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Natural gas pipeline has huge potential; PART ONE

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YELLOWKNIFE, Northwest Territories -Within a quarter-century the flow of
natural gas could be worth up to $100 million (Cdn.) annually to First
Nations in the Northwest Territories.

That is the estimation by the Aboriginal Pipeline Group (APG), a consortium
of Native Canadian leaders and business executives who have partnered to
maximize the economic potential of a proposed pipeline. Established four
years ago, APG has recognized the viability of natural gas as a salvation
for financial independence for some of the isolated communities in Canada's
Far North.

Scheduled to open in 2010, a 1,220-kilometer (760-mile) pipeline will
transport the gas of the Mackenzie Gas Project. Starting in Inuvik, the
line will travel south through the Northwest Territories (N.W.T.) to
northern Alberta where existing lines will distribute the fuel to other
markets in Canada and the United States. At $5 billion (approximately $3.8
billion U.S.), this project will be one of the largest business and
construction endeavors in the N.W.T.

A majority of Aboriginals living along the Mackenzie River Valley and the
pipeline's proposed route has determined the financial benefits are
enticing. Three of the four First Nations have signed on with APG; the
Inuvialuit, the Gwich'in and the Sahtu, and from this unity, they have
negotiated a significant stake in this venture.

One-third of the pipeline will be owned by APG, explained the group's
president Bob Reid at an information session during the 34th annual Dene
National Assembly in Yellowknife from Aug. 30 - Sept. 2. The Dene (First
Nations in the N.W.T.) comprise about half of the territory's 42,000
population and the line will pass through an area where 15,000 people live,
both Native and non-Native. Unlike other natural resource extraction
projects in the past, this deal, APG points out, will be done differently.

"This is an opportunity to change the way things are done in the North. In
the past southerners have come up here, without consultation, and taken our
resources," said Reid.

Thirty years ago pools of natural gas were discovered in the Beaufort Sea
west of Tuktoyaktuk, a town north of Inuvik. Then, Aboriginal resistance
and market prices put the development of this resource on hold. Now, with
cooperation by the local First Nations and a desire for alternative energy
sources in the wake of all-time high oil prices, pre-construction of the
30-inch pipeline will likely occur between 2006 and 2007 and the delivery
system will be completed during two four month periods in the winters of
2008 and 2009.

Presently four oil companies (Imperial, Shell, ConocoPhillips and
ExxonMobil) have stakes of almost 6 trillion cubic feet (tcf) of gas in
three sites west of Tuk. Initially the pipeline will deliver 1.2 billion
cubic feet (bcf) daily and with moderate alterations that number can be
increased to 1.9 bcf. (This amount would heat 2.5 million homes for one
year.)

In addition to the known supply, which would last between eight and 13
years, Reid said the Beaufort region has enough reserves for at least 20
years of activity. Once the pipeline gets the final approval, he added,
other producers would begin exploration. Reid said there are eight other
companies who are in the region and as an example, in Alberta last year
there were 12,000 new gas wells dug while in the N.W.T. there were only
three because there isn't an accessible method to transport the fuel.

Without the initial capital to become a full partner in the project, APG
has financed $1 billion and will pay off this debt with revenues earned.
Even with the large payments required for the first few years, Reid
announced the APG will still net $20 million annually and that amount will
rise until about 2030 when, at a conservative 1.5 bcf daily, the First
Nations partnership will have $100 million per year at its disposal.

Joining Reid at the platform was Chief Charlie Furlong of the Ehdiitat
Gwich'in from Aklavik who explained why, at the start of the decade, tribal
leaders from the N.W.T. joined together. Between the three levels of First
Nations, federal and territorial governments, the Dene Industrial Protocol
was developed. Furlong noted how Aboriginal leaders had to have a plan for
future land use and the distribution of economic benefits.

"We didn't want to open our windows one morning and see the pipeline coming
down because that's what happened before," said Furlong. "[This is] a
process for the Dene to come together for new projects and ways to reduce
risk [while] insuring the Dene maximize the best way for deals."

The chief was referring to an oil pipeline built in Norman Wells two
decades ago. Then, local Aboriginals were offered a 10 percent share in the
project, which was declined. Eventually the project went through and except
for some short-term jobs, there have been no long-term benefits for First
Nations in the area. That fact was openly stated by Reid who used that
failure as a measuring stick for the strength of owning 33 percent in this
proposed pipeline.

While Furlong expressed the Protocol's neutrality towards the project,
there was no denying his enthusiasm for the pipeline that starts near the
border where the Inuvialuit and Gwich'in lands converge. As the three
territories within Canada (Yukon and Nunavut are the other two) don't
control their own natural resources as do the provinces, it's the federal
government that collects the money before filtering some funds back to the
N.W.T.

"Over a 25 to 30-year period Canada is expected to collect $30 billion in
royalties in gas, mining and hydro-electrical development," Furlong said to
the assembly. "Under the current system we don't get any of that money
back.

If we don't make a change right now, Canada will take 95 percent of every
dollar that comes from the Northwest Territories."

(Continued in Part two, anti-pipeline groups tell their side of the story)