CALGARY, Alberta—Canada 's government might consider an equity stake in multibillion-dollar Arctic gas pipeline should the development be at risk of getting scrapped, Ottawa 's lead man on the project said Wednesday.
Andrei Sulzenko, the newly appointed chief representative for the Mackenzie Gas Project, said the Conservative government will not consider subsidizing a private-sector venture, but added that making an investment that would offer returns to taxpayers did not amount to a subsidy.
The previous Liberal government had ruled out gaining an interest in the pipeline that is now facing major cost pressures, and the lead partner, Imperial Oil Ltd., said it was not offering one.
Sulzenko said he was not projecting that such a move is in the cards as Imperial nears a new cost estimate for the project, but would not rule it out as an option.
"In the past, governments have participated in private sector projects at various times, in various guises, as equity partners," he said after speaking to a conference on northern energy development.
"In those circumstances, those are commercial terms. There's an investment and because of the risk there's a return to the taxpayer. I don't consider that a subsidy."
Imperial has paused talks with the government on fiscal and royalty terms while it works to reassess what the 1,200 km (750 mile) pipeline through the Northwest Territories would cost and how long it would take to build.
The previous estimate of $7.5 billion may surge by as much as 30 percent amid a construction boom that has caused major overruns at several energy projects, analysts have said. Imperial Chief Executive Tim Hearn has said the economics were tight even before the recent inflation.
"It's not just a theoretical question of what's a subsidy and what's not a subsidy. It really depends on a specific proposal and evaluation of whether that's based on commercial terms or not," Sulzenko, a onetime free trade negotiator, said.
The project, which would ship up to 1.9 billion cubic feet of gas a day to Alberta from the Mackenzie Delta on the Beaufort Sea, is the subject of public hearings that have recently been extended into April 2007.
Imperial still expects to complete its cost and schedule review later this autumn, spokesman Pius Rolheiser said.
Regardless of the final tally, an equity interest is not on offer, Rolheiser said. The other partners in the project are Shell Canada Ltd., ConocoPhillips, Exxon Mobil Corp. and the Aboriginal Pipeline Group.
"We are not looking for a subsidy, the federal government has said they're not interested in talking about subsidies," he said. "What we're seeking is a fiscal framework for the project, royalty regimes and taxes, etc, that recognizes the type of project it is."
That includes a system designed to allow it to make a return in the face of high upfront capital costs and a long payout time, he said.
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