Enbridge Inc.'s ambitious plan to build an oil sands pipeline to the West Coast will succeed despite opposition from first nations and environmentalists as well as concerns about pipeline overcapacity, the company's chief executive officer says.
Enbridge plans to file next month for a permit from the National Energy Board to build the North Gateway project to Kitimat, B.C., says CEO Pat Daniel. He expects the NEB process to take two years and is confident the project will be approved.
If all goes according to Enbridge's plans, Alberta bitumen would be flowing to Pacific Rim markets by 2015, even though industry observers are warning of a glut of pipeline capacity until at least 2018.
At a meeting with The Globe and Mail's editorial board, Mr. Daniel stoutly defended the Northern Gateway project, saying it is crucial to open new markets and will lead to higher prices for oil sands companies.
"Producers feel that in order to be able to negotiate better pricing for their crude oil, they do need access to another market," the Calgary-based CEO said yesterday. He acknowledged, however, that diverting export volumes from the U.S. could drive up pipeline fees on those lines, because costs would be spread among fewer barrels of oil.
"Experience would show that the improvement in netback pricing by opening up that alternate market would more than outweigh the toll increase associated with less volume going eastward."
Producers, led by Suncor Energy Corp. , have complained that Enbridge and its competitor, TransCanada Corp. , have over-built pipeline capacity into the United States, driving up the per-barrel cost of tolls.
Mr. Daniel said refiners in Asia have expressed interest in receiving bitumen from Alberta in an effort to reduce their reliance on the Middle East. He added that environmental standards at those refineries should match North American ones, so the Canadian government would have no cause to block exports.
The Harper government has said it would prevent any company from exporting raw bitumen - unprocessed oil from the oil sands - for upgrading elsewhere in order to capitalize on lower greenhouse gas emission rules in other locales.
The Enbridge executive said that, by providing access to Pacific Rim markets, the Gateway pipeline should encourage further Asian investment in the oil sands, and boost production beyond what it would be without the project going ahead.
While Mr. Daniel professed confidence that the project would pass regulatory muster, native and environmental groups are gearing up for a fight.
Enbridge is working with B.C. first nations' communities to win their approval for the project. While it has had some success with those along the pipeline right-of-way, native bands that live along the rugged coasts have made clear their opposition.
Several groups - including Haida, Hasla and Gitga'at - issued a stark warning last month that "oil tankers carrying crude oil from the Alberta tar sands will not be allowed to transit" their lands or waters. They raised the spectre of the Exxon Valdez, which lost 42 million litres of oil when it ran aground in Prince William Sound off Alaska in 1989.
Mr. Daniel said it will be up to the NEB and Ottawa to make the final determination in the national interest. "The way I read the laws of the country, they [the first nations]don't have a veto, but we've got a regulatory process to go through" he added.
Enbridge argues the tanker traffic will be as safe as possible - all double-hulled, with B.C.-certified pilots and tugs tethered on the front and back. Oil tankers have accessed the ports of Vancouver, Portland, Me., and Quebec City without mishap, Mr. Daniel noted.
"But can we promise there will never be an accident? No. Nobody can."
The Calgary chief executive urged the federal government to formulate a national energy strategy that would guide development, while driving environmental improvements. He said Canada is well-endowed with energy resources and has a responsibility to supply the world, where many people still dream of the lifestyle that abundant energy provides.
And he said it is "hypocritical" for people to oppose projects like Gateway while enjoying the benefits of the fossil-fuel economy.