INTRODUCTION
I would like to thank Jeffery Parker for that kind introduction. Ladies and gentlemen, it is a great pleasure to be with you today to speak about some of the common issues facing Alaska and the Northwest Territories. First of all, I would like to thank:
· Mr. John Shively, President of the Resource Development Council and Mr. Tadd Owens, Executive Director of the RDC for their kind invitation to speak;
· Govenor Murkowski – for picking up the check for lunch in Vancouver a couple of weeks ago and the pleasant dinner we had on Tuesday evening at the beautiful museum you have in Anchorage; and,
· Canadian Consul General Jeffery Parker;
· Ms. Karen Matthias from the Canadian consulate who has been very helpful working with my office arranging this visit. I think last night’s wonderful reception was an example of the wonderful job Karen is doing representing Canada.
· Finally, I wanted to mention the great evening last night at the Fly by Night Club – I even got most of the Alaska jokes. Although I think I may soon be in the market for an airplane.
Before I dazzle you with my speech about diamonds and pipelines, I would like to respond to many of you who have approached me in the last few days wondering about the level of aboriginal support for the Mackenzie Valley Gas Project.
I can tell you that there is a high level of support up and down the Mackenzie Valley for this project. The movement we are now seeing in the Access and Benefit Agreements speak to this level of support. Earlier this week, one of these groups representing the southern Sahtu communities of Norman Wells, Deline and Tulita announced that they had reached an agreement with Imperial Oil and the other proponents. We are expecting similar announcements from a number of other groups shortly. I hope this helps you all better understand where things are at in the Northwest Territories. I’ll get back to pipeline issues a little later but for now - back to my dazzling speech….
WHAT WE HAVE IN COMMON
This is my fourth trip to Alaska and when I am here I am always struck by the similarities that define our respective homes. As Northerners, we have much in common. There are very few of us compared to our southern provinces and states. Unlike people in the South, who live in densely populated cities, most of us live in small and remote communities. The beauty of our surroundings is the envy of the world. Our Northern Aboriginal peoples of Alaska, Yukon and the Northwest Territories have close kinships and share a rich history. They also continue to have a powerful connection to the land. And, our respective territories are blessed with an abundance of natural resources – both renewable and non-renewable.
We also share many of the same challenges. The beauty of our land can be matched by the harshness of the climate. This brings unique challenges to how we do business. We share the realities of providing services to a smaller population located in many small and often remote communities. In our case, we have some 45,000 people located in 33 communities – about 50% of our population is Aboriginal with the majority of our Aboriginal people living in our smaller communities.
We also share the desire to develop our resources in a way that ensures our people receive the maximum benefits and this is what I am here to speak to you about today.
Similar to the history of Alaska, it is difficult to separate the economy of the Northwest Territories from the land. Since the earliest days of trade, our wealth has been inextricably tied to the land and its abundant resources. In the early days, trade centered around fur – today it is diamonds and oil and natural gas.
I want to share with you a brief snapshot of resource development in the Northwest Territories, talk a little about some of our challenges and some of the approaches that we have taken to ensure that our residents benefit from the development of these resources.
OUR ECONOMY
I am pleased to say that our economy in the Northwest Territories is growing rapidly. Our challenge is to find ways to ensure this prosperity continues and to expand it so that more of our people reap the benefits from the responsible development of these resources.
THE DIAMOND INDUSTRY
As Governor Murkowski “almost” said yesterday, diamonds are a girl’s best friend; well, I can tell you that “Diamonds are our territory’s best friend!” The primary driver of our economy over the past ten years has been our diamond industry. We have seen a significant growth in this industry since the initial discovery of diamonds at Point Lake in the Northwest Territories (NWT) in 1991. In the 15 short years since then, the Northwest Territories has become a major player in the world diamond industry and is currently one of the top three producers of diamonds, after Russia and Botswana.
Currently in the Northwest Territories we have two operational diamond mines - BHP Billiton’s Ekati Diamond Mine, the NWT’s first diamond mine, which began production in October 1998. This was followed by the Diavik Diamond Mine, owned by Rio Tinto and Aber Resources, which has been in operation since early 2003.
A third mine at Snap Lake owned by De Beers’ commenced construction in February 2005. It is scheduled for completion in 2007 and full production is anticipated by the third quarter of 2008.
We expect that De Beers will soon be forwarding an application for its Gasho Kue project to the regulatory process for review in the near future.
