ALF V1

The benefits to the oil industry of Enbridge Inc.'s proposed Northern Gateway pipeline may be exaggerated and its costs to the economy and environment underestimated, hearings into the project heard Tuesday.

The $6-billion pipeline has been touted as a way to link burgeoning production from Alberta's oilsands to growing markets in Asia, which would allow Canadian producers to improve profits by reaping higher prices for crude overseas.

But a lawyer for the Haisla First Nation, which claims much of the land the pipeline would travel though, said projections of nearly $1.5 billion a year in increased revenue by 2018 are inflated.

Hana Boye said the estimate Enbridge (TSX:ENB) is presenting at the National Energy Board hearings was developed with figures from the Canadian Association of Petroleum Producers which suggest oil supply in Western Canada will grow by 6.5 per cent a year between 2011 and 2020.

The proposed route for Enbridge's Northern Gateway Pipeline is from just north of Edmonton Alberta to Kitimat on the West Coast of B.C. EnbridgeThe proposed route for Enbridge's Northern Gateway Pipeline is from just north of Edmonton Alberta to Kitimat on the West Coast of B.C. Enbridge

That's different than what Enbridge is telling its own investors and shareholders, said Boye. The company's own estimate is 4.4 per cent growth — a difference of 500,000 barrels a day by 2020 that leads to a corresponding drop in revenues earned by producers.

"Have you given a different supply forecast to your shareholders than that provided to the panel?" Boye asked Enbridge's Gateway manager John Carruthers on Tuesday.

Carruthers acknowledged that different figures have been used at different times. Estimates can vary depending on assumptions of what the mix of varying crudes would be, he said.

"There would be times when we would see differences."

But the variances aren't big enough to change the project's economics, Carruthers said.

"The minor changes over time don't change the project need."

Boye added that the project could discourage the upgrading of oilsands bitumen in Alberta and that its cost to the environment hasn't been fully evaluated.

She pressed Enbridge over the use of diluent — lightweight solvents mixed with bitumen or other heavy crudes to make them flow through a pipe. Although the mix varies, roughly one-third of what would flow through the Gateway line would be diluent. The Gateway project includes a second pipeline that would import diluent from the B.C. coast back to Alberta.

Boye suggested the cost of that diluent has not been factored into calculations of producer benefit.

Ignoring the cost of diluent exaggerates the case for shipping raw bitumen outside Alberta for upgrading or refining, said Robyn Allan, an analyst for the Alberta Federation of Labour, who is advising the Haisla.

"There is no economic analysis ... that's been supplied to the hearings (of the impact) to the Canadian economy when we import condensate instead of upgrading in Alberta," she said outside the hearing.

"Importing condensate instead of upgrading (bitumen) is hollowing out the sector."

Claims analysis ignored side effects

Boye also questioned environmental economist Mark Anielski about his dollar-value calculation of the project's environmental impact. She pointed out that his analysis only included the 50-metre pipeline right of way and ignored possible effects outside that corridor.

Anielski responded those effects could exist, but there's no credible method of putting a monetary value on them.

"This kind of information is not available," he said. "To speculate would be unprofessional of me."

Anielski also acknowledged his report didn't put a value on a wide array of ecological effects from forests that would be disturbed by the pipeline — everything from erosion control to genetic diversity to pollination.

Enbridge has promised to plant a tree for every one cut down for the pipeline right-of-way, he said. The company is also working with the Nature Conservancy to protect land that would offset areas disturbed by the project.

The hearings are expected to continue in Edmonton throughout the week.

The Canadian Press, Tuesday Sept 18 2012

The benefits to the oil industry of Enbridge Inc.'s proposed Northern Gateway pipeline may be exaggerated and its costs to the economy and environment underestimated, hearings into the project have been told.

The $6-billion pipeline project has been touted as a way to link burgeoning production from Alberta's oil sands to growing markets in Asia, which would allow Canadian producers to improve profits by reaping higher prices for crude overseas.

But a lawyer for the Haisla First Nation, which claims much of the land through which the pipeline would travel, said on Tuesday that projections of nearly $1.5-billion a year in increased revenue by 2018 are inflated.

Hana Boye said the estimate Enbridge is presenting at the National Energy Board hearings was developed with figures from the Canadian Association of Petroleum Producers that suggest oil supply in Western Canada will grow by 6.5 per cent per year between 2011 and 2020.

That's different than what Enbridge is telling its investors, Ms. Boye said. The company's own estimate is 4.4 per cent growth – a difference of 500,000 barrels a day by 2020 that would lead to a corresponding drop in revenues earned by producers.

"Have you given a different supply forecast to your shareholders than that provided to the panel?" Ms. Boye asked Enbridge's Gateway manager, John Carruthers, on Tuesday.

