Why Northern Gateway is probably dead
With climbing costs as well as aboriginal and environmental opposition, the future of the pipeline is up in the air. Justine Hunter and Carrie Tait report
Darryl Dyck/The Canadian Press
Along the proposed route of the Northern Gateway pipeline, nothing is moving.
There is no clearing, mowing, grading, trenching, drilling, boring or blasting. Industry analysts have almost stopped asking questions because interested parties – contractors, engineering firms and others – have moved on to more realistic prospects. Meanwhile, the estimated cost of the project has climbed to $7.9-billion, while not one of the 209 conditions attached to its environmental certificate has been checked off as complete.
After spending half a billion dollars in an effort to win the right to build a 1,100-kilometre pipeline to carry Alberta oil-sands bitumen to tidewater, Enbridge Inc. is understandably reluctant to tell its shareholders that the effort has been for naught. In fact, the company insists that the project is not dead.
But the commitment from the federal Liberals to impose an oil-tanker ban off of British Columbia's north coast, in addition to promised tougher environmental assessments, already provides a draft of the project's obituary.
Senior players in western Canada's oil patch quietly wrote Northern Gateway off some time ago, but they are now comfortable publicly dismissing it.
Steve Williams, Suncor Energy Inc.'s chief executive officer, said Northern Gateway is "not executable" in its current form, despite winning federal approval. More work must be done with First Nations, he said.
TransCanada Corp.'s Energy East proposal looks more promising, Mr. Williams added. "It is a complicated and long pipeline, but I think you've got to say that's probably where betting money would be at the moment," he said.
Investors long ago dropped Northern Gateway from their calculations of Enbridge's financial future, and the oil and gas industry quietly started looking for new prospects three years ago, said Laura Lau, a senior vice-president at Brompton Funds in Toronto. Her funds own Enbridge shares.
"They probably see a higher probability in Energy East," Ms. Lau said. "A lot of the pipe is in the ground. And it is made-in-Canada. It is almost like a nation-building exercise."
Enbridge has until the end of 2016 to get shovels in the ground. But the political landscape has changed dramatically.
The B.C. Liberal government has been cold to the project amid public opposition. There are nine court challenges from First Nations and environmentalists before the Federal Court of Appeal. However, Premier Christy Clark always maintained an exit strategy that kept some shred of optimism afloat: If Ottawa and Alberta played it right, B.C. could be won over. But that now looks unlikely.
In May, Alberta voters elected Rachel Notley's New Democratic Party. Ms. Notley vowed during the campaign to withdraw provincial support of the Northern Gateway pipeline. Her government has tried to walk the commitment back in recent months, saying the project is simply not worth an investment of political capital.
Then in October, voters ousted the federal Conservative government, which had deemed Northern Gateway to be in "the national interest." In its place is a Liberal government that is showing little love for the project. The Liberals have promised to subject existing oil-sands pipeline proposals to tougher environmental assessments. Enbridge won't have to start from the beginning, but it will not have an easy path to the cabinet's final decision.
In the meantime, Kinder Morgan's Trans Mountain pipeline expansion bid and the Energy East project are absorbing the attention of politicians and bureaucrats looking for a solution to getting Alberta oil to tidewater.
Enbridge officials say they remain busy with aboriginal consultation along the pipeline route and have filed progress reports on 15 of the 209 conditions with the National Energy Board (NEB). Ivan Giesbrecht, a spokesman for Northern Gateway, said more measurable progress will be made once a firm date for construction is set.
But there is no point building the pipeline to the West Coast if the product can't get out of port.
Prime Minister Justin Trudeau has directed Transport Minister Marc Garneau to formalize an oil-tanker ban on B.C.'s north coast. The Northern Gateway route would bring Alberta oil to the northern coastal community of Kitimat, B.C., to be loaded onto supertankers bound for overseas markets. If the ban is imposed, that route is bound for a dead end.
DARRYL DYCK/The Canadian Press
Mr. Giesbrecht said the company will be consulting its lawyers to see if a tanker ban can be overturned. "We have 28-plus aboriginal equity partners who have an inescapable economic right to be consulted by the government on how a tanker moratorium would impact them. We are very much looking forward to chat with the federal government."
An expert in maritime law warns that it would not be easy to implement a tanker ban.
Robert Hage, a senior fellow at the University of Ottawa's Graduate School of Public and International Affairs, said a ban would probably include Dixon Entrance, Hecate Strait and Queen Charlotte Sound. That is "not encouraging" for Enbridge, he said, but a legislated ban would probably raise the ire of the United States, while a less contentious "mariner's notice" would not have the force of law.
A better approach would be to hit the pause button on the promised ban, he said, and first take a broader look at how Canada can get its energy to market – a discussion that must include aboriginal Canadians.
One of the leading opponents of Northern Gateway is Chief Councillor Ellis Ross of the Haisla Nation. Although Enbridge says it is making progress with aboriginal communities along the route, the Haisla have slammed the door shut in their Kitimat-area territory.
However, Mr. Ross is not ready to declare the war over. "I am sure they can deliver the ban, but I'm skeptical about the timeline around that – everyone celebrates too early," he said.
Mr. Garneau did not respond to requests for an interview. His staff said he needs more time to learn the file before addressing future plans.
Gaétan Caron, who chaired the NEB for seven years and spent 35 years at the organization before retiring last spring, believes that Northern Gateway still has a chance. Ironically, it is First Nations, which have led the opposition in B.C., that hold the power to revive it.
"The journey toward reconciliation with indigenous people of Canada is a long one and a difficult one – and a worthwhile one," Mr. Caron said. Northern Gateway could be a small part of the reconciliation: "That would depend if there is a change, correspondingly and simultaneously, in terms of the relationship between Enbridge and indigenous people."
For now, he said, he is not ready to declare the project dead. "Until I read in the paper … that Enbridge has abandoned its plan to build Northern Gateway, it is an open possibility. Not an easy one, but it is one."
With a report from Jeff Lewis in Calgary