Oil companies backing the project said in March that the 1,222-kilometre pipeline linking gas fields in the Mackenzie Delta to Alberta's natural gas pipeline grid would cost $16.2-billion, up from $7.5-billion only two years ago, thanks to inflationary pressures that have beset energy projects around the world.As Bond Papers noted last October in an article on a possible Lower Churchill loan guarantee, the federal government favours taking equity in projects rather than providing loan guarantees. Specifically, the October article linked to a Globe and Mail story on the possibility of the feds taking equity in the pipeline project.
The consortium then asked Ottawa for huge tax concessions, but at a May 2 meeting in Calgary [Indian affairs and northern development minister Jim] Prentice slammed the door on the idea of subsidizing the oil companies. Imperial then said it would shut down the project, sources said.
Since then, Ottawa has not only resurrected a proposal to be a partner in the project, but is exploring taking control away from Imperial. The massive venture would provide a new source of natural gas for North America and be a springboard for development of the North. It would also open the prospective frontier to gas exploration.
Under the plan under consideration, Ottawa would buy out Imperial and its partners, Houston-based ConocoPhillips and international conglomerate Royal Dutch Shell PLC, by reimbursing them for costs already incurred on the project plus interest.
Imperial, Conoco and Shell are now formulating a plan to let the government into the project. A deal is expected to take several months to be finalized, sources said.
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