Mr. Carruthers acknowledged that different figures have been used at different times. Estimates can vary depending on assumptions of what the mix of varying crudes would be, he said.

"There would be times when we would see differences."

But the variances aren't big enough to change the project's economics, Mr. Carruthers said.

"The minor changes over time don't change the project need."

Ms. Boye added that the project could discourage the upgrading of oil sands bitumen in Alberta and that its cost to the environment hasn't been fully evaluated.

She pressed Enbridge over the use of diluent – lightweight solvents mixed with bitumen or other heavy crudes to make them flow through a pipe. Although the mix varies, about one-third of what would flow through the Gateway line would be diluent. The Gateway project includes a second pipeline that would bring diluent from the B.C. coast to Alberta. Ms. Boye suggested the cost of that diluent has not been factored into calculations of producer benefit.

Ignoring the cost of diluent exaggerates the case for shipping raw bitumen outside Alberta for upgrading or refining, said Robyn Allan, an analyst for the Alberta Federation of Labour who is advising the Haisla.

"There is no economic analysis ... that's been supplied to the hearings [of the impact] to the Canadian economy when we import condensate instead of upgrading in Alberta," she said outside the hearing.

Ms. Boye also questioned environmental economist Mark Anielski about his dollar-value calculation of the project's environmental impact. She pointed out that his analysis included only the 50-metre pipeline right of way and ignored possible effects outside that corridor.

Mr. Anielski responded that those effects could exist, but there's no credible method of putting a monetary value on them. He also acknowledged his report didn't put a value on a wide array of ecological effects from forests that would be disturbed by the pipeline – everything from erosion control to genetic diversity to pollination.

The Canadian Press, Tuesday Sept 18 2012
Byline: Bob Weber

When Prime Minister Stephen Harper declared this summer the proposed Northern Gateway pipeline is "in the vital interest" of Canada, critics could be forgiven for suspecting the fix was in, that the public hearings reviewing the project were nothing more than a formality.

However, based on the hearings so far in Edmonton it would be unfair to dismiss the process as a rubber stamp. Conducted by a joint review panel from the National Energy Board and the Canadian Environmental Assessment Agency, the sessions have been a thorough, at times painstakingly so, dissection of the $6-billion project that would pump 525,000 barrels a day of Alberta's bitumen to the West Coast port of Kitimat for shipment by tanker to Asia.

The Edmonton portion of the hearings is focused on the economic impact of the project and has so far sat for five days with 10 more days on the agenda beginning next Monday, allowing a list of critics and supporters of the project to cross-examine Enbridge officials in minute detail over company estimates that the pipeline would boost Canada's gross domestic product by $312 billion over 25 years.

The hearings not only present critics with an opportunity to grill Enbridge officials, they also give groups such as the Alberta Federation of Labour a platform to present their own arguments that by shipping raw bitumen offshore, the pipeline represents a loss of refining jobs in Alberta.

The hearings are giving us not just Enbridge's argument for the pipeline but the critics' counter-arguments. The joint review panel is hearing from every conceivable corner in this debate before submitting its final report at the end of 2013, not that any actual debate has broken out on the floor of the hearings. Because the joint review panel is a quasi-judicial body with the power to swear in witnesses, it strives to maintain a decorum more befitting a court.

What the panel and the public are therefore seeing is a cold, bloodless look at the pros and cons of the most contentious energy project in the country.

Emotions might run a little higher in October and November when the hearings move to Prince Rupert and Prince George to examine the much more hot-button issues of pipeline safety, spill response and the effect of a spill on the coastal environment.

If Enbridge officials are feeling frustration with the pressure being applied by pipeline critics, they really have no one to blame but themselves. Enbridge badly tarnished its own reputation by allowing more than three million litres of oil to spill into Michigan's Kalamazoo River in 2010, opening itself up to condemnation by the U.S. government that likened company officials to the bungling Keystone Kops of silent movie fame.

Given the emotions the 1,200-kilometre project is stirring on both sides of the debate (and both sides of the Alberta-B.C. border), we need to judge this project calmly and coolly. That's what the joint review panel is offering us: a dispassionate examination of whether the Northern Gateway pipeline is indeed in the "vital interest" of Canada.

The Edmonton Journal, Wednesday Sept 12 2012

Listen to the first segment of Part 3 of CBC's "As It Happens" for Tuesday, September 4th titled "Northern Gateway Hearings. The Alberta Federation of Labour says the Enbridge pipeline project will actually eliminate Canadian jobs":

http://www.cbc.ca/asithappens/episode/2012/09/04/the‐tuesday‐edition‐45/html

The Alberta Federation of Labour has two main criticisms of the Northern Gateway pipeline: (1) Canadian jobs would be created if the crude bitumen was refined in Canada and then exported rather than being exported directly; and (2) The pipeline will reduce the "Asian" premium, which means a higher price of oil in Canada and job loss due to the higher processing costs for Canadian refineries.

