Federal government offers financial backing for Arctic pipeline

Mon Jan 19, 2009 6:33pm EST
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By Jeffrey Jones

CALGARY, Alberta (Reuters) - Canada has offered financial support for a C$16.2 billion ($13 billion) Arctic gas pipeline, the country's environment minister said on Monday, aiming to revive a struggling proposal to tap vast northern reserves with industry conditions worsening.

The offer to Imperial Oil Ltd and the other backers of the Mackenzie Gas Project would include chipping in money for infrastructure, such as roads and airstrips, as well as pre-construction expenses, Jim Prentice said.

The minister declined to give the deal's value, but said it does include sharing in the project's risks and returns.

"You're speaking of one of the world's last remaining hydrocarbon basins. This is Canadian and it's important that it be developed and brought on stream in a way that is acceptable to the government of Canada as the owner of the resource," Prentice told reporters.

"So, from that perspective, it is extremely important and it does relate to our overall sovereignty in the North and to our economic plans for the North, and to the people who live there."

Imperial and its partners first submitted a financial plan to Ottawa asking for fiscal breaks 13 months ago. At the time, Prentice said the Conservative government had no interest in owning any part of the project or in subsidizing oil companies.

The head of one of the consortium's partners said the offer in no way represents a bailout of the languishing project and there is no discussion about the government taking an equity stake.

"Nor is it in any way a subsidy," said Bob Reid, president of Aboriginal Pipeline Group, which represents several native communities that would have part ownership. "This is a discussion of financial assistance and backstopping that the government could possibly provide to allow the project to move forward."   Continued...