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MAR, 13 2012
THE MACKENZIE GAS PROJECT AND THE NEXT STEPS IN ARCTIC OIL AND GAS DEVELOPMENT
(check against delivery)
Good morning ladies and gentlemen. I would like to take the opportunity to welcome you all here to Calgary for the 12th Annual Arctic Oil and Gas Symposium. The event continues to be one of the more important events the Government of the Northwest Territories attends, and it continues to provide an important forum to discuss the exciting developments taking place in the NWT and across the Arctic.
The Arctic is a land of potential. The Mackenzie Gas Project is a key element of that potential. I am here today to talk to you about the economic, environmental and spin-off benefits of the project, the level of Aboriginal engagement in the project, and why we need the project now more than ever. I also want to touch on other oil and gas areas we are vigorously pursuing that will help us realize our potential.In addition, the transfer of authority for lands and resources from Canada to the GNWT is expected to happen in the next few years. For the resource development industry, this promises a new era of increased accountability and responsiveness from decision-makers, and improved cooperation between territorial and Aboriginal governments.
The GNWT has committed to mirroring existing lands and resources legislation and protecting existing rights and interests, so investors can have confidence in a smooth transition of services. While this devolution addresses onshore resources only, Canada and the GNWT have also agreed to work together post-devolution to harmonize onshore and offshore regimes. The GNWT is committed to working cooperatively with all stakeholders to foster efficient and effective regimes that meet the needs of industry and the people of the Northwest Territories.
Collectively, we in the 17th Legislative Assembly of the Northwest Territories have made a commitment to strengthen and diversify our economy by making strategic infrastructure investments, supporting the Mackenzie Gas Pipeline project, developing a socially responsible and environmentally sustainable economic development and mining strategy, and improving the regulatory process.
We stand by these commitments. And I am here to tell you today that the Mackenzie Gas Project is a major tool in helping us follow through on our commitment to increase opportunities for people across the North. Once it is constructed, the Mackenzie Gas Project will stand as the largest private energy project of its kind in North America. There may have been little media coverage regarding the project of late, but there is a lot of activity going on behind the scenes.
Simply put, the Mackenzie Gas Project makes sense for the NWT – for the oil and gas industry in the Canadian North, and for Canada as a key player in the future of the energy sector for a wide variety of reasons – let’s take a closer look.
At a time when countries around the globe are looking for the answers as to how to prosper in an uncertain economic future, Canadians don’t have to look much further than the Northwest Territories. Oil and gas exploration in the Canadian North continues to have a bright future, and one that can benefit all of Canada.
To give you an idea, I want to highlight the economic benefits of the Mackenzie Gas Project. To many people, the numbers that have been tied to the project are what first strikes them – and these numbers speak for themselves:
This project could contribute nearly $68 billion to the Northwest Territories Gross Domestic Product, labour income of $4.9 billion, and more than 31,000 person-years of employment for NWT residents.
Alberta could see an increase of nearly $10 billion to their GDP, $6.8 billion in labour income, and about 78,000 person-years of employment, and Ontario, an increase of over $5 billion to their GDP, labour income of $3.4 billion, and about 60,000 person years of employment.
When you look at the potential economic impact for Canada overall, the future looks even brighter still. This project will contribute more than $86 billion to the Canadian economy while also generating sustainable economic growth through private investment – and solidify Canada’s position as a source of safe, secure energy for North America and the world.
As you can see, the Mackenzie Gas Project would benefit our entire country and could help move Canada out of its current economic slump.
And these are only a few of the benefits the Mackenzie Gas Project could bring to the Northwest Territories and the rest of Canada. Consider more of the spin-off benefits:
Consider the benefits for the resource development industry in Canada. Throughout the life of the Project, there would be opportunities in seismic data acquisition and ownership; in drilling and well servicing; in oilfield and industrial supply stores; in geotechnical and permafrost applications; in road construction; in environmental and land use studies; and in mainline pipeline construction.
Consider the significant energy savings. A 2008 report on the feasibility of converting communities in the NWT to natural gas estimated that a family of four could save hundreds of dollars on annual heating costs by switching to natural gas. And in a place where the cost of living is one of the highest in Canada, this makes a huge difference.
But it goes far beyond that. Consider the environmental benefits. Providing consumers with a cleaner form of energy to heat their homes and power up their businesses would lead to a reduction in greenhouse gas emissions and ultimately help Canada’s overall efforts in addressing factors contributing to climate change.
Climate change is taking its toll on ecosystems around the globe. In the past few years, the issue of climate change has become an area of unprecedented national and international interest and concern. Most notably, we have recently witnessed political protests against the proposed construction of the Keystone pipeline.
People are concerned about the impact large energy projects could have on their environment. They want to be sure their environment is protected. They want their air, water and land to be clean. As Northerners, we understand completely. In many ways, we are the proverbial canary in the coal mine.
Our geographic location has made us first-hand witnesses to the impacts of climate change, and we are concerned about the current and future implications rising greenhouse gas emissions have on our environment. The elders will tell you that things are changing, that the environment is changing.
