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northern gateway

John Carruthers, president of Northen GatewayJOHN LEHMANN/The Globe and Mail

Enbridge Inc. has rejected the national energy regulator's demand to have almost $1-billion in liability coverage set aside for the Northern Gateway project, and is calling for the creation of an industry-bankrolled fund that would help pay for cleanup in the case of "a catastrophic oil release" from a Canadian pipeline.

As the final arguments for and against the controversial pipeline project are heard in Terrace, B.C., this week and next, Enbridge executive John Carruthers said an industry fund could be the best way to ensure pipeline operators have enough money to cover "a highly unlikely but higher-cost spill."

With cleanup costs that can climb to hundreds of millions of dollars for large spills, rising insurance and liability costs are a growing issue for an industry already under fire by environmental groups and facing close regulatory scrutiny.

The environmental protection fund, which would be built from a per-barrel surcharge on nationally regulated pipelines, could help boost public confidence, Enbridge argues. The industry has been dealing with a series of spills and protests against growing greenhouse gas emissions from Alberta's oil sands.

"Rather than each company having excess funds sitting available in the case of a very low likelihood event – which is an inefficient costly use of resources – a national industry fund is one way of giving the public confidence the funds are available," Mr. Carruthers said in an e-mail.

Mr. Carruthers is president of Enbridge's Northern Gateway Pipelines Inc.

He said the polluter-pays principle should still apply, but "the national fund would cover costs associated with a catastrophic oil release that exceed the funds available from the pipeline company."

Mr. Carruthers said the fund could be similar to Canada's little-known National Ship-source Oil Pollution Fund, an entity created to help pay for oil pollution damage caused by a ship spill. The fund was financed by a levy collected between 1972 and 1976, and in 2009 could pay a maximum of $154-million for one oil spill. If more funding is needed, Ottawa has the power to impose a levy per metric tonne of "contributing oil" imported or exported from Canada on ships.

By the end of this year, the National Energy Board's joint review panel will make its recommendation on the Northern Gateway project to the Harper government. But even before making a recommendation one way or the other, the board has laid out a number of potential conditions that must be met. Among the 199 conditions are stipulations that the project carry $950-million in cash and insurance for the costs of clean-up, remediation, and other damages in the event of a spill.

When asked about this requirement, Mr. Carruthers did not specifically refer to the almost $1-billion condition. He reiterated that Northern Gateway has committed to being responsible for the costs of an oil spill from the pipeline or marine terminal, and has estimated the maximum cost of an on-land pipeline spill would be $200-million. The company's commitment is for $250-million in insurance, he said, and the company "would also have available cash flow and the ability to recover costs in tolls for amounts over that."

At the first day of the final Northern Gateway oral-arguments hearing, the joint review panel heard from Northern Gateway Pipelines lawyer Richard Neufeld, who said Canadians could face "economic catastrophe" if the country continues to rely almost solely on the U.S. and that export market stops taking oil from Canada.

Mr. Neufeld also shot back at critics, particularly environmental groups, who said Enbridge hasn't provided enough information about the project.

"It's almost as if some of these organizations would have you believe if only Northern Gateway had supplied more environmental information, they could have supported this pipeline," he said Monday.

"No amount of additional environmental information is going to persuade Forest Ethics, the Natural Resources Defence Council or any other member of the so-called tar sands campaign to support the pipeline."

The joint review panel also heard from the Alexander First Nation, a band located west of Edmonton – that unlike most B.C. aboriginal groups, supports the project – and the Coastal First Nation, an alliance against the project, among others.