Time Extension – Pipeline – Facilities
Imperial Oil Resources Ventures Limited (“IORVL”) requested an extension to condition 74, being the sunset clause, in the approvals for the Mackenzie Valle Pipeline (“MVP”) and the Mackenzie Gathering System (“MGS”) from December 31, 2015 to December 31, 2022.
Both projects form part of the Mackenzie Gas Project (“MGP”) which consists of 1,842 kilometers of pipelines, a processing plant, and the development of three natural gas fields in the Mackenzie Delta area of the Northwest Territories (“NWT”) for transportation to Alberta for southern markets. The original sunset clause for the MGP provided as follows:
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Unless the NEB otherwise directs, this Certificate shall expire on 31 December 2015 unless construction in respect of the Mackenzie Gas Project has commenced by that date.
IORVL submitted that construction would not begin before the December 31, 2015 sunset date, given the current state of natural gas market conditions, which rendered the project uneconomic at the time. IORVL submitted that the extension would provide time to see if market prices would sufficiently recover. IORVL submitted that it did not see any material changes to the MGP, and that anticipated impacts from the MGP would be consistent with the original application and approvals.
Fourteen parties submitted letters of comment regarding the extension application, eight of which were in support of the extension. Of the six letters opposing the extension, some of the commenters submitted that the extension of the sunset clauses would effectively allow the proponent to tie up resources, which should be opened up to other investors, noting that IORVL has had ample time to commence the MGP, but has made little or no progress to date. Others opposed the extension due to changes in circumstances, including climate change, water issues in the Mackenzie River, Caribou population declines since the issuance of the decision, and devolution of authorities to NWT.
IORVL replied, submitting that the approvals were permissive, not exclusive, and as such, IORVL was not required to construct any facilities, nor did the approvals preclude other proponents from applying for other facilities.
The NEB recognized that the MGP is not economically feasible under current market conditions, which may take many years to recover. The NEB also determined that changed circumstances relating to climate change and environmental impacts were adequately addressed in the original 115 conditions imposed by the NEB on the MGP, including submission of a report on the effects of climate change following consultation with stakeholders.
The NEB determined that devolution of powers to NWT for regulating certain oil and gas activities did not impact its consideration to extend the approvals, given that the regulatory authorities for NWT and the NEB have since entered into a memorandum of understanding and service agreement, allowing each to coordinate on regulatory projects that overlap in jurisdiction.
The NEB noted that, in providing its original decision on the MGP, gas market conditions were low, and further noted that the five year sunset clause as originally worded was meant to give an opportunity for natural gas from the Mackenzie Delta to compete with other gas supply sources, such as shale gas and tight gas.
Accordingly, the NEB held that the MGP was still in the public interest, and that the original 115 conditions imposed on the MGP continue to apply, which would require the MGP to be designed, constructed and operated in a safe manner to protect both people and the environment.
The NEB therefore approved IORVL’s request to extend the sunset clause to December 31, 2022, and will seek approval from the Governor in Council for the variance of the condition.
