CALGARY — Customers on both sides of the Pacific have signed on to the Northern Gateway project, a controversial $5.5-billion undertaking that would help link oilsands crude to Asian markets, Enbridge Inc. said Wednesday.
But the Yinka Dene Alliance, which represents five First Nations the pipeline would traverse, continues to insist that no amount of industry support will change the fact that the project is “dead in the water.”
“Enbridge’s pipeline isn’t happening, period. It doesn’t matter who they get a deal with,” said chief Larry Nooski of the Nadleh Whut’en First Nation.
Calgary-based Enbridge (TSX:ENB) said it filed the so-called precedent agreements with the National Energy Board, which is in the midst of reviewing the project and is set to hold hearings in the new year.
“Northern Gateway is convinced of the project’s feasibility, that the facilities will be used at a reasonable level over their economic life and that the tolls are likely to be paid,” the company said in its filing.
Enbridge said shippers have fully subscribed to service on both a 525,000-barrel per day line from Alberta to Kitimat, B.C., as well as a smaller line that would bring imported condensates inland. Customers have the option to sign on to either a 15- or 20-year term, spokeswoman Gina Jordan said.
Enbridge is not identifying which Asian and Canadian companies have committed to use Northern Gateway, but Chinese refining giant Sinopec was one of 10 companies to contribute to the project’s $250-million pre-development costs.
“It looks like these are relatively firm agreements,” said FirstEnergy Capital analyst Steven Paget.
“It always helps to have commercial agreements going to the (NEB’s) Joint Review Panel process, but it certainly won’t change anything in terms of timing.”
“Of course, if the pipeline is not approved, nothing happens. But this is one of the steps toward moving the pipeline forward,” Paget said.
Enbridge has said it expects a decision from the NEB panel in 2013.
While the precedent agreements take some uncertainty out of the equation, Northern Gateway still faces considerable challenges.
Besides aboriginal groups, the project has been the target of fierce opposition from environmentalists and others who fear a leak on the pipeline itself, or from tankers along the coast, could harm the ecosystem.
Janet Holder, Enbridge’s executive vice-president of western access, called the shipper agreements “a major step forward” for the project, which she said would enable Canadian energy companies to fetch a better price for the crude they produce.
Currently, Alberta oilsands producers are limited to one export market: the United States, where the prospects for demand growth are anything but certain.
“Northern Gateway will link two of Canada’s most important competitive strengths: our tremendous petroleum reserves and our Pacific advantage — safe deepwater ports that are close to the growing markets of the Pacific Rim,” said Holder.
“The project has the potential to move Canada into receiving premium prices in the global energy marketplace, rather than the landlocked, one customer price-taker it is today.”
Shipper interest from Northern Gateway was never really in doubt, since oilsands producers are seeking out alternative markets for their ever-growing production, said energy consultant Doug Matthews.
“I would have thought companies would have lined up pretty quickly to have the opportunity for another market.”
“Enbridge has long served the industry as an oil shipper. They’ve got a pretty good reputation in the business, so I could see companies, shippers, would be keen to get further involved with Enbridge.”