ALF V1

The technical hearings on economic issues raised by the Northern Gateway pipeline recently concluded in Edmonton. In these quasi-judicial hearings, Enbridge and intervenors (labour organizations, First Nations, environmental NGOs and the provinces of BC and Alberta) presented expert testimony and cross examined the experts of other parties. The Northwest Institute summarized the 15 days of hearings. Here are some highlights.

Cross examination of Enbridge Experts

Labour: refine the dilbit in Canada and create jobs

The Alberta Federation of Labour (AFL) questioned the export of raw dilbit (diluted bitumen, the tar sands' crude oil) rather than refining it in Canada. Enbridge responded that markets aren't looking for refined oil. They are looking for feedstock for their own refineries. No one could make money doing it, according to Enbridge, so there would be no benefit to Canada. Ninety percent of the claimed benefit to Canada is the "price uplift" that Enbridge claims will raise the selling price for all Canadian oil producers.

In later questioning, the AFL asked an expert for the Government of Alberta about the $8 per barrel "discount" for tar sands crude. The Alberta expert explained that tar sands crude fetches its highest price in the limited number of refineries capable of refining it for optimal value. When those refiners reach capacity, the price for tar sands crude drops $8. The $8 discount would be avoided by the Northern Gateway during its first year. Any pipeline (Northern Gateway, Keystone, Trans Mountain) would have the same "up lift" but, after the first few years, more heavy crude than refining capacity will trigger the discount and things will be back to where they are. Still, the Alberta expert concurred with Enbridge that, in his government's view, building upgraders in Alberta would not be commercially viable.

BC: an underinsured pipeline

The Province of BC questioned Enbridge about its insurance coverage. Enbridge stated that it was looking at exposure of $60 million for the cleanup cost of a spill once every 250 years. BC noted that works out to $280 million for a 20,000 barrel spill. That's the size of the spill in Kalamazoo which has already cost more than $767 million. BC also questioned whether the proposed separate corporate structure for the pipeline was intended to limit the liability of the corporate giant. Enbridge denied this. It stated that it would not consider a commitment to guarantee 100% of the clean up.

eNGO Coalition: National benefit from a pipeline that is half foreign owned?

A coalition of environmental NGOs (Forest Ethics Advocacy, Living Oceans ad Raincoast Conservation Foundation) established that Enbridge has ten potential funding participants who may each acquire a 4.9% interest and suggested that foreign ownership of the pipeline would impact the purported national benefit. Enbridge responded that the corporate structure would be modified for Enbridge to retain a controlling interest.

Later, the Coastal First Nations noted that, given 47% foreign ownership of Canada's oil and gas industry, that same percentage of the asserted $17 billion of benefit to private interest presumably would leave the country.

Chris Peters: Externalized cost of greenhouse gas emissions

Chris Peters, a Prince George engineer, calculated that the "well to wheels" greenhouse gas emissions would be 37 million tons (2/3 of BC's total emissions in 2010) and suggested this social cost should be entered into the equation. Enbridge responded that Canada is not responsible for emissions it exports to other countries, underscoring Peters' point that the social costs of the emissions enabled by the proposed pipeline are not accounted for anywhere.

Haisla First Nation: An undersized study

The Haisla First Nation's traditional territory will have more impacts than other First Nations because it is affected by all three aspects of the proposal: the pipeline, the terminal and the super tankers. The Haisla established that Enbridge gave different financial forecasts to different audiences – higher to the public, which inflates the claimed public benefit of a "price lift," - and lower to investors.[xii] Enbridge responded that the different forecasts were insignificant to the project's viability. The Haisla also raised concerns that the condensate costs and risks were not adequately addressed. Enbridge responded that this was the responsibility of the shippers. The Haisla noted that Mark Anielski's "natural capital and ecological goods and services" study included no impacts beyond the right of way, no river or salmon impacts and less land than the pipeline would actually occupy.

