Enbridge mulls rescue plan

Company ‘few months away’ from deciding whether to offer First Nations more equity, faces blunt demands from new national leader

Gary Park

For Petroleum News

Enbridge, while acknowledging it missed an opportunity years ago to gain the support of First Nations and the people of British Columbia for its C$7.9 billion Northern Gateway pipeline, is hinting at a possible dramatic gesture to salvage the project.

Having encountered apparently inflexible opposition from a large percentage of the 27 First Nations along the pipeline right of way in British Columbia and failed to win over a majority of those communities with its offer of a combined 10 percent equity stake in the pipeline, Enbridge is rethinking its strategy.

Sources close to the project say discussions are taking place with First Nations and Metis on a proposal to transfer control over Northern Gateway ownership to a board drawn from Enbridge, committed pipeline shippers - including Suncor Energy, CNOOC-owned Nexen, Cenovus Energy, the Canadian unit of France’s Total, MEG Energy and Inpex Canada - and aboriginal equity stakeholders, while expanding the aboriginal ownership position.

Strong voices to be added

He said any changes in governance and ownership could be announced within a few months.

The obvious parallel has been established by the Aboriginal Pipeline Group of the Northwest Territories which secured a right to one-third ownership of the Mackenzie Valley natural gas pipeline.

Carruthers said that even if Enbridge reduces its stake in Northern Gateway it would still expect to build the twin pipelines to export 525,000 barrels per day of crude bitumen and import 193,000 bpd of condensate and play a role in the leadership and management of the system.

Time an issue

Although no formal revised target has been set, Wood Mackenzie analyst Michael Wojciechowski said he doubts that Enbridge can satisfy the 209 conditions set by Canada’s National Energy Board and the five requirements insisted on by the British Columbia government to start construction within two years.

He said Northern Gateway could be stalled until at least 2025 if producers can find market outlets on any of three other stalled pipeline projects - Kinder Morgan’s Trans Mountain expansion and TransCanada’s Keystone XL or Energy East.

However, the apparent dawn of awakening at Enbridge may not be enough to win over First Nations that have been emboldened by a Supreme Court of Canada judgment this year giving them rights to land beyond their defined treaties, or claims.

Blunt-spoken new grand chief

Perry Bellegarde, who follows the conciliatory Shawn Atleo, told Canadians that “for too long we have been dispossessed of our homelands and the wealth of our rightful inheritance.”

“Canada will no longer develop pipelines, no longer develop transmission lines or any infrastructure on our lands as business as usual,” he said. “We will no longer accept poverty and hopelessness while resource companies and governments grow fat off our lands.

“If our lands and resources are to be developed, it will be done only with our fair share of the royalties. It will be done on our terms and our timelines. Canada is Indian land.”

That message mirrored a stand taken Dec. 5 by 36 chiefs in northern British Columbia who have taken collective action to pursue ownership positions in LNG, mining and forestry projects. Another six chiefs are expected to join the alliance.

Chief Martin Louie of the Nadleh Whut’en First Nation said the Supreme Court has set a new standard in indigenous rights that should lift the burden on aboriginal communities to engage in blockades or lawsuits to collect the benefits of resource development.

Pipelines on their own

The Canadian government has effectively told Enbridge and Kinder Morgan they are on their own if they hope to secure final approval for pipelines to carry oil sands bitumen to tanker ports on the British Columbia coast.

Industry Minister James Moore, the senior cabinet minister from British Columbia, said his government has “done everything we can in a responsible way” to support plans for the Northern Gateway pipeline and Trans Mountain expansion to deliver an additional 1.2 million barrels per day to Asia-Pacific markets.

He told the Canadian Broadcasting Corp. it is now up to the two companies to meet environmental standards, engage with First Nations, negotiate the conditions set by the British Columbia government and reach agreements with municipal governments.

Moore said the federal government could not have done anything different to avoid the protests that have stalled the two pipelines, adding the “culture in British Columbia ... invites disagreement. But frankly these were not particularly massive protests.”

The underlying message seems to be that the government is no longer prepared to fight losing causes to achieve Prime Minister Stephen Harper’s long-time goal of turning Canada into an energy superpower and advance its resource-based economic policies to create jobs and generate revenues.

Nathan Cullen, a New Democratic Party Member of Parliament, whose British Columbia constituency includes the terminus for Northern Gateway, ridiculed Moore’s position.

He said the government made a “fatal mistake” by rigging the regulatory process in a way that convinced the public they had no chance of a fair hearing and that every pipeline proposal would be approved, regardless of the economic or environmental impacts.”

Cullen told the CBC that by applying the “old bulldozer politics of the 1950s,” the government has made the outlook for the two pipelines “dark and growing darker.”

—Gary Park