Imperial Oil Limited's top executive Thursday reiterated his company's support for the proposed $7-billion Mackenzie gas project while warning that the process cannot drag on indefinitely.

"The evidence is we have got close to $400 million invested and we are working hard to try to find a solution to this being built," Tim Hearn, Imperial's president and chief executive told reporters following a luncheon speech to the Calgary Chamber of Commerce. "We are very committed to the project."

However, project proponents need to be able to proceed to National Energy Board and Joint Review Panel public hearings very soon because "time is not on our side," he said. "If this thing drags out and drags out, I believe Alaska (the pipeline from the North Slope) will get built and we might as well take a back seat for a long period of time," said Hearn. "It is not in our best interests."

Imperial Oil Joint Ventures Limited operates the pipeline project on behalf of ConocoPhillips, Shell Canada Limited, ExxonMobil and the Aboriginal Pipeline Group.

Hearn acknowledged that in recent months the federal government has worked with the companies and northern communities to clear away roadblocks to the project.

While there is lots of work to be done in a short period of time, he said he is hopeful it can be accomplished.

The Imperial CEO said he cannot predict when public hearings might get underway. Last month, Imperial postponed until November a decision on when it will be ready to proceed to hearings. Because the board will require 60 days to prepare for hearings, they would not begin until early in 2006 at the earliest.
Hearn rejected reports suggesting that project proponents are looking for federal royalty breaks for the project. "We are not asking for handouts, we are not asking for giveaways," he emphasized.

Rather, the company is trying to negotiate a fiscal framework for the pipeline. "We are trying to find a framework because today under current conditions we don't have an economic project and we are working hard to ensure we can find one," Hearn said. While gas this week was trading at $14 (U.S.) per mmBtu, those prices will come down as larger LNG volumes hit North America, he pointed out.

Because the Mackenzie has large up-front capital requirements, discussions with Ottawa are focused on how the various costs can be recovered while ensuring the integrity of the federal government's royalty and tax structure, Hearn said.
Imperial would consider going to public hearings without nailing down all the required elements, he told reporters. "If we could get the final fiscal framework and benefits and access agreements agreed to, at least in principle, I would want us to go ahead," he said.

The company is also negotiating with exploration companies in the Mackenzie Delta who are concerned that the currently proposed gathering system does not have adequate capacity for future discoveries. Hearn said Imperial is trying to work with the producers to get the right size that allows them to participate in the project. Ultimately, the cost of the system will be reflected in the tariffs," he said.

"Some people are committed to come, others are negotiating a little bit and others are still trying to decide," he said. "We hope a lot of people find gas and the bigger the better," said Hearn. "We would like to make it (the gathering system) as big as possible and our planning allows us to do that and we will expand as things get firmer and firmer."

Meanwhile, the former premier of the Northwest Territories says he is determined to hold out for a better deal than the lump sum payments Imperial is offering for the right to cross aboriginal lands.

"An annual revenue stream is the only way to get out of poverty and that is the only way for dirt-poor communities to have access to decent infrastructure," Stephen Kakfwi, now a negotiator for the K'Asho Got'ine Dene of Fort Good Hope, said in an interview.

Under the Kakfwi plan, $47 million would be paid annually as property taxes to communities along the pipeline right-of-way. Fort Good Hope in the central Mackenzie valley would receive $8 million a year while the payment would be $20 million for the Deh Cho, who occupy 40% of the land a pipeline would cross.

The charge would amount to about one per cent of the total cost of the pipeline, he said. "One per cent is pretty low and they are still screeching we are gouging them," said Kakfwi. "If they are so short on profit margin they cannot do it, then stay home and have someone else put a proposal that can have some benefits to aboriginal people."

The aboriginal groups are not only landowners, but also governments. Annual payments will enable them to provide proper services to their constituents, he pointed out. "We are saying we are governments too," said Kakfwi. "The only governments in Canada that have no revenue stream are aboriginal and this is going to change."

Imperial as yet has not put anything worth looking at on the table, according to Kakfwi. Imperial has yet to make a deal with the federal or Northwest Territories governments or with any aboriginal groups in the valley, he added. "They have come up with really nothing yet to show so they are asking everyone to accept the meagre offering they have produced," Kakfwi said. "So far, nobody's taking it, even the aboriginal groups dying to get the project underway."

Kakfwi said his people hope the project can proceed and everyone can get on with their lives. However, "if they (Imperial) want to build a project, they are going to have to put some things on the table and stop asking for concessions from everybody," he said. "They should pay like everyone else."

The former premier dismissed promises of the benefits that will flow from a pipeline. "A winning hand after the game is over is worthless," he said. "I don't want the promise of revenue sharing down the road, I want the shares right now and the net fiscal benefit and the revenue flowing to many communities on the right-of-way."

Kakfwi further said he is not looking for vague promises of jobs or training. "I don't see it around Calgary (on reserves) so why would I think it is going to be magically different in the Northwest Territories," he asked.
Aboriginal groups ought to seize their negotiating advantage while they can, Kakfwi added. "The time to negotiate is now, the game is on," he said. "You can negotiate after the deal is made, but we've lost our lever."

Elsie Ross, Daily Oil Bulletin