will be one of the main suppliers. On Wednesday, the Calgary-based company received a court ruling delaying its $8-billion Kearl oil sands mine for at least several months, a decision that stemmed from an error by the government regulatory panel.

For the energy industry, regulatory reviews are becoming more rigorous and projects are facing greater scrutiny.

That's ramping up costs, as companies seek to meet the stricter standards to ensure their new developments are approved.

Imperial had planned to finish building the pipeline by 2009, but has been hit with a series of complex and frustrating hurdles that have set back its plans to bring Arctic gas to North American markets.

While the company has been trying to build Mackenzie since 2004, it has yet to resolve aboriginal land access issues or the financial terms for constructing the massive project with the government.

Meanwhile, the JRP, an independent body appointed by the Minster of Environment, was originally supposed to publish its impact report on the potential pipeline by August, 2007.

But the scale of the task has consistently forced it to push that deadline back, meaning the group is now about two years behind schedule, delaying Imperial from resolving the other regulatory issues that surround the development.

The JRP's report won't appear this year because of the vast amounts of information that the panel needs to go through, said Annette Bourgeois-Bent, manager of communications for the Northern Gas Project Secretariat, a body created to assist with the regulatory process for Mackenzie.

"It's a monumental task. ... There's thousands of pages of evidence, and the panel is committed to doing a thorough job and analyzing the information to the best of its ability," she said. "Maybe people didn't appreciate the depth and breadth [of the task]."

Companies participating in the pipeline said they were aware that the report was likely to be delayed, but hadn't been informed of the reasons why.

"We've had no indication, and at this point don't understand the reasons for the delay," said Imperial spokesman Pius Rolheiser.

While he added that it is too early to evaluate the impact of the adjournment on the overall timeline for Mackenzie, and emphasized that Imperial is still committed to the project, Mr. Rolheiser said that "a delay is not a positive or desirable ... not many things in life get less expensive over time. It wouldn't be accurate to say that we are pleased."

Sources familiar with the project said the in-service date of the pipeline - the date on which gas starts flowing through the pipeline - currently set at around 2014, could be pushed back by at least a year because of the JRP's dilly-dallying.

Northwest Territories Premier Floyd Roland said the new delays were creating "concern" in the territory over the progress of the pipeline, which he categorized as "the next big economic development for our constituency."

"There's frustration with these delays. We all know we need to get on with this ... we need to find out what's driving the delays and get some momentum going," he said.

One solution might be to add people to the seven-man JRP group to expedite its activities, Mr. Roland added.

© The Globe and Mail

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