Coastal First Nations: Enbridge admits that a spill is 93% likely

The CFN noted that neither the provincial nor federal governments have exclusive jurisdiction to decide whether the project will proceed given that the First Nations have never ceded their traditional territories. The CFN couldn't evaluate impacts to salmon because they hadn't been provided the necessary information. "Whose responsibility is that?" CFN council asked. Enbridge responded that they had tabled sufficient information for a determination by the JRP.

Enbridge agreed that there is a 93% chance of a tanker spill, terminal spill, or full bore pipeline rupture happening within 50 years. In a heated exchange, CFN pointed out that there was no accounting of the social costs of the conflict that the pipeline would cause if the project goes forward.

Economist Robyn Allen: risks from tanker traffic increases are exponential

Enbridge's questions to the Alberta Federation of Labour panelist economist Robyn Allen allowed her to point out that if the pipeline were to increase from its stated capacity (525,000 barrels per day) to its potential capacity (850,000 barrels per day), this would increase tanker traffic by over 50 percent as well as activity in the marine terminal. "Risk is not additive," she said. "It is exponential."

JRP panelist Kenneth Bateman asked Allen about the value of Enbridge giving a "parental guarantee" that it would backstop all costs of a major oil spill. When Allen stated Enbridge won't entertain that, Bateman implied that it could be required by the federal government.

Next Steps

The technical hearings will continue through December. Beginning October 9, the JRP will convene in Prince George to hear expert evidence regarding the construction and impacts of the pipeline. Beginning November 22, the JRP will travel to Prince Rupert to hear expert testimony on marine and First Nations issues. Community hearings in southern BC are scheduled to begin in January 2012. The final arguments on technical evidence will be in April, 2013. The 2012 Federal Budget and Bill C-38 require the JRP to submit its report by the end of 2013. The federal cabinet will make the final decision.

Earth Matters, Oct 05 2012
Byline: Carrie Saxifraze

But we can win says economist Robyn Allan. Last in a series on Norway's petro-policies and lesson

[Editor's note: The Tyee sent veteran energy issues journalist Mitchell Anderson to Norway to learn how it amassed a $600 billion oil savings fund for its population of under 5 million, a stark contrast to Canada. To finish the series we invited him to share his views on how those lessons could be applied here. With input from economist Robyn Allan, here they are.]

Why do we tolerate homelessness and poverty in Canada? Underfunding for our schools and health care system? Why is our government eliminating 20,000 public sector jobs in a supposed effort to balance the books?

Imagine instead if Canada was a country capable of developing a national oil strategy similar to what has been achieved in Norway. This tiny nation enjoys full employment and enviable social programs, has no public debt, $600 billion in the bank, and remarkable public buy-in about their petroleum industry. Could we do it here? Do we have the guts to seize our economic destiny?

Such a system might seek to maximize employment, tax revenues and environmental protection -- exactly the opposite motivations of most extractive industries. There is another public policy goal that is of no interest to private companies: the energy security of our nation.

Seen through this lens, how is Canada doing? Abysmally, by four measures:

1. Dependency. Even with our vast oil wealth, Canada currently relies on other countries for about 50 per cent of our supply -- so-called "unethical oil" from the volatile Middle East. Proposals to pipe unrefined bitumen from western Canada to Asia will increase this dangerous dependence since Alberta will have to import vast amounts of condensate from the Middle East to dilute thick bitumen enough for pipeline transport.

2. Staying in the red. Alberta has been unable to balance the books since 2007, burning through $17.7 billion of past oil wealth, with another $3 billion deficit forecast for the coming budget.

3. Draining at full tilt. Labour and production costs are through the roof, at least until the next employment bust. Both the Alberta Federation of Labour and the late premier Peter Lougheed have both called for slower the pace of oil sands growth. Ten proposed upgraders have been cancelled since the 2007 recession, replaced instead with pipeline proposals for unprocessed diluted bitumen. With resource values rising relative to global currencies, what's the rush?

4. Getting global black eye. The oil sands have such a credibility problem the Alberta government spends $25 million a year countering "baseless" criticism from environmental groups.

