Ottawa is expected to decide the fate of two major pipeline proposals in a test of the Trudeau government’s pledge to balance environmental concerns with economic interests in the energy sector.
The federal government is poised to decide late Tuesday afternoon whether to veto Enbridge Inc.’s contentious Northern Gateway line after a federal court quashed approval of the project earlier this year.
Meanwhile, the company is awaiting final approvals for its proposed Line 3 replacement project.
The plan involves replacing a 46-year-old pipeline between Edmonton and Superior, Wisc.
Unlike the $7.9-billion Gateway proposal, Enbridge has billed Line 3 as a maintenance project that would enable it to boost capacity on the 1,660-kilometre pipeline to 760,000 barrels a day. It has suffered a number of ruptures over the years and currently operates under pressure restrictions with about 390,000 barrels of capacity.
Upgrading the older line with new pipe could make it an easier project for the federal government to approve, given heightened public concerns about potential oil spills and building new pipelines through virgin territory, said AltaCorp. Capital Inc. analyst Dirk Lever. The Canadian portion of the project will cost $4.2-billion.
The U.S. segment will cost $2.6-billion (U.S.) and be handled by Enbridge’s U.S. affiliate.
“It would be like almost sucking and blowing if you said to them, ‘no, you can’t replace it and we’re going to hold your feet to the fire if you had a leak,’” he said Thursday.
“You can’t say to people, ‘you’ve got to run a safe pipeline’ and not let them do major work.”
Both verdicts are likely to be closely studied for signs of whether the federal government will approve Kinder Morgan Canada Inc.’s Trans Mountain expansion to Canada’s West Coast.
That project, a $6.8-billion (Canadian) plan to more than double the capacity of the 300,000-barrel-a-day system from Edmonton to Burnaby, B.C., is touted as key to expanding overseas markets for Alberta oil. However, it has drawn staunch opposition from some First Nations and municipal politicians in B.C.’s Lower Mainland.
Oil producers in Alberta have been plagued by tight export capacity on the country’s pipelines as new proposals face heightened regulatory scrutiny and opposition from environmentalists. It has contributed to depressed prices for the province’s extra-thick crude as producers struggle to bypass system rationing, known as apportionment.
A decision on the Trans Mountain project is due by mid-December. Mr. Lever said the expansion would provide an important outlet to markets beyond the United States, currently the No. 1 destination for Alberta oil, even if it is not imperative today.
“It’s pretty critical for that. Is it critical for the industry as a whole in order to just get product to market? Not today, but it will be later,” he said.
In the United States, president-elect Donald Trump has signalled his intention to approve the Keystone XL pipeline, reviving hopes for the $8-billion (U.S.) TransCanada Corp. project after it was rejected by President Obama.
Alberta’s NDP government has faced pressure since the U.S. election to review its environmental policies, reflecting fears that new regulations in the province will be out of step with the more hands-off approach favoured by the incoming administration.
The province has introduced a cap on carbon emissions in the oil sands and is set to implement an provincewide carbon tax next year.
Meanwhile, provincial finances have been bruised by the crash in oil prices, and industry layoffs number in the tens of thousands. Alberta Premier Rachel Notley told a Canada-U.K. session in Edmonton on Thursday that new pipelines are essential to the province’s economic well-being, but she has so far rejected calls to review or halt new climate policies.
“The short answer to that question is absolutely not. Our climate leadership plan is a made-in-Alberta plan,” she said.
Enbridge has said Line 3 could start up in the first quarter of 2019, although some analysts have said it could be later owing to regulatory delays.
With a file from Shawn McCarthy in Edmonton.Report Typo/Error