In January 2012, joint review panel hearings into Enbridge Inc.'s (TSX:ENB) proposed $6 billion Northern Gateway pipeline got underway in Kitimat.
Since then, Canada, according to the Canadian Association of Petroleum Producers (CAPP), has lost roughly $14 billion in potential economic benefits – the cost of Alberta's oil being landlocked and therefore held hostage to North American oil prices.
"If you think in terms of cost per barrel that we're not getting, it's estimated to be $27 million per day," BC Chamber of Commerce president John Winter told Business in Vancouver.
CAPP puts the estimate much higher, at $40 million per day.
Winter added, "The ability to unleash a landlocked resource such as the oilsands to international markets is the challenge here, and it seems to have been lost in much of the debate around the how-to as opposed to the why."
The pipeline would generate an estimated $1.2 billion over 30 years in tax revenue for B.C., and create 560 permanent jobs here, not to mention the construction jobs that would be created during the pipeline's building phase.
However, B.C. would receive none of the royalties that Alberta gets. Facing re-election against an NDP leader who opposes the project, Premier Christy Clark drew a line in the sand at the Alberta border in July, demanding a greater share of the benefits.
Clark walked out of a premiers' conference on national energy policies in July, saying the province would receive only 8% of the benefits while assuming 100% of the risks of a marine oil spill and a significant portion of the risks in the event of a land spill.
University of British Columbia research released on December 11 pegged the cleanup cost of a major tanker spill off B.C.'s northeast coast at $9.6 billion. The study, sponsored by WWF-Canada, estimated that such a spill would also result in $300 million in lost economic activity and wipe out any potential economic gains from Northern Gateway.
In July, Enbridge's assurances that it has state-of-the-art technology and procedures in place to prevent and react to land-based oil spills were called into question when the National Transportation Safety Board in the U.S. likened Enbridge's response to the 2010 oil spill in Michigan to the "Keystone Kops."
The spill was triggered by a corroded pipe, but it was reportedly exacerbated by Enbridge technicians, who kept pumping oil through the pipeline to see what was causing a drop in pressure.
An estimated 877,000 gallons of Canadian crude spilled into the Kalamazoo River. To date, the estimated cost of the cleanup has been more than $700 million.
To prevent another similar spill, Enbridge plans to use thicker pipe on its Northern Gateway pipeline and to use horizontal drilling to bore beneath 30 rivers, instead of passing through them.
But concerns over a spill at sea remain, and as BIV reported in January, Enbridge would not be on the hook for any oil spilled onto B.C. shores – the shipping companies would. (See "Enbridge off the hook for any oil tanker spill cleanup costs in B.C." – BIV issue 1160; January 17-23, 2012)
In August, the Northern Gateway project developed an unexpected twist when B.C. media mogul David Black announced plans to raise $13 billion for an oil refinery in Kitimat.
The refinery would be dependent on the Northern Gateway pipeline being built and would address some of the concerns over a marine spill, because refined gas and diesel do not cause the kind of environmental damage that crude oil does. Black said it would also generate 3,000 permanent full-time jobs.
In September, Clark appointed former attorney general Geoff Plant as chief legal strategist for the government at the Joint Review Panel of the National Energy Board and Canadian Environmental Assessment Agency. Then in October, Plant told BIV the B.C. government was not happy with the answers it was getting from Enbridge.
However, the biggest obstacle that Enbridge faces in B.C. might not be the B.C. government or public sentiment but First Nations. Enbridge claims 60% of First Nations along the pipeline corridor have signed equity agreements that would give them 10% of the income from the pipeline – a claim it has been unable to back up, because no First Nation has publicly affirmed its support for the project.
In December, when the Haisla First Nation quit the Coastal First Nation organization, which has been highly critical of the Northern Gateway pipeline, it was viewed as a possible softening of the Haisla's position. Because the pipeline would terminate in Kitimat – Haisla territory – getting the band's co-operation would be a key strategic move. But Haisla chief councillor Ellis Ross told BIV his people remained opposed to the Northern Gateway project, although it strongly supports the development of a liquefied natural gas industry.
If the Northern Gateway pipeline is not approved – or is approved and gets bogged down in legal challenges – it doesn't necessarily mean oil companies won't have B.C. port access for Alberta crude.
Kinder Morgan Inc. (NYSE:KMI) is planning a $4 billion twinning of its existing Trans Mountain pipeline, which runs from Alberta to Burnaby.
The expansion would increase monthly oil tanker traffic in Burrard Inlet from five to between 20 and 25.
Final hearings by the joint review panel for the Northern Gateway project entered the questioning phase in Prince Rupert December 10 and are scheduled to conclude May 18. Proponents and interveners will make their final arguments starting June 17. The joint review panel is set to deliver its recommendations by December 31, 2013. •
What the polls said
An Ipsos Reid survey, commissioned by Enbridge and released January 5, 2012, found 48% of British Columbians supported the project. Asked if the poll had been updated, an Ipsos Reid spokesman told BIV that it had not done any "publicly released polls" on the topic since January.
In August, an Abacus Data poll found 63% support for the project in Alberta and 56% opposition in B.C.
In an online survey of 800 British Columbians conducted by Vision Critical in October, only 9% of British Columbians unconditionally supported the proposal, 27% supported it conditionally and 34% opposed it.
Northern Gateway facts
1,177 kms, Edmonton to Kitimat
525,000 barrels of oil per day, Alberta to Kitimat
193,000 barrels per day condensate, Kitimat to Edmonton
Benefits for B.C.
3,000 construction period
$1.2 billion over 30 years