Robyn Allan's prescriptions

Robyn Allan thinks we can do better. She is a British Columbia economist, former CEO of the provincial insurance corporation and outspoken critic of the Northern Gateway proposal to pipe diluted bitumen to Kitimat. She also believes the recent retreat from value-added processing in Alberta is not only a threat to the B.C. coastline, but to the entire Canadian economy. In an interview for this series she told The Tyee:

"Canada has an energy strategy, but it is being developed in a handful of boardrooms of multinational oil companies and national oil companies of foreign governments. And that strategy seems to be to extract oil sands bitumen as quickly as possible, mix it with distillate imported in increasing amounts from the Middle East, and move it down pipelines to Asia and the U.S. Gulf Coast. And that strategy is going to hollow out Canada's oil sector, move us away from creating jobs and value-added refining, and increase pressures on our exchange rate and the non-oil sectors of our economy. And when the boom becomes a bust, we won't have a strong economic fabric to fall back on."

So why does she feel so many state-owned oil companies now clamouring for a piece of the oil sands?

"More than 80 per cent of global oil reserves are controlled by state own oil companies, and there's good reason for that. Canada is the only major oil-exporting country in the world without a national oil company. Of the remaining global oil resources open for private sector investment, Canada has the majority. That's why national oil companies from China, Korea and Norway, and now maybe Kuwait and India, are coming here to buy up our resources -- it's the last big game in town."

Allan believes our country is becoming dangerously exposed in a world increasingly short of energy, especially as we allow state-owned interests from other nations to snap up our globally-strategic resources.

"Canada is being outplayed. We are losing control of our natural resources. We're losing control of our environmental standards. And we're losing the ability to upgrade and add value in Canada. We're not even beginning to use the leverage in this country that we have to control and manage the pace of our development and ensure that oil resource returns come to the people of Canada."

So what can we do about it? Allan feels one of the key problems is that our petroleum continues to be sold in American, not Canadian currency.

"When the price of oil goes up, the value of our dollar goes up and this creates problems not only for the manufacturing sector but for our oil industry as well. Because we trade our oil in U.S. dollars, any Canadian oil producer finds that their profits fall when they sell their product in U.S. dollars and have to repatriate those revenues into Canadian dollars. The ability of the oil industry to expand and grow is hamstrung by an appreciation of the Canadian dollar. The oil sector itself hurts, it not just manufacturing, tourism, forestry and other sectors."

She also sees a linkage between our inflated currency and the cancelled upgrading facilities in Alberta.

"We need to address the issue that maybe because our currency has appreciated in value, it's not as economic to build upgraders in Canada. We have a natural resource in Canada that's traded in U.S. dollars. Why? When Russia decided to trade their oil with China they elected not to do it in U.S. dollars, but their own currencies. We have to start thinking about what is in the long-term interest of Canada, not what is in the best interests of a handful of oil companies."

Upgrade here first, then ship

By choosing Canada instead of China, Allan believes Albertans would benefit from higher prices and greater economic stability. Nation building through such mutually profitable arrangements might prove far more productive than past interprovincial posturing.

"One of reasons that bitumen is not capturing the value that western producers want is that its not good enough quality. So if we upgraded it in Alberta into a product that North America wants, we might solve so many problems. Everybody in Canada could win if less expensive western Canadian crude got to eastern Canada.

"At the recent Northern Gateway Hearings in Edmonton, the Joint Review Panel was told by Enbridge's expert witnesses that right now Eastern Canada is buying imported crude at $20 to $30 more than the price of western Canadian crude. If that's the case, that works out to about 15 cents a litre at the pump. Western producers could get a price premium of five cents a litre over what they are getting now, the refiners in eastern Canada could save five cents a litre on their crude supply and consumers could save five cents a litre when they fill up at the pump.

"So if that happened, producers and refiners would make more money and consumers would spend less money. That's got to have a stimulative effect on our Canadian economy."

Allan points out that shipping upgraded crude rather than bitumen would also require half as much pipeline capacity since we would not need to build supply lines for imported condensate. And most importantly, upgraded Alberta crude should be moving east rather than unrefined bitumen moving west.

