The Northern Gateway Pipeline Gets Green Light from Review Panel 

Without a doubt the Western Canadian energy patch has faced its challenges over the past few years. With no access to international markets and severely constrained transportation infrastructure into the United States, Canadian crude oil and natural gas trades at a substantial discount to international prices.

On Thursday, a key milestone was passed with respect to connecting Canada’s Oil Sands with buyers in Asian. The Joint Panel responsible for reviewing the Northern Gateway Project proposal issued their final report and recommended to the federal government that the pipeline be approved, subject to 209 specific conditions, which include the pipeline developer having $950 million in liability coverage and “unfettered access” to $100 million within 10 business days of a large spill. The ultimate fate of the project is now in the hands of the federal government which has 180 days to make their (yay or nay) decision. 

At this point, it seems almost certain that the federal government will approve the Northern Gateway project with the allowed time frame. The economic argument is virtually undebatable. 98% of Canadian crude exports are sent to the United States who may not be a reliable customer over the next decade. Technological advancement has allowed our only energy customer to access unconventional oil and gas reserves which were previously uneconomic and the International Energy Agency expects the U.S. to be energy independent by 2020. Canadian companies have also had serious difficulties building the much needed infrastructure which is required to access U.S. markets. KeyStone XL, which would connect Canadian oil reserves to refineries in Texas, has faced unending regulatory delay and we feel little reason to be confident that a decision will be made in the near term. The federal government claims to understand the importance of diversifying Canada’s energy exports and have been supporters of Northern Gateway since the project was first proposed.

Even with final approval from the federal government almost a certainty, we don’t anticipate that the contentious battles over the project with end…rather they will likely intensify. The environmental movement will continue to fight against the Northern Gateway and any Oil Sands development at all costs. But another potential battle could be against British Columbia’s provincial government who have vowed to support the project only if five specific conditions are met. These conditions include an environmental review, world-leading response and prevention systems, appropriation liabilities and responsibilities in the event of a spill, and addressing Aboriginal and First Nations rights. However, these four conditions, at least on paper, are unlikely to be sticking points. It is the fifth condition, that British Columbia share in the economic benefits of the pipeline, which may cause a little more political entanglement. BC Premier Christy Clark has vowed to stop the pipeline if all five of these conditions are not met, but it is uncertain if she has the power as approval of the project appears, at least technically, to be a federal decision.

Regardless of the battles that ensue, it is highly likely that most of the players will eventually reach their consensus and the project will proceed largely as planned. The importance and potential benefits of the pipeline seem too important to ignore and both the federal and BC provincial governments have expressed their commitment to resource development. Accessing international markets would be a monumental step for the Canadian energy sector and would undoubtable open up a wide range of investment opportunities for Canadian investors.  

Regards,

Jenny McConnell,

Administrative Assistant/Office Manager