In 2004 the two current mines produced a total of 12.6 million carats at a value of US$1.65 billion dollars. When all three mines are in operation Canada’s Northwest Territories will produce approximately 15% of the world’s diamonds.
About half of the total global investment in prospecting for diamonds was spent in Canada in 2004. Diamond exploration is now taking place in about 60 areas across Canada.
Over two thirds of these explorations are in the NWT with total expenditures of over US$94 million. Nearly 10.5 million hectares of permits were taken out in the NWT in 2004.
But we are equally excited about the developments in our secondary diamond industry as well. In recent years, the NWT has moved beyond the role of diamond producer to developing a vibrant secondary diamond industry.
As part of an understanding between the producers and the Government of the Northwest Territories, our two operating diamond mines sell rough diamonds to manufacturers in the Northwest Territories to promote and support value-added diamond activity in the NWT.
Our region now has four established cutting and polishing facilities including Laurelton diamonds, owned by Tiffany and Co, which opened in October of 2003.
Our government has taken the lead in supporting this growing industry and the NWT is now recognized for its leadership in training, craftsmanship and producing high quality polished diamonds.
Our government has also partnered with industry to promote the diamond industry and related tourism opportunities. One of the most visible of these opportunities is the diamond and tourism sweepstakes we are holding in conjunction with the release of jazz singer Diana Krall’s new Christmas album. This promotion includes exciting prizes such as the sponsorship of a new winter ice rink at Bryant Park in New York, custom arctic diamond tours for couples and a hands on diamond cutting workshop for tourists.
Development of Natural Gas
While diamonds have been the primary driver of our economy over the past ten years, it is clear that the economy of the Northwest Territories will be powered over the longer term by the production of natural gas.
I cannot overstate the importance of the Mackenzie Gas Project to the long-term strategic interests of the Northwest Territories and the socio-economic future of our people and communities. Today, I want to update you on the progress of this project.
Before I speak about the specifics of the project, I want to briefly touch upon the recent events in the southern part of your country that have highlighted the importance of northern gas to the entire continent.
We were all deeply saddened by the loss and devastation that Hurricanes Katrina and Rita inflected on the communities along the US Gulf Coast. There is little doubt the effects of this disaster will be felt for years to come. Not only is there the human element to this disaster but it also points out the very real need for dependable and secure sources of energy to power our lives and economies, both in the United States and Canada.
While offshore sources are increasingly unreliable and conventional basins are depleting, energy consumption in North America continues to rise significantly. It is now certain that diversified continental supplies, particularly arctic hydrocarbons, will be critical to a long-term continental energy solution. This is yet another reason we must ensure that both the Mackenzie and Alaska Pipeline move forward.
With respect to the Mackenzie Gas Pipeline Project, I am pleased to report that work is progressing well and we are optimistic that we will hear from Imperial Oil shortly, on behalf of the project partners, about their readiness to go to public hearings.
As I said earlier, this project is critical to the economic health of the Northwest Territories. The wealth from this project can provide critical opportunities for our communities and residents to take control of their economic future.
With construction scheduled to begin as early as 2008, natural gas could begin flowing through the proposed Mackenzie Valley pipeline as early as 2010. Based on the current estimated reserves of natural gas alone, NWT gas will supply southern markets until at least the year 2033. This is an important point. Natural gas from the Northwest Territories will end up in North American markets and not, as many may think, just serve to feed the Alberta tar sands.
The return in dollars and jobs, over the next 30 years, under a very conservative price scenario of $4 US per thousand cubic feet, would see US$49 billion dollars in Gross Domestic Product and total project revenues of US$45.4 billion dollars. The project will generate some US$20 billion dollars in government revenues – mostly of which will accrue to our federal government.
Canadians in the north, south, east and west will all benefit from increased investment and job creation. The numbers are impressive: US$6.6 billion dollars in total labour income and 157,000 person years of employment. Re-investment of corporate profits in new exploration and development could generate an additional US$14 - US$23 billion dollars in GDP and between 243,000 and 406,000 additional person years of employment.
The addition of this new supply of gas will help restrain gas price increases with every 10-cent per Mcf restraining effect saving consumers US$300 million dollars per year. Equally important, the supply of cleaner burning fuel from this project could save Canada up to US$1.8 billion dollars in greenhouse gas emission costs. Providing energy through natural gas will also benefit American consumers by way of providing affordable and secure access to clean energy resources.
The macro-economic benefits from this project to Canada are impressive but it is the significant fiscal, economic and employment benefits of this project that will accrue to the people of the Northwest Territories that are of greatest importance to my government. And it is these benefits that are at risk should the project not go ahead.
