CALGARY - The long-delayed Mackenzie natural gas pipeline has received the final green light from the National Energy Board, though the future of the $16.2-billion project is still far from certain.
The NEB said Thursday it has issued a certificate allowing the project to move ahead, after it received the blessing of the federal cabinet.
In December, the NEB said the 1,200-kilometre pipeline ought to go ahead so long as 264 conditions are met.
The announcement marks the end of a more than six-year-long formal regulatory process, though approvals from several other government agencies and local boards are still needed before construction may begin.
"It has been a long journey and a long process and we're obviously pleased to see this," said Pius Rolheiser, a spokesman for project leader Imperial Oil Ltd. (TSX:IMO).
The next step will be for the project's backers, which also include ConocoPhillips, ExxonMobil, Shell and the Aboriginal Pipeline Group, to resume negotiations with the federal government over a fiscal framework.
More than two years ago, then-environment minister Jim Prentice announced Ottawa had offered a financial package to the Mackenzie partners. Talks were put on hold until the regulatory process wrapped up.
"Our objective is to work with the government to develop a framework that provides an appropriate balance of risk and benefit, not only for the project proponents, but for the government of Canada as well," Rolheiser said.
Following that, Imperial and its partners will need to obtain some 6,000 permits from various government departments, restaff the project and resume engineering work.
Given the "tremendous" amount of work ahead, the very earliest Imperial would be in a position to decide whether to go ahead with the project is late 2013, with start-up expected around five years later, Rolheiser said.
The pipeline will stretch from near the coast of the Beaufort Sea in the Northwest Territories to northern Alberta, where it will link up with TransCanada Corp.'s (TSX:TRP) vast pipeline system.
Several communities in the North have been eagerly awaiting construction of the project, which they say would bring a much-needed economic boost to the region.
However, as technological advances unlocked huge volumes of natural gas from shale formations closer to market, the economics of the Mackenzie gas project have been called into question.
The project also faces a challenge from a proposed pipeline in Alaska's North Slope region. TransCanada and ExxonMobil are competing against ConocoPhillips and BP to build that much larger pipeline.
Long term, Mackenzie gas will be needed to feed growing energy demand and replenish the supply from declining conventional resources, Rolheiser said.
"There's a significant focus on current conditions in the market. Well, Mackenzie is a project that could come on stream no earlier than very late this decade and would operate for a period of 20-plus years after that," he said.
"So we're focused not so much on near-term market conditions as we are on our best analysis of what the North American market is going to look like in 2020 and 2030 and 2040."