"TransCanada Pipelines have said they are looking at converting one of their natural gas pipelines to ship Western Canadian crude to eastern Canada. That could be up to 800,000 barrels a day and would be a tremendous boost to the Canadian economy. We should be focusing everything we can to get that to happen. And the way to get that to happen is to say no to the Northern Gateway pipeline. The best thing that British Columbia could do is restrict bitumen from coming into this province, period. That would essentially be a little bit of tough love to Alberta."

The late premier Peter Lougheed urged Albertans to "think like an owner." That determination to do what's in the interest of Canadians rather than companies is what Allan seems to be championing as well.

"I would hope that the real issue here is what can we do to support and develop the future health and long-term growth of the Canadian economy. We need to stop responding to the preferences of corporations that don't have the Canadian national interest at heart. They don't. They're not meant to.

"Every single time issues are raised such as energy security in Canada, value-added and upgrading, concerns over the appreciation of our dollar -- the oil industry goes crazy. And the reason they do is because these are serious issues that need to be addressed and they could be addressed relatively easily for our long-term benefit. What the oil industry doesn't yet understand is that many of these changes would be for their long-term benefit as well."

A challenging question

The Enbridge and Kinder Morgan pipelines will obviously benefit China and the shareholders of private oil companies, but what is in Canada's interest? Are we even asking that question?

At the end of this series I'm left reflecting on the blunt advice of Norwegian petroleum engineer Rolf Wiborg: "You have to leave the feudal thinking and leave the idea that people coming to exploit you have the right to tell you what to do.... It can be done, but do the Canadian people have the power and the will? Do they have the collectiveness and guts to do it?"

How about it Canada? Do we?

The Tyee, 3 Oct 2012
Byline: Mitchell Anderson

EDMONTON - Enbridge insists estimates of environment damage from construction of the Northern Gateway pipeline have been overestimated, because sections of the line will be built in areas already disturbed by a new natural gas pipeline, the federal review panel heard Thursday.

Enbridge lawyer Bernard Roth also questioned the expertise of economist Matthius Ruth, whose report for the Haisla Nation estimates the cost of environmental damage at between $254 million and $775 million for construction along the 1,700 kilometre route from Bruderheim northeast of Edmonton to Kitimat on the British Columbia coast.

That estimate includes cutting trees on the kilometre-wide corridor, crossing rivers and habitat damage, the Joint Review Panel was told.

The proposed $6-billion pipeline will carry 525,000 barrels of Alberta bitumen a day to Kitimat.

Enbridge proposes to use already disturbed land for about 80 per cent of the route, including areas already logged, old roads and along part of the 463-kilometre Pacific Trail Pipeline route, now under construction from the Prince George area to Kitimat.

"Through the entire Haisla territory, the PT pipeline is in the same corridor as the Northern Gateway," said Roth. Any environment impacts there have already occurred and should not be attributed to Enbridge, he said.

"If a road and power line is already constructed and we use the same right of way," how does Enbridge's pipeline cause additional damage? asked Roth.

But Ruth said the environmental costs might be higher because of the "cumulative effects" of two pipelines running through fragile ecosystems.

"Any new project will put additional stress on the environment," he said.

The Haisla Nation is a partner in a proposed liquefied natural gas facility that will ship natural gas from northeast B.C. to China. But they oppose the Enbridge bitumen pipeline because of fears that spills of the sticky product would pollute the water along the coast.

Roth said it's unfair to attach to a pipeline project the additional cost of greenhouse gases emitted in producing the bitumen, shipping it to Asia and burning the resulting gasoline in cars — a total calculation of $206 million in the Matthius report.

"These are indirect costs," he said.

Earlier in the day, a witness for the provincial government told the panel that building the Northern Gateway is just one way to handle the increased bitumen production underway in the oilsands.

Other solutions include upgrading the bitumen to synthetic crude oil, expanding refining capacity in Alberta or slowing the pace of development, said Harold York, author of the Wood Mackenzie report done for the Alberta government.

