By Paul Vieira and Chester Dawson
The push to expand pipeline links from Alberta's landlocked oil
sands to Canada's Pacific coast got a boost Tuesday when the
federal government approved Enbridge Inc.'s Northern Gateway
project.
Enbridge faces other hurdles before it can start construction on
the 7.9 billion Canadian dollar (US$7.3 billion) project. Like
TransCanada Corp.'s proposed Keystone XL pipeline in the U.S.,
Northern Gateway has come up against opposition, from politicians
in British Columbia to environmentalists and aboriginal groups who
have vowed to stop the project.
In approving Gateway, the federal cabinet said Enbridge must
satisfy the 209 conditions set out by Canada's main energy
regulator when it approved the project in December after 18 months
of highly-charged public hearings. Enbridge "clearly has more work
to do in order to fulfill the public commitment it has made to
engage with aboriginal groups and local communities along the
route," Natural Resources Minister Greg Rickford said in a written
statement.
Northern Gateway would carry 525,000 barrels a day of crude oil
from near Edmonton, Alberta, to a marine terminal at Kitimat,
British Columbia, where the oil would be loaded onto tankers bound
for Asia.
With the U.S. increasingly energy self-sufficient, building
pipeline capacity to get crude to new markets has become a priority
for Canada, which currently sends almost all of its crude exports
to the U.S. Keystone XL, which has yet to get a green light from
the White House nearly six years after it was proposed, has added
to the urgency around tapping new markets.
Failure to win approval for more pipelines could lead to delays
for planned oil-sands projects and lower prices for oil from
Alberta, which already trades at a discount to other North American
crudes. Canadian Finance Minister Joe Oliver this month warned that
Canada's failure to find new energy markets would carry stark
consequences for its economy. The natural-resources sector accounts
for 20% of Canada's economic output, according to the
government.
Enbridge has spent C$400 million of the estimated cost to
prepare and promote Gateway and has received firm commitments from
major oil-sands producers, including domestic companies Suncor
Energy Inc., Cenovus Energy Inc. and Husky Energy Inc., as well as
the Canadian units of China's Cnooc Ltd. and France's Total SA.
Many of those shippers have hedged their bets by also making
commitments to other pipeline projects, including a proposal backed
by Kinder Morgan Energy Partners LP to nearly triple the capacity
of its Trans Mountain pipeline, which already carries Alberta crude
to the Pacific coast.
People in the industry say that not all those pipelines are
needed today, but that their capacity will be spoken for over the
next decade as oil-sands production grows.
Gateway has polarized Alberta neighbor British Columbia, with
opposition strongest among aboriginal groups and environmentalists.
The provincial government had demanded environmental guarantees and
compensation before construction permits can be issued.
Many of the native tribes that exercise control over land and
coastal waters along the proposed route through British Columbia
have signaled that they will oppose the project, citing
environmental risks and what they say is their lack of influence on
a pipeline that will run through land they have lived on for
centuries.
"It traverses some of the most rugged terrain in North America
and crosses hundreds of streams and river that represent the
spawning grounds for B.C.'s wild salmon," said Chief Stewart
Phillip of the Union of British Columbia Indian Chiefs. "The
specter of a tanker spill along the north coast is something that
people are not prepared to risk."
The issue also has threatened to complicate discussions between
aboriginal groups and provincial government and industry groups
seeking to build pipelines to carry natural gas from inland to
proposed liquefied-natural-gas terminals on the Pacific coast. The
British Columbia government and First Nations have been more
receptive to those natural-gas projects.
Alistair MacDonald contributed to this article.
Write to Paul Vieira at paul.vieira@wsj.com and Chester Dawson
at chester.dawson@wsj.com