Reduction of greenhouse gas emissions and reducing our own dependence on diesel fuel to heat our homes and power our business will benefit the NWT in the long run.
As consumers continue to look for ways to maintain power levels that do not require increasing our dependence on more carbon intensive forms of energy, natural gas is becoming more important as a viable option.
There are increasing signals that demand for natural gas is going to grow, substantially, in the near future. In fact, Peter Tertzakian, an energy economist and author of the book, A Thousand Barrels a Second, and the chief energy economist for ARC Financial, made that exact point when he spoke to energy executives this past December. He is a firm believer that the worst is over for natural gas – and that growing demand in Asia and other parts of the world are clear arguments to support natural gas. Consumption of natural gas is growing at three per cent per year – that’s twice the rate of oil consumption.
Japan is also looking for an alternative to nuclear power, and natural gas could be the ideal option. The emergence of the developing world is leading to increased demand for natural gas that will continue to grow in the years to come. As the economies of countries such as India and China continue to grow at a staggering pace, their need to seek out new sources of power and their reliance on other nations to fulfill their own energy requirements will bring North American supply options – and more specifically Canadian gas – into greater focus.
We also want to consider the spin off projects. The Mackenzie Gas Project would open the Mackenzie basin to further exploration, spurring on more economic development.
The Beaufort Delta would see not only exploration increase, but there would also be a need for future construction and development beyond the present scope of the MGP.
Much would ultimately depend on discovery success, but the possibility exists that should more significant reserves be uncovered early in the development phase, the natural gas could flow sooner.
Other parts of the NWT would also benefit. Development of natural gas reserves in the Colville Hills area would require new production wells, new conditioning plants, and a central processing facility.
One of the more significant aspects of the Mackenzie Gas Project – and one that truly sets it apart from other resource development projects anywhere else in Canada – is the participation of Aboriginal organizations in every step of the project. It is this level of engagement I want to touch on next.
I know Mr. Bob Reid from the Aboriginal Pipeline Group is here and will be talking about the project from that perspective later today, but it is important to explain the significance of their participation.
Back in 2000 when the Aboriginal Pipeline Group was established, no other resource development project had ever included the Aboriginal population of any region to such an extent. As the MGP moved through the regulatory phases, the APG remained an important part of any and all work that took place – and it remains a strong and central partner in the project today.
The APG could hold up to a one-third equity stake in the pipeline, with the potential for an even larger share of the overall revenues in the long-term. The continued involvement of the APG throughout this process remains an immeasurable asset. The GNWT hopes that future resources development projects look to this as a model of how to do things the right way.
Many Aboriginal groups have been actively engaged in the MGP process. They are interested in developing the resources on their doorsteps and land claim settlement areas, and view the MGP as the catalyst to economic self-sufficiency.
As a government, we are committed to ensuring our residents benefit from sustainable resource development. We continue to work with stakeholder groups to help them prepare for the opportunities the MGP will bring.
The proponents and Aboriginal organizations in the Northwest Territories have been negotiating Access and Benefits Agreements throughout the territory. These agreements are private arrangements. Terms of these agreements can include financial arrangements and benefits such as training, employment, contracting and business opportunities, in exchange for access on, or through, land with Aboriginal interests.
The Government of the Northwest Territories and the project proponents have also signed a significant Socio-Economic Agreement for the project that will support and complement these Access and Benefits Agreements.
So as you can see, this goes far beyond the construction of one pipeline. The MGP is a big pot of gold at the end of our rainbow, and it is not the only gem where oil and gas projects are concerned. I want to share with you other areas in oil and gas we are pursuing to help us realize our potential.
The Northwest Territories sits on top of the oldest, continuously operating oil wells in North America, and a sea of natural gas. The hydrocarbon potential of the NWT is significant: Approximately 16.2 trillion cubic feet of natural gas and 1.2 billion barrels of oil have been discovered in the Northwest Territories. The potential is currently estimated at 81.2 trillion cubic feet of natural gas and nearly seven billion barrels of oil.
This has translated into renewed activity lately. A recent land sale for petroleum exploration rates generated $536.2 million in work expenditure bids for 13 parcels covering 1.1 million hectares in the Mackenzie Delta and the Sahtu regions of Northwest Territories.
A recent call for exploration bids in the Sahtu garnered 11 submissions, with awarded bids totalling more than $500 million. As we speak, people in the Sahtu and indeed in other Regions are working to explore and develop these areas.
We are also focusing more on our robust offshore energy reserves. The United States Geological Survey estimates that the area north of the Arctic Circle has an estimated 90 billion barrels of undiscovered recoverable oil, 1,670 trillion cubic feet of recoverable natural gas, and 44 billion barrels of recoverable natural gas liquids in 25 areas thought to have potential for petroleum. The Northwest Territories has, within its territorial waters, a piece of those resources in the Beaufort Sea which extends to the North Pole.
Industry recognizes significant potential in the offshore. In 2008, companies committed to spend $1.2 billion to develop their petroleum exploration licences in the offshore and subsequent bids expanded this to almost $2 billion in work commitments. Work is moving ahead to develop these leases.
