Enbridge Inc. is expecting a green light Tuesday from the Harper government on its proposed Northern Gateway pipeline, but will still have to clear a series of hurdles, including signing up committed shippers for the project, if it gets the go-ahead from Ottawa.
And assuming it gets approval from Ottawa, Enbridge has just two weeks to file a report with the National Energy Board detailing what progress it is making in securing commercial support for the controversial $7.9-billion project.
A federal review laid out 209 conditions in December when it recommended that the federal government approve the project, with 113 of those that must be met before the Calgary-based pipeline company can break ground on pipeline construction. They include a requirement to win firm commitments from would-be shippers on the line, who would be taking some risk that the project could run into insurmountable local opposition.
Ottawa will announce its decision after markets close Tuesday, and is expected to approve the project while highlighting the need for Enbridge to meet conditions laid down by the review panel and the government of British Columbia, as well as to win more support from local populations, including First Nations.
The conditions require Enbridge to report back to the National Energy Board on virtually every aspect on its construction plan, its environmental protection efforts and its consultations with First Nations and other communities. But while voluminous, they are – for the most part – not seen as posing a serious obstacle to the company.
The bigger hurdles will come from Premier Christy Clark’s Liberal government, and from environmentalists and First Nations who vow to use every means at their disposal to block the project.
Enbridge’s Northern Gateway project will transport 525,000 barrels a day of diluted bitumen from the oil sands to a marine terminal in Kitimat, B.C. The Harper government has declared it to be a national priority that the Alberta-based oil industry gain access to Asian markets.
While Enbridge has yet to sign up shippers for Gateway, TransCanada Corp. does have producers and refiners who have made binding, long-term commitments to secure space on its two proposed oil projects: the Keystone XL line to the U.S. Gulf Coast and Energy East, which would carry 1.1-million barrels per day of western crude to eastern Canadian refineries and marine export terminals.
In one of its 209 conditions, the review panel – which was jointly run by the National Energy Board and the Canadian Environmental Assessment Agency – requires Enbridge to have at least 60 per cent of the pipeline capacity secured by long-term contracts at least six months before construction begins.
And it must report on its progress in fulfilling that condition by July 1, and then every six months thereafter.
Environmental lawyer Gavin Smith said the condition could prove challenging if shippers are unwilling to commit volumes of crude production to a project that still faces lengthy court battles and even civil disobedience campaigns. That is particularly true if the U.S. approves Keystone XL and Energy East appears to be heading toward approval, the lawyer from West Coast Environmental Law group said.
But University of Alberta energy economist Andrew Leach said shippers will likely be willing to book space on Northern Gateway, which will offer a route to the Pacific and world prices. If Enbridge can’t complete the project, the producers and refiners would then be free to find other options, he said.
Enbridge believes there is “strong recognition of the need for opening new markets for Canada’s oil resources by our partners and potential shippers,” company spokesman Ivan Giesbrecht said.
“Executing a shipping commitment will always be a material decision by a company based upon such things as regulatory approvals, alternatives, toll competitiveness, market flexibility, supply, and pipeline capacity – all of which are considered over the long term.”