In about 200 words carefully explain why the creation of the Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries. Be sure to include proper references to your background material.

According to Gil McGowan (President of Alberta Federation of Labor), the creation of Northern Gateway pipeline will raise the price of crude oil for Canadian refineries. Oil refineries take crude oil as the raw material for production and convert it into consumable products like gasoline. Currently, the oil suppliers for Canadian refineries are primarily domestic, and the buyers/consumers of their refined products are primarily domestic as well.

With the pipeline in place, the expansion of Canadian crude oil industry to a world market would bid up the domestic price of crude oil to meet the world price (narrowing the gap between the domestic and the world price). This will be so as the result of a much higher demand from a worldwide refinery industry/oil market, particularly with access to the ones in Asia and West coast US. Mr. McGowan mentioned that the Saudi Arabia (currently the main oil supplier to the Asian market) when facing the Canadian entering their Asian oil market could lower their oil price to keep their market share. Thus, it would result in a reduced "Asian Premium". The "lowered" oil price in Asia market/world market would then still be higher than the current Canadian domestic price of crude oil because of the high demand. This would encourage Canadian crude oil export as long as it allows a higher margin of profit than selling the oil domestically. The potential shrinking supply of crude oil domestically would cause the domestic oil price to rise. In addition, the Canadian refineries' bargaining power would be reduced as the Canadian crude oil industry is open to the world market which would probably be reflected on an increase of price of crude oil as well.

Happy Trades Blog, September 10, 2012

Explanation of why the creation of the Gateway pipeline from Alberta to Kitimat BC will raise the price of crude oil for Canadian refineries.

Segment III titled, "Northern Gateway Hearings. The Alberta Federation of Labour says the Enbridge pipeline project will actually eliminate Canadian jobs"

http://www.cbc.ca/asithappens/episode/2012/09/04/the-tuesday-edition-45.htlm

It is true that the creation of the northern gateway pipeline will rise the crude oil price for the Canadian refineries. Despite the fact that Enridge alleged that there are thousands of new jobs created from the pipeline project, this economic benefit is deemed as insufficient to outweigh the enormous job losses from the refinery sector (as mentioned by Gil McGowen, president of Alberta Federation of Labour Union).

According to an economist from the CBC radio, the reason behind such detrimental impact to the refinery industry is because even though Canada is being paid with the so-called Asian premium when they agree to take China's offer. Consequently, the oil supply in Canada becomes more scarce due to large amounts of exports. This, in turn, rises the market price for oil which adversely affects the Canadian consumers, refinery industry, and oil upgraders plants, as oil in home country becomes more expensive. In effect, some oil refining firms choose to exit the market due to negative profits, which results in many job losses within Canada. The amount of job losses exceeds that of the new jobs generated by Enridge, and thus an approximation of $750m hit in the Canadian GDP.

The Get Out of Fail Free Card Mission, Sept 07 2012

Masters Student, U of BC

Forecasts are too rosy; critics claim

Enbridge faced tough questions Wednesday on its predictions that more than $300 billion in economic benefits will flow from its proposed $6-billion pipeline to the West Coast to carry oilsands bitumen to Asia.

In its second day of questioning at the federal Joint Review Panel, the Alberta Federation of Labour challenged the company's forecasts of the economic benefits to Canada.

Federation lawyer Leanne Chahely asked economists why their forecasts say little about the impact of the pipeline on gasoline prices but tout major economic gains for oil producers and a net benefit for Canada.

Enbridge contends the proposed pipeline would allow oilsands producers to get higher prices - up to $20 more a barrel - for bitumen by opening up new markets in Asia.

The company also says other conventional oil producers in Western Canada would also get $2 to $3 more per barrel.

Enbridge panel economist Bob Mansell said the local price of gasoline will likely only increase by about 1.5 cents per litre as a result of the "price uplift" that comes from Gateway sending 585,000 barrels of bitumen a day to Asia. Mansell said it's "likely" Canadian refiners would absorb that small additional cost, because there's pressure to keep the price low to compete with gasoline imports.

Over a 35-year period, the higher prices for crude oil feedstock would cost refiners in Canada about $12 billion, Mansell said.

But that additional cost to the refining industry has been taken into account in the company's forecast, which says Canada will gain $312 billion net benefit over the 35-year forecast, said Mansell, a University of Calgary economics professor.

