Imperial Oil Ltd. isn't ready to give the green light to its $7-billion Mackenzie Valley natural gas pipeline, the company's chief executive said Thursday, arguing record-high gas prices can't be counted on over the life of the project.

Speaking to reporters following a speech to the Calgary Chamber of Commerce, Tim Hearn said he's not ready to ask regulators to approve the project. The company halted work on the line in April, citing demands for cash from communities and groups along the line's route and excess bureaucracy.

While the federal government stepped in with up to $500 million in new funding for Mackenzie Valley communities, Hearn said nothing has yet convinced the company the line will earn its keep.

"We are not asking for handouts," he said. "We are looking at a fiscal framework that will make the pipeline economic. . . . Today, under current conditions, we don't have an economic project."

Imperial is the lead partner in the proposed line, which could carry as much as 1.9 billion cubic feet of gas a day 1,220 kilometres from the Mackenzie Delta to Alberta. ConocoPhillips, Shell Canada Ltd., ExxonMobil Corp. and the Aboriginal Pipeline Group also have stakes.

Natural gas traded above $14 US per million British thermal units in New York this week, but Hearn told reporters that Imperial wasn't counting on current prices for planning the Mackenzie project. He said burgeoning imports of liquefied natural gas will eventually bring down prices.

While the pipeline is still scheduled to be completed by the end of the decade, construction could be delayed if regulatory hearings don't start this year. Originally scheduled to begin in the summer, they're being put off while the company negotiates royalties and tax terms with governments.

"We'd like to go to hearings but we're not there yet," said Hearn. "We really need to come to some conclusions that make sense for everybody. We're trying to find a solution that works for the federal government, the (government of the Northwest Territories), the people of the North, producers and consumers."

But, if construction is further delayed, Hearn warned that it was likely that the larger Alaska Highway pipeline, taking gas from the massive fields of Alaska's Prudhoe Bay to southern markets, would threaten the Mackenzie project, since it would have to compete for labour, materials and markets.

"If this thing drags out and drags out, I believe Alaska will get built and we might take a back seat for a long time," he said. "That is not in our best interest."

Though Imperial is Canada's largest oil producer and refiner, selling gasoline through its chain of Esso stations, Hearn also said that he would like to see oil prices drop to between $30 and $40 US a barrel, well below the $61.36 it traded for Thursday.

"I believe those kind of prices will, long term, reflect the replacement costs" of oil, he told reporters.

"It's also more reflective of the real supply-demand fundamentals, as opposed to some of the speculation. . . . The global economy and some companies would be better off at a lower level.

As with most of its peers, Imperial shares fell Thursday, dropping $7.73 to $115.82. The stock has risen 71 per cent over the past 12 months.

Scott Haggett