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June 2014

Vol. 19, No. 24 Week of June 15, 2014

Northern Gateway at crux point

Canadian government on verge of make-or-break decision for controversial Enbridge pipeline; talk of legal action, civil disobedience

Gary Park

For Petroleum News

Canada’s original Great Pipeline Debate over plans to ship natural gas from Alberta to Ontario and Quebec was so controversial that it ended 22 years of Liberal Party rule at the federal level in 1957.

That thought has probably been weighing heavily on the Conservative administration of Prime Minister Stephen Harper as it faces a June 17 decision on the most contentious energy pipeline project in the past 60 years and whether to approve Enbridge’s plan to ship 525,000 barrels per day of oil sands bitumen to the Pacific Coast for export to Asia.

There is no clear-cut verdict for Harper, no easy way to appease either side in a dispute that could get bogged down in years of litigation and, most disturbingly, result in civil disobedience or even violence if Enbridge starts construction.

On the pro-Northern Gateway side, led by the petroleum industry and the Harper government, the stakes are high.

Without the pipeline one of the best chances of opening markets for Canadian crude outside North America is in trouble, along with billions of dollars of investment, thousands of jobs and royalties that are vital to financing Canada’s social programs, including health care and education.

If Enbridge decides it can no longer afford to wait out another decade of legal battles after a decade of planning and opts to walk away from the C$7.9 billion project, the attention will immediately shift to Kinder Morgan’s plan to increase capacity on its Trans Mountain system to 900,000 bpd and possibly 1.2 million bpd from the current 300,000 bpd.

Mounting public concerns

Once seen as a cinch until public concerns over pipelines mounted, catching Kinder Morgan off guard, the C$5.4 billion Trans Mountain expansion is faced with 117 questions from parties with official “intervener status” in the regulatory hearings, requiring 60 employees to work around the clock on answers.

For Enbridge, Northern Gateway has involved spending hundreds of millions of dollars on project design and improvements and a prolonged regulatory hearing process, along with countless community meetings and efforts to reach equity agreements with First Nations.

For Harper, the political stakes are extreme as he faces an election in fall 2015 with his 21 Members of Parliament from British Columbia vital to his precarious chances of maintaining a majority government, or even holding a minority administration.

For the governments of Alberta and British Columbia, a damaging rift over building a pipeline across British Columbia has been only partly healed, while still falling short of British Columbia Premier Christy Clark’s five demands that include a greater share of revenues from Northern Gateway, environmental safeguards covering the overland pipeline and tanker traffic in coastal waters and full consultation with First Nations.

Promises from government

There has been a late flurry of promises from the Harper government to address safety concerns and to persuade First Nations that resource development projects offer them an “unprecedented opportunity” for jobs and economic benefits to resolve the chronic social issues in remote aboriginal communities.

Northern Gateway project leader Janet Holder has repeatedly insisted that First Nations covering 60 percent of the pipeline right of way have agreed to support the project, but the company says the identity of those communities must remain confidential.

But Holder sees no reason why legal challenges from First Nations would last indefinitely, or whether they would even force work on a pipeline to be postponed.

“The appeal process is not something that would go on forever and ever,” Holder said.

No modifications

The National Energy Board, whose recommendations can only be accepted or rejected, but not modified by the Harper cabinet, has required Enbridge to meet 113 of 209 safety, environmental and financial conditions before construction can start.

Holder estimates those requirements could be met by about September 2015, giving time for some of the legal challenges to be dealt with under streamlined federal regulations that could see litigation go directly to either the Federal Court of Appeal or the Supreme Court of Canada.

She also suggested that progress through the courts is time specific and would not involve re-hearing evidence presented at the public hearings.

Canada’s Natural Resources Minister Greg Rickford said the NEB conditional sanctioning six months ago of Northern Gateway is undergoing “careful consideration by cabinet ... and we will be in a position to respond to that in fairly-soon timelines.”

Equity increase?

However, the government could suggest the NEB ask Enbridge to increase its offer of a 10 percent equity stake to First Nations, which was widely seen as unacceptable from the outset, and possibly match the 33 percent offered to Northwest Territories aboriginal communities by co-owners of the Mackenzie Gas Project.

Aboriginal business leaders in Alberta, who view Northern Gateway as vital to their economic well-being, have suggested the Canadian government and possibly Alberta could offer loan guarantees to make a 50 percent ownership stake possible.

Jim Prentice, a former federal cabinet minister who has re-entered politics as a candidate to become Alberta’s next premier, said Alberta could play a larger role in overcoming Northern Gateway’s obstacles.

Before entering the contest for leadership of the Alberta Conservative party, which automatically sees the winner become the next Alberta premier, Prentice had been hired by Enbridge to seek answers to the unresolved issues between First Nations and Enbridge.

In launching his leadership bid, Prentice said he would aggressively pursue access to the Pacific Coast for Alberta crude bitumen.

“The premier of Alberta bears a heavy responsibility to build the partnerships that we are going to need with Coastal First Nations (an alliance of eight communities) and with the government of British Columbia ... our future does not lie in being a provider to the United States of oil and selling it at 70 cents (on the dollar). We need access to the Asia-Pacific basin.”

Spill cleanup fears

Art Sterritt, executive director of Coastal First Nations, whose greatest fear is an inadequate system for cleaning up oil spills in Pacific waters, said that even if Northern Gateway gets cabinet approval, opposition in British Columbia is so widespread that First Nations will have no difficulty enlisting others to join it in blockading construction on a pipeline.

Already a splinter group in northern British Columbia’s Wet’suwet’en First Nation has established a “resistance camp” to deny access to the Northern Gateway route by Enbridge.

Freda Huson, leader of the camp, said the community has “never ceded or surrendered” its land by negotiating a treaty agreement.

“We don’t need permission to be out there,” she told the Globe and Mail. “The land is ours and we’ve never given it up.”

That position applies to most of British Columbia and could become the ultimate stumbling block for Northern Gateway.






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