Even with the pipeline shipping out 585,000 barrels of bitumen a day, there will still be plenty of crude oil feedstock to supply Canadian refineries, the economists said.

AFL president Gil McGowan disputed the net benefit figures.

"They want Canadians to believe statements refiners will not pass the higher cost on to consumers .

"Does anyone really believe that? The net benefit to Canada is a house of cards. It is based on the assumption that all oil producers in Western Canada, not just those with bitumen in the pipeline, will get higher prices for their product."

There is also no guarantee that Chinese refiners will continue pay the "Asia premium" when bitumen starts flowing, he said. Saudi Arabia currently charges a higher price for crude it sells to China, called the Asian premium.

Edmonton Journal, Thursday, September 6, 2012

Byline: Sheila Pratt

Exactly how much will Enbridge Inc.'s Northern Gateway pipeline benefit Canada? In a report submitted to the National Energy Board, Enbridge says $38-billion.

But in a federal review panel hearing on the proposed pipeline on Thursday in Edmonton, Leanne Chahley, a lawyer with the Alberta Federation of Labour, inquired about Enbridge's math skills. The actual net benefits, listed year by year between 2018 and 2035, add up to $45-billion (U.S.), she said.

Enbridge consultant Neil Earnest said he would have to pull up a spreadsheet to double-check – something he didn't have immediately handy.

But according to the Globe's calculator, Ms. Chahley is correct. The numbers add up to $45-billion, or $44.2-billion (Canadian).

Still, Ms. Chahley points out, that's down some 10 per cent, on an annual basis, from a previous Enbridge estimate – although the numbers aren't exactly comparable, since the first estimate uses 2009 dollars, while the second uses 2012.

Why? Mr. Earnest says the assumptions are different, and the assumed benefit for Gateway has eased with the likelihood that both trains and other pipelines – including Keystone XL – will take away Canadian oil, lessening the need for Gateway.

Still, the fact that Enbridge was conservative with its numbers – accidentally listing $38-billion (Canadian) in benefits to Canada instead of $45-billion (U.S.) – is unlikely to be held against the company. It does, however, illustrate the striking complexity of attempting to pin down the impact of a major project like Gateway.

The Globe and Mail, Thurs Sept 6 2012
Byline: Nathan VanderKlippe

Under fire from Alberta unions, Enbridge said Tuesday its proposed Northern Gateway pipeline will not cause job losses in the refining sector though it will be affected by higher prices for crude oil that will result if the pipeline goes ahead.

As the federal hearing on the project entered its final stages, the Alberta Federation of Labour questioned the company's panel of well known energy economists about the impact of exporting 585,000 barrels of bitumen a day to China rather than upgrading and refining it in Canada.

Calgary economist Bob Mansell, a consultant speaking for the company, said the proposed $6-billion pipeline could carry a range of refined petroleum products, along with diluted bitumen, if conditions changed to make refining and upgrading profitable here.

"But no shipper is asking for that," they want to move bitumen, Mansell said.

Refineries that turn the heavy oil or upgraded bitumen into gasoline, jet fuel and other products usually set up near major consumer markets, so "it is not realistic to think of Alberta as a base for large- scale refining.''

The federal joint review panel also heard that oil producers operating in Western Canada will benefit by $5 billion in 2019 if the pipeline goes ahead because they will get closer to world price for their bitumen. The current difference can be as much as $20 a barrel.

Edmonton Journal, Friday September 6 2012

(Edmonton Journal; Sept. 4) - Enbridge will be grilled this week on its $6 billion Northern Gateway project as hearings enter the final phase where interveners can challenge the company's evidence. Enbridge will square off with unions and First Nations, as oilsands producers appear in a joint witness panel. Alberta's government will also appear for the "questioning" phase of the federal Joint Review Panel examining the economic benefits of the proposed pipeline to carry Alberta bitumen to Kitimat, B.C., for export to China.

Critics like the Alberta Federation of Labour will argue Canada's refining industry will shrink if the pipeline goes ahead and diverts bitumen feedstock to China. Opponents will also argue there is plenty of room in existing pipelines to handle growing bitumen exports. Enbridge, however, is "very confident" going into the hearings as it will finally have a chance to respond to critics, said spokesperson Ivan Giesbrecht.

"This is our first chance to speak; it's going to be a rigorous questioning and we welcome that," Giesbrecht said. "We really feel the project will benefit both provinces and Canada." Enbridge's project - twin pipelines, with one to carry 585,000 barrels of diluted bitumen west and another to carry the diluent east - faces growing resistance from First Nations, environmental groups, and the B.C. government that wants a larger slice of the economic benefits. The federal panel hearings will continue into November.

Oil and Gas News, Sept 6 2012

Compiled by: Larry Persily