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National Post: Pipeline plan revived

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The proposed pipeline would run through the Mackenzie Valley. (HO/AFP/Getty Images)

TransCanada steps in to jump start Mackenzie

Claudia Cattaneo And Jon Harding, Financial Post 
Published: Wednesday, December 05, 2007

CALGARY – A deal that restructures the stalled Mackenzie natural-gas pipeline appears to be close at hand, and would involve TransCanada Corp. and the Aboriginal Pipeline Group taking control away from a consortium of oil companies led by Imperial Oil Ltd., sources said yesterday.

After six months of attempts to reconfigure the project, in limbo because of rapidly rising costs, it appears the producers are prepared to step aside and let Trans Canada, Canada’s largest pipeline company, take the lead with 60% ownership, with the rest going to the APG, a Calgary-based organization representing aboriginal groups in the North.

The new partnership is expected to seek help from Ottawa in the form of loan guarantees, shipping commitments or other breaks for the multi-billion-dollar project, the sources said.

Meetings involving the key stakeholders and Jim Prentice, the federal minister responsible for the project, are scheduled for next week in Calgary, leading to a board meeting of the APG on Dec. 15. An announcement is hoped for by Christmas.

“The various parties are pretty close to a deal,” said a knowledgeable source. “The producers are out, the pipeline would be owned 60% by Trans-Canada and 40% by APG.”

“All the parties except for the feds have come to an agreement,” said another source. “I don’t think the feds have signalled they are willing to do the loan guarantees yet. That may be the ask.”

A third source said restructuring is all but done, but the government is not sure it wants its role in the project to be firmed up before a possible spring federal election.

Progress on the project stalled last spring when the price tag swelled to $16.2 -billion, from $7.5-billion two years earlier, and Ottawa refused to give oil companies large incentives to improve the project’s economics.

It emerged last May that the oil companies told Ottawa the project was dead, and that they were considering the merits of the government owning the pipeline with TransCanada and the APG, with TransCanada being the builder.

Ottawa backed away from the idea of becoming a part-owner and instead challenged the proponents to restructure the project.

Under the so-called Plan B, the oil companies – Imperial, Royal Dutch Shell PLC, ConocoPhillips and Exxon Mobil Corp. – would become shippers with long-term commitments. It’s unclear whether they would be compensated for the $600-million spent on planning so far.

Calgary-based Trans-Canada has been involved in the Mackenzie pipeline by financing the APG. Its involvement would be welcomed by oil companies outside the Imperial partnership that would also like to ship gas on the system.

TransCanada’s involvement is seen as improving the pipeline’s chances of success because the regulated company has lower profit expectations than oil companies.

Even if the government provides some form of support to the new partnership, it may be more politically acceptable than aiding highly profitable oil companies, a source said.

The restructuring talks have been cloaked in secrecy, partly because of Ottawa’s anger about previous leaks that stirred a hornet’s nest over the politically sensitive topic of the government aiding a private-sector energy megaproject.

The revamped proposal comes as competing plans to build an Alaska natural-gas pipeline were launched last weekby ConocoPhillips, Trans-Canada and others, injecting new life into that project.

Alaska’s progress “provides impetus for the Mackenzie project,” said a source.

It also comes as the federal government tries to assert Canada’s sovereignty in the Arctic. As well, two years of regulatory hearings into whether to approve the Mackenzie pipeline wrapped up last week.

Pius Rolheiser, a spokesman for Imperial, would not comment on rumours. He said a decision from the National Energy Board on whether the project can move ahead is now expected around mid-2009.

A spokesman for TransCanada would also not comment.

© Financial Post 2007

http://www.nationalpost.com/story.html?id=145263

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