News
Enbridge Gateway challenged on economics, rejected by natives
Dec 16, 2010, Vancouver Sun (Read article on originating site site)
VANCOUVER - Enbridge Inc.‘s proposed Northern Gateway pipeline hit headwinds from two directions today with a new report questioning its business case and the formal rejection by five first nations of the company’s offer of equity participation in the project.
Billed as a 1,100-kilometre, $5.5-billion, pipeline designed to fill increasing demands for oil in Asia, the Gateway project is currently the subject of a Joint Review Panel of the National Energy Board and federal Environmental Assessment Agency to determine if the project is environmentally sound, whether it is needed and in the interest of Canadians.
However, the Pembina Institute, a think tank on sustainable energy issues, argues that Alberta’s oilsands likely won’t produce enough bitumen oil to fill Gateway’s 525,000-barrel-per-day capacity as well as TransCanada-pipeline’s Keystone XL expansion project to the United States.
Pembina also argues that Enbridge, in its project application to the Joint Review Panel, hasn’t shown that it has the long-term commitments of shippers that will use the pipeline to justify its construction.
“What we’re saying is that there is simply not enough information for the federal government to fairly consider Enbridge’s application,” Nathan Lemphers, a Pembina Institute policy analyst said in an interview.
“First of all, there is unproven demand,” Lemphers added. “In an unprecedented move, there are no long-term shipper commitments in place in the application.”
And with other oil pipeline projects on the books designed to export Canadian oilsands bitumen, Lemphers argues “there is an incredible amount of excess capacity in the export pipeline system.”
The attack on Enbridge’s business case represents an expansion of the opposition of the project which, to date, has focused on the environmental risks from a breach of the pipeline or spill from an oil tanker run aground.
Pembina summarizes its argument in a report under the title “Pipeline to Nowhere.”
Enbridge, however, fired back with a statement in which it argues that at this stage of the application it doesn’t have to show binding commitments from shippers that want to use the pipeline.
“There is no legal or policy requirement to file evidence of binding transportation service contracts at this stage of project development,” spokeswoman Gina Jordan said in the statement.
In its application, Enbridge noted that uncertainty over whether the project would receive regulatory approval was a barrier for shippers considering commitments to the line.
Enbridge did, however, line up 10 funding participants, which it has only identified as Canadian oil producers and “Asian market-area-interests,” that have contributed a total of $100 million to help pick up some of the costs of the regulatory process.
In exchange, the funding participants earn rights to portions of the pipeline’s capacity at preferential toll rates for moving oil.
“Binding transportation agreements will be in place prior to financing and the commencement of construction,” Jordan said.
Jordan added that Enbridge’s application shows growth in demand for oil from Asian energy markets indicate Canada could have an opportunity to supply up to 1.75 million barrels a day of oil to the region.
In its application, Enbridge notes that while Canadian production estimates vary considerably from year to year based on market conditions, “Canadian oil production growth will be driven by growing market demand.”
On the environmental front, a group of five first-nations under the name the Yinka Dena Alliance, publicly rejected Enbridge’s offer of equity participation in the Gateway pipeline.
Enbridge, at the end of November, said it had set aside 10 per cent of the project’s equity for Aboriginal ownership.
“We want no part of Enbridge’s project and their offers are worthless to us when compared to the importance of keeping our lands, rivers and the coast free of crude oil spills,” said Chief Larry Nooski of the Nadleh Whut’en First Nation, one of the Yinka Dene Alliance’s members.
“What Enbridge is offering is the destruction of our lands to build their project, and the risk of oil spills for decades to come, which could hurt everyone’s kids and grandkids,” he added.
Jordan, in her statement, said it was premature for the Yinka Dene group to reject the offer, which hasn’t formally been presented to them.
“We are currently meeting with the first nations to discuss our equity offering and we are very pleased that a number of [them] have executed commercial agreements in the past month,” she added, but did not identify the groups.
“Northern Gateway wants to ensure maximum participation of aboriginal communities in meaningful economic opportunities that arise from the project, including equity ownership, direct procurement, employment and sole-sourcing,” Jordan said.
Read more: http://www.vancouversun.com/business/Enbridge+Gateway+challenged+economics+rejected+natives/3990209/story.html#ixzz18U9JOHgm