Oil producers will need other ways, besides the Gateway pipeline, to handle the increased amount of bitumen, he said.

In response to questions from the Alberta Federation of Labour, York noted that to get the price increase producers want, Alberta bitumen must be sold into "coking" refineries that can first upgrade it.

If it is sold to conventional refineries, it could only be used to make lower value fuel oil. That could lower the selling price of the bitumen, he said.

Montreal Gazette, Thurs Sept 27 2012
Byline: Sheila Pratt, The Edmonton Journal

The battle over upgrading oilsands bitumen in Alberta dominated Northern Gateway pipeline hearings Wednesday, with a government consultant arguing local upgrading is not economically viable given the high cost of construction.

But the Alberta Federation of Labour pointed to a 2009 Alberta government report that set a goal of upgrading two-thirds of bitumen in Alberta. Upgrader Alley would have involved $314 billion in capital investment, created two million jobs across the country over 20 years and added $5 trillion to the national GDP.

Harold York, a witness for the province and author of the Wood Gundy report commissioned by Alberta Energy, predicted oilsands producers would lose $8 billion a year if the pipeline does not go ahead, because they would not get access to world prices for bitumen. The proposed pipeline will carry 525,000 barrels a day of bitumen to the West Coast for shipment to refineries in Asia.

York told the Joint Review Panel his analysis was focused on the benefit to oil producers and did not consider other government policy goals.

In response to questions, York said he was unaware of a provincial government goal of upgrading two-thirds of the bitumen in Alberta - though the government did mention to him, without providing details, that it wanted to encourage value-added resource development, he said.

Asked if upgrading the bitumen locally is a viable alternative to exporting, York said no, because building costs are high.

"The capital cost in northern Alberta is large - up to $15 billion for a large upgrader capable of handling 200,000 barrels a day," he said.

Leanne Chahley, a lawyer for the AFL, asked York if he had seen the report of the 2009 hydro-carbon upgrader task force produced by the energy department. York said he had not.

That report outlines a vision of "world-scale industrial complexes" northeast of Edmonton, known as "Upgrader Alley," that would produce higher value products such as synthetic crude oil and petrochemicals.

If the Northern Gateway pipeline goes ahead, experts have told the panel the amount of upgrading here will decline to 26 per cent by 2025, Chahley pointed out.

Earlier in the day, energy department official Christopher Holly, the only other government witness, confirmed the province will not present any other information to the panel. Holly rejected the suggestion that the energy department should have considered new pollution regulations set out in the recently approved Lower Athabasca Regional Development Plan when calculating the economic benefits for the oil industry.

Barry Robinson, lawyer for a coalition of B.C. environmental groups, told the panel that documents filed for Shell's proposed Jackpine oilsands mine expansion show that air quality limits (set out in LARP) will be breached if all planned oilsands projects go ahead.

The levels of sulphur dioxide and nitrogen dioxide will exceed the limits set out in the LARP, according to the documents.

The Edmonton Journal, Thurs Sept 27 2012
Byline: Sheila Pratt

Government of Alberta does not consider jobs, taxes, royalties, or the public interest in their evidence at Northern Gateway hearings

Edmonton – AFL President Gil McGowan will be available to the media throughout today as the Federation quizzes the Government of Alberta on their evidence before the Northern Gateway panel.

“We are very troubled by what we’ve heard so far today. The Government of Alberta did not put any evidence before the Board about jobs, taxes, or royalties, says McGowan, President of the Alberta Federation of Labour, representing over 145,000 unionized workers.”

“The Government’s evidence confuses what’s good for foreign-owned oil companies with what’s good for Albertans. Their evidence at Northern Gateway looks exclusively at industry profits, without considering jobs or royalties for Albertans.”

The province is “blurring the lines between profits for the world’s largest corporations and the public interest,” says McGowan.

“Oil companies are capable of advocating for themselves, they shouldn’t need the government’s help. It’s the government’s job to advocate for Albertans. They are failing to do that job at the Northern Gateway hearings.”

