Canada’s Pipeline Fight

by Greg Pollowitz

Canada has approved a nearly multi-billion-dollar pipeline to transport oil from Alberta through British Columbia to port facilities on the Pacific coast, but like with Keystone XL here in the U.S., there’s still work to do at the local level to win approval. Financial Post:

Enbridge Inc. cleared a major hurdle Tuesday with federal cabinet approval of its contentious Northern Gateway pipeline. Now the difficult work begins.

The $7.9-billion export artery would bring up to 525,000 barrels of oil per day from Alberta to a super-tanker port on B.C.’s northern coast for export to refineries in California and Asia. Deliveries could start by late 2018, Enbridge has said, but first the company must nail down a final cost estimate as well as oil-shipping contracts that take into account the 200-plus approval conditions regulators attached to the project last year.

Suncor Energy Inc., Cenovus Energy Inc., Inpex Canada Ltd., CNOOC Ltd. subsidiary Nexen Inc. and Total SA of France have all helped front the project’s initial development costs and signed so-called precedent agreements to ship oil on the 1,178-kilometre pipeline. But they balked at signing binding shipping contracts, citing uncertainty over whether the project would get approved.

With that hurdle cleared, some industry analysts say a raft of competing export projects and the sharp growth of oil shipments by rail could make shoring up commercial support for the pipeline difficult, potentially delaying construction well into next decade.

Enbridge has until July 1 to update regulators on commercial negotiations. The company needs firm transportation contracts covering at least 60% of the pipeline’s capacity prior to starting construction, according to conditions of its approval.

“There’s only so much take-away capacity needed,” said Robert Mark, director of research at MacDougall, MacDougall & MacTier Inc. in Toronto.

Oil sands production is expected to climb to 3.2 million barrels per day by 2020, rising to about four million barrels by 2025, according to industry estimates. In 2013, production stood at 1.95 million barrels a day.

If built, Gateway would serve as an important link between the Alberta deposits and energy-thirsty markets such as China, Mr. Mark said. But construction could get pushed to the “early 2020s” if alternative export options materialize first.

“Timing is a big part of it,” he said. If TransCanada Corp.’s Keystone XL project and Energy East are approved, “I think Gateway gets shelved for a very, very long time, because we won’t be able to fill it.”

Those projects are no sure bet: Keystone XL remains mired in a political quagmire in the United States and Energy East has yet to begin regulatory hearings.

The rest here.

Conservatives in Canada, however, are distancing themselves from the approval. National Post:

Only two years ago, Prime Minister Stephen Harper described the Northern Gateway pipeline project as in Canada’s “vital interest.” His environment minister called opponents “radicals.”

But on the day that his government gave its sanction to the project — as long as Enbridge Inc. meets 209 conditions — nary a Conservative minister or MP was there to announce it.

The news came, instead, via a colourless release with the bureaucratic title “Government of Canada Accepts Recommendation to Impose 209 Conditions on Northern Gateway Proposal.” The usual prefix, “Harper Government,” was absent.

The surgical gloves approach speaks volumes on the tough position the Conservative government find itself in on the project.