In 2008‑09, Imperial Oil completed three dimensional seismic and gravity surveys and undertook a field data collection program. The information gathered will be used to support the Ajurak exploration drilling program, the plan for which is currently in development.
In 2009‑10, British Petroleum completed 3‑D and 2-D seismic surveys and undertook a field data collection program. And just last week Chevron put forth an application to conduct seismic data collection programs in the Canadian Beaufort Sea.
Chevron plans to run a 3‑D and 2‑D seismic data collection during the open water season of 2012, or during the same period in subsequent years. The purpose of the collection is to evaluate petroleum reserves in the area.
The potential also exists for developing our resource potential even further through the introduction of hydraulic fracturing to the resource industry in the NWT. When done in an environmentally responsible manner, hydraulic fracturing can extend the life cycle of many projects. The practice of hydraulic fracturing is certainly not new to the resource development industry, and could serve to benefit future resource developments across Canada and even extend those projects.
It is obvious that there is a lot of potential for oil and gas development in the NWT. So why do we continue to focus our attention on the MGP? I’ll give you several reasons.
• The National Energy Board clearly stated in March 2011 that construction of the project was indeed in the best interest of the public. We remain confident that has not changed;
• Expert analysis indicates that both the price of and demand for natural gas will only increase in the years to come, supporting the economic viability of the MGP; and
• As the search for cleaner forms of energy and the transition to lower-carbon energy sources moves closer to completion, natural gas can serve as the ideal transitional fuel.
Although supply of natural gas has grown and prices have fallen, it is widely accepted that growing demand and gradually rising prices will reach a point in the future – incidentally about the same time Arctic gas is expected to come on stream – that these projects will become economic. Building those “missing links” in continental energy infrastructure will kick off unprecedented exploration and development in the territory. It will help us and other provinces across Canada ensure stable and needed revenue and that this energy source continues to supply the world’s needs.
As it presently stands, the Mackenzie Gas Project is focussed on three anchor fields in particular in the Mackenzie Delta – but there is a potential for much more.
That is really what the MGP can offer – not only the benefits from the project itself, but also the potential for increased and future resource development. Opening the Mackenzie Delta Basin to future development makes good sense for the NWT – and good sense for Canada.
In light of the controversy regarding other major pipeline projects, there has been a lot of talk recently about the future of Canada’s resources, pipelines and oil and natural gas. It can be difficult to see what makes one pipeline project different from any other project currently under consideration. When it comes to the Mackenzie Gas Project, I can make that distinction for you.
• First and foremost, the MGP has already passed through all the regulatory phases required.
• The MGP also has strong stakeholder support on all sides. Public hearings were held in all communities of the NWT and all residents were given the opportunity to comment on the project.
• Environmental impact assessments have been conducted; feasibility studies have been completed; and every single milestone to date has been achieved.
• Aboriginal groups have been active participants in the project, and NWT residents have been actively involved and supportive of the project and the economic and social benefits it will bring the territory.
The one thing that continues to delay the MGP at this stage is the financial support of the federal government. The GNWT has worked closely with our counterparts in Ottawa during all phases of this project, and we have had great collaboration as all sides continue to complete the work that remains outstanding – the fiscal framework agreement in particular.
The negotiation of the fiscal framework agreement is that last piece of the puzzle – the one remaining thing that MGP Proponents have said is essential for the project to continue to move forward. Although we have not been a party to these negotiations, the GNWT will continue to work to ensure that the federal government is aware of how important this agreement remains, and how it is the one thing that is needed to move the project forward and to get the permitting process underway.
We have so much natural gas in the Northwest Territories; we need to be doing something with it. And we need a pipeline to get it to market.
If proponents are to report to the National Energy Board on progress to their Decision to Construct by December 2013, work must begin on collecting the data to support applications for a significant proportion of the nearly 7,000 permits required for the Mackenzie Gas Project. And with the stipulation that construction of the pipeline must begin by the end of December 2015, we need to prepare. This all being said, we remain confident the timelines will be respected.
The Mackenzie Gas Project is a nation-building project that will force everyone to stand up and take a closer look at what we have to offer to the rest of the world, and what we can contribute to the global economy. In these times – what better single effective economic stimulus project could there be?
We in the Northwest Territories are more than ready for the challenge that lies ahead. Our resources are plentiful; our people are looking towards the future; our industries are working to prepare themselves for what is to come; and our residents are more than ready to rise to the occasion. We must not be made to keep waiting for our future to begin – because it is already here.
As I conclude my remarks, I want to leave you with three key points I made today:
• The Mackenzie Gas Project is a nation-building project that will be a key economic driver for the Canadian economy;
• Stakeholders and Aboriginal groups have been an active part of the process and strongly support the construction of the Mackenzie Gas Project; and
• Federal support is necessary to move this Project forward.
I also would like to extend an invitation to all of you to come to the Northwest Territories to see what’s going on for yourselves. Come see the sights, come meet the people, and come experience the excitement for the future. You won’t be disappointed.
Thank you and I hope you enjoy the rest of your time in Calgary.
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