McGowan says the Government of Alberta’s evidence – though technical in nature and written by high-priced energy consultants – really tells a very simple story.

“The government allowed a stampede of development in the oil sands, without making good on their commitment to have 2/3 of our bitumen upgraded here,” says McGowan, adding that the province’s evidence predicts only 26% of Alberta’s bitumen will be upgraded in Alberta by 2025.

The result is a flooded market of an inferior product.

The Government’s evidence shows oil companies are getting a lower price for bitumen because Alberta doesn’t force them to upgrade it before it leaves Alberta.

“We are selling the wrong product,” explains McGowan.

“If we were selling upgraded synthetic crude oil, we would be getting better prices, and higher royalties as a result,” says McGowan.

Raw bitumen can only be turned into gasoline or diesel by a small number of refineries in North America. The rapid pace of development means there is too much bitumen on the market. The choice is simple: bitumen could be upgraded to synthetic crude before it leaves Alberta, creating thousands of jobs. It could then be refined at a large number of refineries around the world. Or, it could be shipped raw to China, and take thousands of jobs with it.

“There is not one word in the Government of Alberta’s evidence about the public interest. We are left to wonder if they care about jobs and royalties for Albertans, or if the priority is profits for oil companies backing the Northern Gateway pipeline – none of which are majority-owned by Canadians,” says McGowan.

MEDIA CONTACT:  Gil McGowan, President at 780-218-9888 (cell) or 780-483-3021 (office) Alberta Federation of Labour

Reality Check:  Profits, Prices, and Access to Markets

Alberta is producing too much of the wrong product; no mystery why oil companies are getting a low price.

The Government of Alberta’s evidence filed with the Joint Review Panel for the Northern Gateway pipeline shows Alberta’s failure to upgrade bitumen is what is causing lower prices for bitumen and what is driving the alleged need for the Northern Gateway pipeline.

The Government of Alberta hired energy consultant firm Wood Mackenzie to do an analysis on the need for “new markets” for Alberta’s bitumen. The analysis is designed to support the Northern Gateway pipeline.

The report is technical in nature.

The GoA evidence says oil sands producers “could” lose up to $8/barrel because bitumen is flooding North American refineries incapable of handling it. Chinese refineries can handle bitumen, and it makes sense for oil sands operators deeply involved with Chinese state-owned oil companies to ship raw bitumen to Chinese refineries, who rely on lower labour and environmental laws.

There is plenty of North American refinery space for synthetic crude oil, which is upgraded bitumen. But the Government of Alberta hasn’t forced companies to build upgraders, and has allowed a stampede of development without any regard for keeping jobs in Alberta.

The Government of Alberta is responsible for the problems they describe in their evidence. We are pulling bitumen – a lower-quality product – out of the ground, shipping it out as fast as we can, flooding the market with a low-quality product, and wondering why we are losing money.

The Wood MacKenzie report before the NEB might be complicated and technical, but the explanation is quite simple. Upgrade the resource before it leaves Alberta, keep the good jobs here, earn more tax and royalty revenues for Albertans, and the economic case for the Northern Gateway pipeline evaporates.

Technical Backgrounder on the Wood MacKenzie Report

Wood MacKenzie’s $8/barrel “discount”

WMK’s $8/barrel discount prediction is a figure based on the concept of “refining value.”

WMK predicts Canadian producers “could continue to lose approximately C$8/bbl relative to its refining value.”[1]

The discount of value is driven by the fuel oil yield in the cracking configuration, which sells at a discount to the gasoline and diesel produced in a coking configuration.

