Blow for oil groups over Canada pipe plan

Oil companies’ hopes of being able to export from the west coast of Canada to Asian markets suffered a blow on Friday, when the government of British Columbia said it would oppose the construction of a critical pipeline unless there was a greater ability to respond to a spill.

Terry Lake, British Columbia’s environment minister, said the province’s questions about the proposed Northern Gateway pipeline “were not satisfactorily answered” during hearings of a review panel that will make a recommendation on the project to Canada’s federal government.

He added: “Our government does not believe that a certificate [to build the pipeline] should be granted before these important questions are answered.”

John Carruthers, president of the Northern Gateway project for Enbridge, the Calgary-based pipeline company, said he still expected the panel to advise in favour of the project on schedule at the end of the year.

“We’ve found that when we’ve been able to sit down with people and discuss the issues, we’ve been able to reach agreement,” he said.

Northern Gateway is intended to carry 525,000 barrels per day of diluted bitumen – heavy oil mixed with lighter liquids so it will flow – about 730 miles from the oil sands of Alberta to a terminal at Kitimat on the coast of British Columbia, where it could be loaded to tankers for sale anywhere in the world.

The pipeline is a strategic priority for producers in the oil sands, which want to reduce their dependence on the US market.

A shortage of transport capacity for carrying oil out of Alberta has depressed the price of Canadian oil, and threatens to put a brake on investment in the oil sands.

TransCanada’s proposed Keystone XL pipeline from Alberta to southern Nebraska in the US, which would make it possible for increased volumes of heavy oil to reach refineries in Texas, has become a lightning rod for environmental campaigners concerned about the effect of oil sands development on carbon dioxide emissions. The administration of US President Barack Obama has been dragging its feet over a decision on the project.

However, Northern Gateway also faces difficulties, because of the need to cross British Columbia to reach the sea.

The province argued in its 56-page submission to the review panel that “it is not clear from the evidence that Northern Gateway will in fact be able to respond effectively to spills either from the pipeline itself, or from tankers transporting diluted bitumen from the proposed Kitimat terminal”.

Mr Carruthers said he believed British Columbia and Enbridge were united in wanting a safe pipeline, and the company had already proposed “world-class” standards.

“This has been the most scrutinised project in the history of Canadian infrastructure,” he said. “We have spent about half a billion dollars on environmental and engineering studies.”

He added that it was still realistic to think that the pipeline could be in operation by 2018, although there were many reasons why that timetable could slip.

Another proposed westward route from the oil sands, Kinder Morgan’s planned expansion of the existing Trans Mountain pipeline to Vancouver, is at an earlier stage of development.

British Columbia said it and other projects would be judged “on their merits”, and its opposition to the present form of the Northern Gateway plan “is not a rejection of heavy-oil projects” in general.

Finding an alternative market in Asia for Alberta’s oil would have a symbolic impact in demonstrating that production in oil sands would continue to grow even without Keystone XL.