Canadian Government Approves Enbridge's Northern Gateway Pipeline - Update

By Dow Jones Business News, 
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By Paul Vieira and Chester Dawson

The push to expand pipeline links from Alberta's landlocked oil sands to Canada's Pacific coast got a boost Tuesday when the federal government approved Enbridge Inc.'s Northern Gateway project.

Enbridge faces other hurdles before it can start construction on the 7.9 billion Canadian dollar (US$7.3 billion) project. Like TransCanada Corp.'s proposed Keystone XL pipeline in the U.S., Northern Gateway has come up against opposition, from politicians in British Columbia to environmentalists and aboriginal groups who have vowed to stop the project.

In approving Gateway, the federal cabinet said Enbridge must satisfy the 209 conditions set out by Canada's main energy regulator when it approved the project in December after 18 months of highly-charged public hearings. Enbridge " clearly has more work to do in order to fulfill the public commitment it has made to engage with aboriginal groups and local communities along the route," Natural Resources Minister Greg Rickford said in a written statement.

Northern Gateway would carry 525,000 barrels a day of crude oil from near Edmonton, Alberta, to a marine terminal at Kitimat, British Columbia, where the oil would be loaded onto tankers bound for Asia.

With the U.S. increasingly energy self-sufficient, building pipeline capacity to get crude to new markets has become a priority for Canada, which currently sends almost all of its crude exports to the U.S. Keystone XL, which has yet to get a green light from the White House nearly six years after it was proposed, has added to the urgency around tapping new markets.

Failure to win approval for more pipelines could lead to delays for planned oil-sands projects and lower prices for oil from Alberta, which already trades at a discount to other North American crudes. Canadian Finance Minister Joe Oliver this month warned that Canada's failure to find new energy markets would carry stark consequences for its economy. The natural-resources sector accounts for 20% of Canada's economic output, according to the government.

Enbridge has spent C$400 million of the estimated cost to prepare and promote Gateway and has received firm commitments from major oil-sands producers, including domestic companies Suncor Energy Inc., Cenovus Energy Inc. and Husky Energy Inc., as well as the Canadian units of China'sCnooc Ltd. and France'sTotal SA.

Many of those shippers have hedged their bets by also making commitments to other pipeline projects, including a proposal backed by Kinder Morgan Energy Partners LP to nearly triple the capacity of its Trans Mountain pipeline, which already carries Alberta crude to the Pacific coast.

People in the industry say that not all those pipelines are needed today, but that their capacity will be spoken for over the next decade as oil-sands production grows.

Gateway has polarized Alberta neighbor British Columbia, with opposition strongest among aboriginal groups and environmentalists. The provincial government had demanded environmental guarantees and compensation before construction permits can be issued.

Many of the native tribes that exercise control over land and coastal waters along the proposed route through British Columbia have signaled that they will oppose the project, citing environmental risks and what they say is their lack of influence on a pipeline that will run through land they have lived on for centuries.

"It traverses some of the most rugged terrain in North America and crosses hundreds of streams and river that represent the spawning grounds for B.C.'s wild salmon," said Chief Stewart Phillip of the Union of British Columbia Indian Chiefs. "The specter of a tanker spill along the north coast is something that people are not prepared to risk."

The issue also has threatened to complicate discussions between aboriginal groups and provincial government and industry groups seeking to build pipelines to carry natural gas from inland to proposed liquefied-natural-gas terminals on the Pacific coast. The British Columbia government and First Nations have been more receptive to those natural-gas projects.

Alistair MacDonald contributed to this article.

Write to Paul Vieira at paul.vieira@wsj.com and Chester Dawson at chester.dawson@wsj.com


  (END) Dow Jones Newswires
  06-17-141859ET
  Copyright (c) 2014 Dow Jones & Company, Inc.


This article appears in: Energy

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