As I said at the outset, we have made significant progress in a number of areas over the past twelve months.
Last year, we developed a unique partnership between our government, the federal government and industry to train our young people to take advantage of the jobs that will be created in this project and other resource development projects in the Northwest Territories. I heard your Governor speak to the importance of creating jobs for Alaska’s young people and clearly here is another area we share a common interest. Job creation for the North’s young generation is tremendously important for us. Sixteen per cent of our population in the NWT is between the ages of 15 and 24. For our many young people who are about to enter the work force, the pipeline and the development it will bring provides the potential of stable employment.
We are also working with our community governments to prepare for the challenges and opportunities that the proposed Mackenzie Gas Project will bring – including impacts on local infrastructure – roads, utilities, recreation facilities and more. To support both community governments and Aboriginal organizations, the Government of the Northwest Territories has worked with partners to make a number of funding programs available.
Another of the important long-term benefits to Aboriginal groups is through the equity position they have in the project through the Aboriginal Pipeline Group. The agreement between the proponents of the project and APG is a precedent-setting agreement – its importance to the Northwest Territories will transcend the construction of the pipeline. APG has secured: a minimum one-third equity interest in the proposed Mackenzie Valley pipeline; US$68 million in financing from TransCanada Pipelines to cover APG’s project definition costs; and, assistance from the Producers Group for any necessary funding to cover the APG’s share of the construction costs.
We believe this partnership will result in significant Aboriginal participation and economic benefit from the Mackenzie Gas Project - benefits only dreamed about in past large-scale resource development projects in the Northwest Territories. It is for these reasons our government has and continues to fully support the Aboriginal Pipeline Group. We are also exploring other mechanisms to maximize the return to the shareholders of APG such as federal loan guarantees.
For the Northwest Territories, one of the primary benefits from this project is the opportunity it can provide to diversify our economy. This project and other large-scale development in the oil and gas industry can provide this opportunity if we take the necessary steps to ensure this development helps build our local and regional economies in healthy and sustainable ways. For example, we are talking to the proponents of this project about the potential for powering their compressors stations with hydropower from the Bear River in the central Northwest Territories.
Another important development over the past several months was the announcement by the Government of Canada this past July to establish a US$428 million dollar social economic impact fund to help address the socio-economic impacts resulting from this project. This money will be disbursed over the next ten years in the regions directly affected by the project.
Our government has been pressing our federal government for investment in the north to prepare for resource development. We are very pleased that the federal government has responded to this request in such a comprehensive and constructive manner.
In September, the Mackenzie Valley Producer’s Group sent a letter to the regulatory bodies National Energy Board and Joint Review Panel describing the progress made on over past months. The Producer’s Group also outlined the two issues that remained to be resolved prior to moving forward with public hearings. These issues include the negotiations for land access with Aboriginal organizations along the right of way and agreements with the federal government and the Government of the Northwest Territories on the fiscal framework for the project.
Although our government is not a party to those negotiations, we are pleased with the progress that is being made on the individual Access and Benefit Agreements that Aboriginal organizations are negotiating with the proponents of the project. As I said earlier, these negotiations are with the five Aboriginal groups along the right of way – the Inuvialuit, Gwich’in, southern and northern Sahtu and the Deh Cho. Once completed, these agreements will deal with specific aspects of land access, employment and training, business opportunities much, much more.
The second issue is one all to familiar to folks in this room today. In the Northwest Territories, the Producer’s Group wants to reach agreement on the fiscal framework for the project with governments. The Government of the Northwest Territories understands and appreciates the desire of the proponents to gain greater certainty concerning the economics of this project and we are working to reach an agreement that will satisfy both the proponents of the project and our government.
We are at an important crossroads for the Mackenzie Gas Project. Many of the pieces of the puzzle are in place to allow the project to move forward – the regulatory process is in place, the US$428 million socio-economic fund has been agreed to, Aboriginal groups have negotiated an equity position in the project through the Aboriginal Pipeline Group and we are working in partnership to prepare our communities and residents for the challenges and opportunities this project will bring.
If we do it right, the pipeline represents employment, investment and business opportunities for the people of the Northwest Territories. It means long-term self-reliance and the opportunity for many of our residents to provide a good standard of living and quality of life for their families. It means real hope and opportunity for all our people. Thank you for providing me the opportunity today to share my thoughts with you and for making us all feel at home here in Alaska.
