MACKENZIE PIPELINE HUNG UP ON LAND TAX

Ottawa reportedly has rejected bid by region to apply levy

CALGARY •

Ottawa appears to have poured cold water on a request from aboriginal communities in the Northwest Territories to apply a land tax to the Mackenzie Valley natural gas pipeline. The development could further hamper the time-pressed and troubled $7-billion construction project.

Andy Scott, the Federal Indian and Northern Affairs Minister, is reported to have written in a letter to Northwest Territories Premier Joe Handley that the Deh Cho, the largest of the four regions the proposed line would run through, cannot apply a 1% property tax to the pipeline that would have generated about $ 20- million annually to be shared between the Deh Cho’s 10 communities.

“ This is our traditional land and our Treaty — which is with the Crown, not the Government of Canada — says we have the right to tax our land,” Deh Cho chief Keyna Norwegian said yesterday. “Unfortunately, in Minister Scott’s clarification he made reference to us not having that power or at the least, having to negotiate to get that power.

“ The group up and down the valley has responded to him and said yes, we have that right according to our Treaty rights.”

The letter, received late last week, was a response to Mr. Handley’s request that Ottawa clarify Canada’s tax rules and what authority an aboriginal community has to collect and disperse such revenue.

The conflicting opinion also signals of how far apart the sides still are after one of the project partners — the Aboriginal Pipeline Group — said last week there is a window of six to eight weeks to settle key agreements with aboriginals and the federal government.

Ms. Norwegian said the Deh Cho, the Gwi’chn and the Sahtu are unanimous in wishing to impose a property tax that, all told, would cost the pipeline operators $47-million a year, about 1% of gross revenue, according to Ms. Norwegian.

Project leader Imperial Oil Resources Ltd. — partnered with the APG,

ExxonMobil Corp., ConocoPhillips and Shell Canada Ltd. — is offering one-time payments to communities along the path of the 1,220kilometre line as access and benefits agreements, which mirror the formula used for pipeline rightofways in other parts of Canada.

Ms. Norwegian said Imperial’s one-time access and benefit payment offer to the Deh Cho was $800,000.

“Imperial’s plan is to make billions [of dollars] from this project. I don’t think 1% or 2% is too extreme. What is that for them?” she said.

The pipeline's future has been uncertain since April, when Imperial halted all field work because it was unhappy with aboriginal expectations and the readiness of regulators to proceed efficiently.

Imperial reiterated again yesterday the aboriginal deals, and fiscal terms with the federal governments, must be ironed out before the project moves into a lengthy public hearing stage or falls of the rails entirely.