CALGARY, Alberta - The C$16.2 billion ($15.4 billion) Mackenzie pipeline in Canada's Arctic should be allowed to proceed, provided 176 recommendations aimed at securing socioeconomic benefits and minimizing environmental damage are followed, regulators ruled on Wednesday.

In a much-anticipated report, the Joint Review Panel said it believed the huge gas project would bring overall benefits to Canada's Northwest Territories and avoid major ecological impact if the oil companies proposing the line and governments follow its list of measures.

The list is as diverse as analyzing the impact of climate change on facilities buried in permafrost, monitoring grizzly bear dens, and assessing if alcohol and drug abuse programs in the sparsely populated region are adequate.

The Mackenzie Gas Project and associated Northwest Alberta Facilities would provide the foundation for a sustainable northern future, the seven-member panel said. The challenge to all will be to build on that foundation.

The pipeline would carry at least 1.2 billion cubic feet of gas a day to the Alberta border from fields in the Mackenzie Delta near the Beaufort Sea. In Alberta, the gas could be routed to numerous markets in Canada and the United States.

The JRP report, which concentrated on the project's environmental, social and economic impact, comes more than two years after public hearings into the development ended. The project is led by Imperial Oil Ltd.

Imperial and its partners welcomed what appears to be a vote of confidence for the long-delayed project, but could not say yet if any of the recommended measures appear onerous, spokesman Pius Rolheiser said.

The company has three weeks to respond to the report.

It would be fair to say that we're pleased that the JRP has concluded that, with appropriate measures to mitigate potential impacts, the project be allowed to proceed, Rolheiser said.

Imperial's partners are Royal Dutch Shell, ConocoPhillips, Exxon Mobil Corp, and Aboriginal Pipeline Group.

Canada's National Energy Board will use the JRP report to help make its decision on whether the project can go ahead. That decision is expected in September.

(To view the report's executive summary, including the list of recommendations, click here )


The Mackenzie project was first envisioned in the 1970s after oil companies discovered large gas deposits in Canada's Arctic. Imperial and its partners began studying the current incarnation of the project in 2000 and filed regulatory applications four years later.

Since then, the Mackenzie project has been beset with a big cost increase, regulatory delays, lengthy talks with Ottawa over fiscal breaks and a transformation of gas markets due to the recession and development of massive shale gas reserves located close to major U.S. markets.

Still, northern communities see the project as an opportunity for badly needed economic development, one that could provide careers for young people and spark spinoff businesses in the rugged region.

As part of a deal with the oil companies, aboriginal groups along the proposed 1,220 km (760-mile) route have the right to own up to one-third for the pipeline.

Environmental groups that opposed the project, such as the Sierra Club, argued during the JRP hearings that the bulk of the gas would be used to fuel development of Alberta's oil sands.

($1=$1.05 Canadian)

(Reporting by Jeffrey Jones; editing by Peter Galloway)