Enbridge’s Northern Gateway pipeline is the first of Canada’s proposed Big Four pipelines to export crude bitumen to gain approval at the highest level of government.
The administration of Canadian Prime Minister Stephen Harper did the expected June 17 when it gave a green light to the C$7.9 billion project to send 525,000 barrels per day of oil sands production to Asia and possibly California and import 193,000 bpd of condensate.
But, aside from 209 conditions that Natural Resources Minister Greg Rickford said Enbridge must demonstrate it will meet, along with consulting First Nations and local communities on the pipeline right of way, the battle over Northern Gateway has in many ways only just begun.
The decision was released in a prepared statement. Neither Rickford nor any members of the government were available to answer questions.
But the leaders of Canada’s two main opposition parties - Tom Mulchair of the New Democratic Party and Justin Trudeau of the Liberals - both said they would reverse the Northern Gateway approval if they win the next federal election in October 2015.
May be first to foldThere is no easy way for Enbridge to change the public mood and win over the British Columbia government, leaving many to believe the project may be the first of the Big Four to fold, shifting Canada’s hopes of opening new markets for its oil sands production to TransCanada’s Keystone XL and Energy East pipelines and Kinder Morgan’s Trans Mountain expansion.
Enbridge Chief Executive Officer Al Monaco acknowledged his company has considerable work ahead to win the support of British Columbians and resolve 113 of the 209 conditions before construction can start.
One of the first items on Enbridge’s to-do list is a report it must file with Canada’s National Energy Board within two weeks outlining what firm commitments it has from shippers who have contracted for space on the pipeline.
Those 12 supporters have already covered more than C$400 million in planning and regulatory costs. Whether they are prepared to battle on against daunting odds, including the strong prospect of legal action by First Nations and environmentalists, is uncertain.
Among the 209 conditions recommended last December by the NEB and the Canadian Environmental Assessment Agency, Enbridge must also show it has at least 60 percent of pipeline capacity secured by long-term contracts at least six months before construction starts.
Shippers could bailIf Keystone XL and Energy East make strong progress towards approval, that condition could see shippers bailing out of Northern Gateway, said Gavin Smith, a lawyer with the West Coast Environmental Law Group.
An Enbridge spokesman told the Globe and Mail that shipping commitments are always a “material decision by a company based upon such things as regulatory approvals, alternatives, toll competitiveness, market flexibility, supply and pipeline capacity - all of which are considered over the long term.”
That uncertainty has been compounded by the International Energy Agency which said Canada could ship up to 300,000 bpd of oil to China by 2019 if it got permits to re-export through the United State or used rail to access ports on the Pacific Coast.
Even now government data shows Canada is sending occasional tankerloads to China, India, Malaysia and Singapore, the IEA said.
It said that if Northern Gateway and the Trans Mountain expansion are commissioned by the 2018-19 period that would mean “Canadian exports to the Pacific Basin could steeply increase.”
As well, the IEA said the rail option is showing rapid growth as shippers skirt pipeline congestion - which is costing the Canadian economy an estimated C$50 million a day - reaching 160,000 bpd of oil sands crude in the first quarter, up more than 50 percent from a year earlier.
In May, Repsol bought a 600,000 barrel cargo of Western Canada Select heavy crude from the U.S. Gulf Coast for use in its Spanish refineries.
Turning to the courtsThere is little doubt that First Nations and environmental opponents of Northern Gateway will now turn to the courts to effectively stall progress on the pipeline and, if they fail there, they have indicated construction crews will face human blockades.
Art Sterritt, executive director of the Coastal First Nations, has led aboriginal leaders in voicing his displeasure with Enbridge, which he said has not shown the courtesy of consulting with First Nations, unlike the major international companies involved in British Columbia’s LNG projects.
Compounding the challenges facing Northern Gateway, members of the Dogwood Initiative said they have plans in place to use British Columbia legislation to force a provincial referendum on the pipeline.
The organizers have 90 days to collect the signatures of 10 percent of registered voters in each of the province’s 85 legislative constituencies, although gathering the required signatures is not viewed as an easy job, given that the threshold must be met in every constituency, meaning they will need 320,000 verified signatures.
The Dogwood legal team said 5,500 people say they will help collect signatures, claiming 27,000 people have already pledged to sign.
Dogwood spokesman Kai Nagata said his organization’s polling shows the issue has “moved into the mainstream,” as British Columbians increasingly agree the pipeline should not be built without their “democratic input.”
First Nations issuesA telling blow has also been delivered earlier in June by Doug Eyford, a British Columbia lawyer who was appointed last year as Harper’s special envoy on aboriginal and energy issues.
He told a conference of treaty negotiators, industry and government officials that the Canadian government has provided “little or no ... oversight, direction, or assistance” to industry to navigate complex First Nations issues on Northern Gateway.
“There is a lot at stake and not just in terms of our national economic agenda,” he said.
Eyford said communities that are now threatening legal action and civil disobedience were earlier ignored when they made “feasible proposals to address the environmental and other issues associated with the project.”
It is not immediately clear whether the British Columbia government of Premier Christy Clark will use the five conditions it has attached to Northern Gateway to stall the hundreds of permits it must issue for construction to proceed.
She said on June 17 the “five conditions (covering safe operations of tankers and the pipeline, consulting with First Nations and delivering economic benefits to the province) are very clear. They’ve been on the table for a very long time now. It is up to the proponent ... to figure how, if and when they’re going to meet them. None of them have yet.”