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The Northwest Territories government, frequently disappointed by failed energy projects, is optimistic about a new concept for a crude oil pipeline to the Arctic from Alberta, although a senior official cautions that aboriginal participation will be crucial.
A study commissioned by Alberta concluded that a south-to-north oil pipeline could benefit the energy industry, especially as other major export initiatives, such as Enbridge Inc.’s Northern Gateway and TransCanada Corp.’s Keystone XL pipeline proposals, face regulatory delays and opposition from native communities.
The report by Canatec Associates International Ltd. says retreating sea ice in the Arctic Ocean could make bitumen exports possible from Tuktoyaktuk. Another option is a link from the territory to the Trans Alaska Pipeline, which runs between the state’s North Slope and Valdez.
A south-to-north oil corridor along the Mackenzie Valley is a goal, along with future drilling in the Beaufort Sea, which could also make use of export infrastructure, said David Ramsay, the territory’s minister of industry, tourism and investment.
“As far as a new oil pipeline, that’s new territory for us,” Mr. Ramsay said. “I don’t see it moving forward unless there’s an ownership component by the aboriginal governments in the territory. According to the leaders I’ve spoken to, that’s an idea that is going to get some traction.”
As an initial step in an Arctic export plan, bitumen from the oil sands could travel by rail to Hay River, then by barge to the northern coast at Tuktoyaktuk, according to the Canatec study. But a pipeline is the preferred long-term option, Mr. Ramsay said.
Mr. Ramsay said the ownership structure of the chronically delayed Mackenzie Gas Project – of which aboriginal communities can own up to a third – could be a model. Last year, Imperial Oil Ltd. raised the cost estimate for the Mackenzie project to at least $20-billion, and said it does not know when market conditions will ever be favourable.
However, the government still wants the Mackenzie Valley to be a transport, telecommunications and energy corridor, and an oil pipeline could be part of that, Mr. Ramsay said. “The aboriginal participation that was present for the gas line, if that’s there for an oil line, I can see this going someplace,” he said.
The Northwest Territories has waited decades for energy development to kick into gear and bring its communities economic benefits and jobs. With Mackenzie on the back burner again, the territory had looked to a shale oil deposit near Norman Wells called the Canol, although drilling there has slowed.
Imperial and Chevron Corp. are planning to drill in deep water acreage in the Beaufort Sea, although timing depends on rulings by the National Energy Board on the issue of accepted alternatives to same-season relief wells. The companies have said allowing technology in place of that current regulation is necessary to moving forward, and even then it is an end-of-decade proposition.
That moves an oil pipeline up on the agenda, and the territory has been discussing it with both Alberta and Alaska, Mr. Ramsay said.
“Stay tuned on that front. We’re hoping to see the concept expanded upon and moved forward here soon,” he said.
He acknowledged that the steep drop in oil prices over the past two months has added some wariness, but the the concept is long term and in the very early states, so crude markets are not likely to kill the idea.
Alberta is actively pursuing the “Arctic Gateway” idea, said Derek Cummings, spokesman for Frank Oberle, the province’s energy minister. Jay Hill, the government’s senior representative for Saskatchewan, British Columbia and the North, and a former federal Tory MP, has been in talks with the governments of both the Northwest Territories and Yukon about the concept, he said. The government of Alberta is also sponsoring a prefeasibility study by the Van Horne Institute for a railway between Fort McMurray, Alta., and Valdez to ship oil and other goods.