Canadian Min Sees Tax Deal On Mackenzie Gas Project By Fall 2008
Dow Jones
http://money.cnn.com/news/newsfeeds/articles/djf500/200709051521DOWJONES...
September 05, 2007: 03:21 PM EST
WASHINGTON -(Dow Jones)- Regional Canadian investment minister Brendan Bell said Wednesday that he believes the federal government may be able to negotiate a tax agreement with companies partnering on the Mackenzie gas project by next fall.
Soaring costs, aboriginal opposition and regulatory hurdles for the 6- trillion-cubic-foot natural gas project have pushed back the timing and raised questions over its economic viability.
The project would develop and transport gas via pipeline from northern Canada to the U.S. and southern Canada.
Bell, minister of industry, tourism and investment for the Northwest Territories, said the government wouldn't subsidize the project, but was negotiating accelerated depreciation schedules as a primary incentive.
Speaking on the sidelines of an energy conference here, Bell also said that based on the aboriginal equity stake in the project, he is pushing for a federal loan guarantee backed by the government that would lower the cost of borrowing.
The Canadian government is also considering investing about C$500 million in local infrastructure to help defray the costs.
Imperial Oil Ltd. (IMO) is the operator of the proposed Mackenzie gas pipeline, with partners Royal Dutch Shell PLC (RDSA), ConocoPhillips (COP), ExxonMobil Corp. (XOM) and the Aboriginal Pipeline Group.
The cost of the troubled project has climbed to C$16.2 billion at the lastest estimate, and the project isn't expected to start producing until late 2013 or early 2014.
Although only half of the aboriginal settlement claims needed to build the pipeline have been resolved, Bell said he was chiefly concerned that the project might become too expensive for the partners.
"At the end of the day, we might have the regulatory process taken care of, and it may not make economic sense in terms of the hurdle rates that the companies need internally," he said.
Bell said he expected that the regulatory process and negotiations with the government could be resolved by the fall of next year.
He said that after visiting with many of the aboriginal leaders he was confident the groups weren't as much opposed to the project as they were concerned that there wouldn't be adequate compensation.
