Thank you, Mr. Chairman, and honourable members.
We appreciate the opportunity to appear before you today to highlight the importance of the Mackenzie gas project, not only to our northern stakeholders but to Canada as a whole.
There are two points that I want to leave with you today: first, the Mackenzie gas project is a vital component of Canada's energy mix; second, the project will provide an economic base for the aboriginal people of the Mackenzie Valley, allowing them to take a big step forward toward economic independence and self-sufficiency.
After a thorough six-year regulatory review, the project now awaits the release of the final step in the regulatory process, and that's the order in council. This is now critical in allowing us to move forward with the detailed engineering and preparatory field work in order to start construction before the expiry of the recently issued NEB certificate in December of 2015.
The first two slides in the handout provide you with an overview of the project. I'll allow you to read those at your leisure.
I'll start on the third slide.
APG is a unique alignment of aboriginal groups in the Mackenzie Valley, not only to support construction of the Mackenzie Valley pipeline but to be a part of it. Our mandate is to maximize the long-term financial return to the aboriginal groups of the Northwest Territories through ownership in the pipeline.
Our shareholders are the Inuvialuit Regional Corporation, the Gwich'in Tribal Council, and the Sahtu Pipeline Trust. The Mackenzie Valley pipeline is owned by APG, the Aboriginal Pipeline Group—we have a one-third share in the project—and our partners at the table are Imperial Oil, ConocoPhillips Canada, Shell Canada, and ExxonMobil Canada. Together they hold the remaining two-thirds.
A question I get asked frequently is whether we need northern gas. The short answer is, “Yes, but not today”. We will need northern gas by the latter part of this decade.
On the supply side of the equation, conventional production in North America is mature, with decline rates approaching 20% per year. In Canada alone, over three billion cubic feet a day of new production must be attached each and every year just to maintain current production, and we haven't been doing that.
On the demand side of the equation, natural gas is the most environmentally preferred of the fossil fuels, with emission rates one-third less than oil and fully one-half less than coal.
The power generation market is the fastest-growing market segment for natural gas. Last year, former minister Prentice announced that there were 33 coal-fired generating plants in Canada that will reach the end of their economic life by the year 2020. If those plants are fueled by natural gas, that will create an incremental demand of 1.2 Bcf/d, exactly equal to the throughput of the Mackenzie Valley pipeline.
The next slide is a chart that shows that even with the addition of shale gas and other unconventional gas, our total production in Canada continues to decline, and will continue to decline through to the year 2020.
Shale gas is an important addition to the supply mix, but is it sustainable? We know there are very high decline rates in the early years, up to 65%; there's a significant amount of water consumption associated with the production of shale gas, typically about 100 times that for a conventional well; and there are some environmental concerns that are cropping up, such as groundwater contamination.
The conclusion reached by Ziff Energy, the company we engaged to undertake a supply-demand study for us, is that shale gas and both northern pipelines will be required to meet the forecast demand requirements by the latter part of this decade.
The next slide shows the overall project schedule for the Mackenzie gas project. We just concluded a rather lengthy regulatory process last December.
We expect to resume our discussions on a fiscal framework with the federal government in the first quarter of this year, following receipt of the actual NEB certificate. That will allow us to restart the project, restaff the engineering team, and proceed with the detailed engineering field programs and about 7,000 site-specific permits. We hope to reach an owner's decision to construct by the year 2013, and the first gas will flow in the year 2018.
This is truly a nation-building project determined to be in the public interest by the National Energy Board. Other nation-building projects have received federal support. Examples include the St. Lawrence Seaway, Hibernia, the original TransCanada Pipeline, and, of course, the Trans-Canada Highway.
The United States government is providing an $18 billion loan guarantee for the Alaska Highway pipeline. There is a possible role for the federal government to offset regulatory costs and infrastructure costs and to provide a guarantee to lower the cost of capital. The cost of capital is the largest single component of the shipping toll.
This project provides huge economic benefits for the Mackenzie Valley, and they're outlined in this particular slide. There will be over 7,000 jobs at the peak of construction. It generates economic independence and self-sufficiency, displacing the present dependence of aboriginal communities on government programs.
The final slide highlights the significant benefits of this project to Canada as a whole, including the creation of over 100,000 jobs right across Canada. This is truly an all-Canadian project that will deliver the clean energy we need in an environmentally responsible manner while creating jobs and economic opportunities for all of Canada.