Imagine a world where the Northern Gateway pipeline doesn't get built.
With the federal government's curiously tepid approval in hand, Enbridge Inc. sets to work trying to chip away at the dozens of conditions it must meet before it is allowed to fire up its trenching equipment.
First Nations opposed to the project dig in for lengthy court battles and noisy demonstrations, arguing that an oil sands pipeline threatens long-held rights and title to their lands and that they were inadequately consulted. Despite its unprecedented push to start over and gain trust, Enbridge fails to bring enough aboriginal leaders on side.
B.C. Premier Christy Clark scans her bitumen pipeline checklist – the environmental, safety, financial, consultative and financial conditions laid down two years ago – and finds boxes unticked. The project's final go-ahead gets pushed back again and again. The market moves on.
It's a nightmare scenario for Northern Gateway, as well as for the energy sector and Alberta and federal governments that have so much riding on it in terms of economic hopes and political capital.
It would be a major blow to Enbridge's reputation as a company that can get important work done for its customers and, in the short term, its earnings statement as it is forced to write off the hundreds of millions of dollars it has sunk into the years of planning, design and regulatory work.
Ugly for the company, sure, but not a disaster: Enbridge wants to build Northern Gateway; it does not need to build Northern Gateway. That's a crucial distinction.
Besides already operating the world's most extensive crude oil pipeline system as well as natural gas pipeline and distribution networks, it has $42-billion of new projects in the hopper that it expects to complete by 2017, $37-billion of which are commercially secured. It represents the largest capital spending plan in the company's history, and will help meet its target of 10- to 12-per-cent increases in annual earnings per share.
Northern Gateway is not included in that shopping list.
In a cogent report on Wednesday, in response to Ottawa's conditional approval of the $7.9-billion conduit to Kitimat. B.C., from Bruderheim, Alta., FirstEnergy Capital Corp. analyst Steven Paget put it into perspective.
Regardless of whether the contentious project gets built, Enbridge should outperform its peers in the stock market. In fact, Mr. Paget has never accounted for Northern Gateway in his financial outlook for Enbridge, citing the uncertainty.
"The company does not need Northern Gateway to go ahead to be worth owning at current prices," he said.
CIBC World Markets' Paul Lechem has a similar assessment: "All told, we see the federal government's approval largely as academic at this point, with B.C. provincial, environmental and First Nations challenges likely stalling further progress, potentially for years."
That leaves, well, a whole lot of projects proceeding with far less gnashing of teeth. Its $6.3-billion Light Oil Market Access plan will boost its capability to move crude from Western Canada and North Dakota's Bakken fields to the U.S. Midwest and beyond.
The $2.7-billion Eastern Access projects will get lighter-grade oil to Eastern Canada, partly through the recently approved Line 9 reversal between Sarnia, Ont., and Montreal.
The $5.2-billion Western Gulf Access pipelines, including a key Midwest link called Flanagan South, bolsters connections for Canadian heavy oil producers to the U.S. Gulf Coast.
The company is adding capacity with a $7.5-billion plan to replace its aging Line 3 pipeline to Superior, Wis., from Edmonton, which has operated at about half its design rate. Enbridge is also in the midst of a major build-out in regional pipelines in Alberta and North Dakota.
"It's about the network and it's about potential new investments, such as power transmission," Mr. Paget said.
Make no mistake, Northern Gateway would be a more than welcome addition for the company as the energy industry keeps clamouring to get its crude to lucrative Asian markets, and the project is the first hope.
But the real value in Enbridge remains its long-held franchise of moving oil around this continent and its much easier-to-accomplish plans to get more of the stuff to places within it.