Erin O’Toole’s plan to revive Northern Gateway could run up against risk-averse oilpatch

Article content

CALGARY – Conservative Party leader Erin O’Toole hopes to revive the long-cancelled, West Coast-bound Northern Gateway pipeline if elected prime minister, but oil companies and pipeline giants are less keen to take risks on major new pipelines since the project was cancelled five years ago.

Article content

Twice this week, O’Toole said that if elected he would revive the Northern Gateway pipeline project in an effort to ship Canadian oil and provide economic partnerships for Indigenous groups along the pipeline’s path.

Prime Minister Justin Trudeau cancelled Calgary-based Enbridge Inc.’s Northern Gateway project in 2016 and implemented a ban on oil tankers along the northern stretch of British Columbia’s West Coast — effectively killing hopes of a building a replacement project.

Before its cancellation, Indigenous groups held a 33 per cent equity stake in the 525,000-barrels-per-day pipeline to the West Coast but the project was challenged by eight First Nations and four environmental groups at the Federal Court of Appeal, which overturned the project due to a lack of Aboriginal consultation.

Article content

Trudeau opted not to engage in further consultation at the time, in a move which terminated the project. Enbridge declined to comment on whether it would revive the Northern Gateway pipeline.

Now, five years later, the Conservative Party is looking to revive the project, driving a wedge between themselves and the Liberal Party, which promised this week to cap oilsands production.

“I would like to see intergenerational transfer of wealth and opportunity after generations of trauma-transfer,” O’Toole said at a campaign stop on Monday of the Northern Gateway project’s potential to provide income to First Nations.

But the Conservative Party’s hopes of reviving the long-cancelled, West Coast-bound Northern Gateway pipeline could stall in Calgary’s newly risk-averse oilpatch, which has watched multiple proposed pipeline projects cancelled in recent years.

Article content

“We’ve created so much risk in the system that we can’t expect private companies to develop pipelines on their own. They need government backing of some kind,” said Richard Masson, chief commercial officer of Fractal Systems, a technology company involved in oilsands upgrading.

Masson noted that both the Trans Mountain pipeline expansion and the Keystone XL project required government backing before construction started on either project.

The federal government purchased the Trans Mountain pipeline and expansion project from Houston-based Kinder Morgan Inc. after the company signalled it would abandon the project given opposition from the B.C. government. Meanwhile, Alberta’s government backed the Keystone XL pipeline that was cancelled in Jan. 2021 on U.S. President Joe Biden’s first day in office.

Article content

“You would have to have federal leadership or a lot of federal backstopping to see Northern Gateway developed, just like Alberta had to step in on Keystone XL,” said Masson, who is also an executive fellow at the University of Calgary School of Public Policy.

We’ve created so much risk in the system that we can’t expect private companies to develop pipelines on their own

Richard Masson

If Northern Gateway were revived, the risk of its subsequent cancellation would likely need to be spread out between Enbridge and the oil companies interested in shipping crude on the line, said Vicki Knott, CEO and co-founder of Calgary-based Crux OCM, which provides control room software systems for industrial companies and pipelines.

“I would think that the structure of the financial commitments up front would be very different than what they used to be 10 years ago,” she said. “The risk is just too high with cancelled pipelines over and over again. It’s been a failed strategy for them.”

Article content

If the risks were spread out, there continues to be a need in the oilpatch for additional export pipelines.

Reports from IHS Markit show that Enbridge Inc.’s Line 3 pipeline and the federally owned Trans Mountain expansion could be full in the next six years, providing a market opportunity for another oil export pipeline project to be built out of Western Canada.

“I would assume Enbridge would still be game to try,” Knott said, adding, “Enbridge makes money on their rate base, so the more pipelines they have, the more money they make.”

With additional reporting from The Canadian Press

• Email: [email protected] | Twitter: geoffreymorgan

_____________________________________________________________

 If you liked this story, sign up for more in the FP Energy newsletter.

_____________________________________________________________