The Canadian government denied on Thursday it had formally proposed that it take a stake in a long-delayed Arctic natural gas pipeline but made clear it had not ruled out the idea.

The proposed C$7 billion Mackenzie Valley Pipeline is stalled as oil firms, native groups and various levels of government argue over financial issues.

The National Post newspaper said that Ottawa -- in a bid to end the deadlock -- had offered to take a stake of around 20 percent in the pipeline in exchange for concessions on fiscal demands from lead consortium partner Imperial Oil Ltd..

"I've got to tell you that when I read that headline this morning I was probably as surprised as everyone else. Absolutely no proposal has been made to Imperial in any form in relation to any fiscal enhancements," Deputy Prime Minister Anne McLellan told reporters.

"We clearly see this as a private-sector driven project," she added. Imperial says the pipeline cannot be economically viable without a royalty system to cushion the blow of the huge initial investment.

"We know Imperial has talked about fiscal enhancements, we've indicated we're willing to sit down and talk to them about that," McLellan said.

"There is a long, long lengthy list of things that could or could not be done. It is way to soon to say whether this government will choose to take a serious look at a package that is defined as fiscal enhancements."

One major reason for the delay is the inability of Imperial and its partners to agree with northern aboriginal communities what the price of access to native lands should be.

Imperial halted field work in late April, blaming cash demands from communities and red tape. Imperial's partners are Shell Canada Ltd., ConocoPhillips, Exxon Mobil Corp. and the native-owned Aboriginal Pipeline Group.

Reuters