Where to go from here?

It's great to see that the Mackenzie Valley Pipeline has been approved by Canada's National Energy Board.  It's possibly the most significant regulatory step in a mega-project that's been more than three decades in the making, and that means that in terms of planning and permitting, we're reaching the home stretch.

The question is, what happens now?  It may be as much as two years before Imperial Oil announces whether or not it will build the line, but that doesn't mean the region lies dormant.  Gas exploration in the Mackenzie Delta was fairly active a few years ago, but has dwindled to nearly nothing in the past year as exploration companies became wary of the regulatory process.  It's safe to say that exploration should pick up as early as 2011.  While many critics still point to supposedly abundant shale gas, there are still some questions to be answered about just how economical this gas is, and how easy it is to recover in an environmentally responsible manner.

As well, shale doesn't really solve the issue of declining conventional reserves in Western Canada the way Delta gas might.

The shovels aren't yet in the ground, but we're getting closer.

Green Light for Mackenzie Line

Mackenzie gas pipeline OK'd by NEB - CBC.ca website

The long-awaited ruling from the National Energy Board has come: The MVP has official approval, albeit with some conditions.  I haven't had a chance to review them yet, but I'd suspect there aren't any serious deal-breakers.

The approval goes to cabinet now, but any significant changes are seen as unlikely.

Some analysts are mistakenly seeing this as a competing line with the Alaska Highway line, which simply isn't the case.  Different markets, different purposes, and access to different fields.  Both are viable under the right circumstances.

And would would those "right circumstances" be?  Well, the MVP gets built first, and gets a few years of having the market to itself while the Alaska line continues development. During this period, it should show a healthy profit and a decent return to investors.  The gas it supplies will also help cover current declines in the Western Canada Sedimentary basin.  As the Alaska line starts bringing gas onstream, the MVP will have already paid a considerable portion of its own capital costs and have established fields from which to ship.