DECEMBER 28, 2017     BY JEFFREY JONES

The sun sets over the Mackenzie Delta near Inuvik, Northwest Territories November 11, 2009.

STAFF/REUTERS

A $20-billion Arctic energy dream has died with little more than a whimper.

The major oil companies that had studied for years how to get trillions of cubic feet of natural gas out of Canada's Mackenzie Delta and into markets across the continent have formally disbanded their alliance and walked away from the idea.

For many Canadians, even some who work in energy, it will come as a surprise the Mackenzie Gas Project had still been on life support, given how little has been said about it in recent years.

Read more: Imperial-led consortium calls it quits on Mackenzie pipeline project (for subscribers)

There's still lots to lament, not least the unrealized potential of a unique approach to giving aboriginal communities a real stake in the enterprise. It should be a model by now.

Mackenzie was the first pipeline in the modern era to go through years of planning, heated debate and regulatory proceedings only to get stalled before any steel was delivered. By the time it won federal approval following a six-year review, the North American gas market had been transformed by drilling and well-completion technology that allowed seemingly endless supplies of gas to be produced in close proximity to some of the largest cities in the United States.

The price of the commodity plummeted, and the cost of installing a tube 1,196 kilometres from the top of the Northwest Territories mainland to the bottom skyrocketed. Mackenzie turned out to be obsolete before it existed, and in a little-noticed statement before Christmas, project leader Imperial Oil Ltd. and its partners said there was no other option but to pull the plug. Thus ended a project first sketched out when Mackenzie gas deposits were discovered in the 1970s.

Other pipeline plans , most designed to carry oil, have been dashed as Mackenzie's delays turned chronic, including Enbridge Inc.'s Northern Gateway and TransCanada Corp.'s Energy East. Start of construction on Kinder Morgan Canada's $7.4-billion Trans Mountain expansion is still no fait accompli. It has its federal clearances but faces legal challenges and opposition from various environmental groups and First Nations communities.

Canadians debate scads of pipelines, but build few. For many Northerners, this one stings like exposed skin in December.

The Mackenzie Gas Project offered Indigenous people of the North ownership and a seat at the planning table. The communities that would have been beneficiaries of these unique agreements won't see them put into practice.

Imperial, along with partners ConocoPhillips Co., Shell Canada and Exxon Mobil Corp., rekindled plans to tap six trillion cubic feet a day of gas reserves from three major fields in 2000. But they said they would not proceed with a project until agreeing on terms with Indigenous leaders.

The talks came several years after the end of a decade-long moratorium on pipeline construction in the Arctic. B.C. Supreme Court Justice Thomas Berger had proposed the ban so that long-standing land claim disputes could be settled and environmental impacts could be studied. Indeed, some notable opponents to pipeline development in the 1970s became supporters in the 2000s.

Yes, there would be benefits and access agreements for lands in the Gwich'in, Inuvialuit, Sahtu and Deh Cho regions, but also an ownership stake in the project for Indigenous people. The result was the Aboriginal Pipeline Group, which had the right to own a third of the project.

Imagine: A multibillion-dollar energy development where the Indigenous locals have a say on everything from construction to employment to service contracts alongside the world's biggest oil majors. There are few, if any, examples around the globe of such an innovative partnership.

By 2002, the aboriginal partnership was in the fold when the companies said they would proceed with putting together the first part of a regulatory application, in itself a $250-million proposition. The total cost of a project was estimated at the time at $3-billion. The partners filed their application in 2004, and hearings started in 2006.

The project hit numerous stumbling blocks, and costs ballooned, as the proceedings unfolded and talks with Ottawa over a possible incentive package dragged on. All along though, Indigenous leaders including Aboriginal Pipeline Group chairman Fred Carmichael and Inuvialuit Regional Corp. chair Neillie Cournoyea, and a succession of NWT premiers, pushed hard for the development to proceed as a way to bolster economic activity and provide badly needed jobs.

In the end, it was all for naught. The epic length of the Mackenzie hearings is often cited as a cautionary tale about how the market can turn before a major project gets built.

An equally important lesson from the Mackenzie experience is the partners' dealings on aboriginal relations. Had the model been adopted by other developers in subsequent pipeline proposals, a lot of dispute could have been avoided.