“The Refining Value, which is the value of refined petroleum products produced from a given crude oil, falls as a refinery configuration becomes more ‘simple’ because the simpler configuration has less capability to convert the lower-value heavy end of the crude assay to higher-value products, such as transportation fuels.”[2]

The $8/barrel “discount” is attributable to:

• A glut of supply for coking refineries
• Too much non-upgraded bitumen looking for a home. It is finding its home in cracking refineries, thus simply producing fuel oil rather than diesel or gasoline

Prediction of losses of refining value are further attributable to:

• Not enough pipeline capacity to “premium heavy crude markets,” aka refineries that can process bitumen straight into gasoline or diesel
• Runaway growth in bitumen supply and a glut on the market

The Wood Mackenzie analysis relies on the following assumptions:

• A lack of upgraders in Alberta. If bitumen is upgraded to SCO in greater amounts, higher refining values can be achieved
• A prediction of just 26% of Alberta bitumen being upgraded by 2025, far below the Government of Alberta’s stated policy goal of 2/3 bitumen upgraded in Alberta
• A growth in supply due to ERCB approving every project, without associated upgrading capability
• A total lack of pacing by the GoA Department of Energy
• Ignoring the use of rail entirely, which is not only being used right now but also contained in Enbridge’s analysis

Heavy Crude Refining Predicted to Fall in Western Canada With Northern Gateway

According to Enbridge’s evidence before the National Energy Board, Western Canadian “heavy crude” – aka bitumen coming from the oil sands -  will be increasingly refined in China, where state-owned companies are building massive refining complexes capable of handling bitumen.

About the AFL Northern Gateway Reality Check Series

The Alberta Federation of Labour is a full intervener in the Northern Gateway Pipeline.

The debate around the Northern Gateway pipeline is heated, and we hear governments and industry saying all kinds of things to justify locking Canada in to being a raw resource producer, but never move up the value chain with our natural resource wealth.

“The Northern Gateway pipeline hollows out our value-added industries, imposes higher oil prices on consumers, and rewrites the rules of Canada’s oil industry. Gateway will reduce the amount of oil sands upgraded in Alberta and ship thousands of jobs to China,” Gil McGowan, President, Alberta Federation of Labour.

CALGARY, Alberta, Sept 24 (Reuters) - A lawyer for Enbridge Inc said on Monday that a prominent economist opposed to its Northern Gateway oil pipeline to Canada's West Coast is wrong in her contention that the project will raise costs for refiners, regardless of where their crude comes from.

At public hearings into the C$6 billion ($6.1 billion) project, Enbridge attorney Rick Neufeld told British Columbia economist Robyn Allan the company's market experts have shown that Northern Gateway will not restrict crude supplies in other markets on the continent, as she has concluded.

Allan, former chief executive of the Insurance Corp of British Columbia, provided an economic assessment of Northern Gateway early this year for the Alberta Federation of Labour, which opposes the 525,000 barrel a day pipeline from Alberta to Kitimat, British Columbia, for crude oil shipment to Asia.

Neufeld took issue with Allan's evidence that the export pipeline would result in $2-$3 per barrel annual increases in oil prices across the country between 2016 and 2046, including for Eastern refineries now supplied almost exclusively with imported oil priced against international benchmark Brent oil.

"Indeed that's what you've told people around the country, and I'm suggesting to you, Ms Allan, that that's not the evidence of these witnesses," Neufeld said at the proceedings in Edmonton. "They did not suggest that Northern Gateway would increase the price of Brent crude, and you were here for that."

The exchange was part of the first opportunity Enbridge has had to cross-examine its opponents. Most of the testimony in hearings before a federal Joint Review Panel into the contentious Northern Gateway project has so far been about environmental issues, but the Edmonton proceedings are delving solely into economic impacts and benefits.

One aim of the project is to remove a price discount on Canadian oil that currently exists due to an oversupply of oil in traditional markets such as the U.S. Midwest. Enbridge said Canadian producers would benefit by diversifying their markets to include Asia, where prices are higher.

The Alberta Federation of Labour opposes the pipeline because, the group says, it would mean the loss of oil processing and refining jobs in Canada as the raw material gets shipped across the Rockies to the Pacific.

Neufeld said Enbridge's evidence, prepared by consultants Muse Stancil and Wright Mansell Research, did not show that the pipeline would restrict oil supplies in North America, push up gasoline prices for consumers, or have any impact on oil prices in other parts of the world, as Allan has concluded.

Allan has argued that restricted supply in North American markets as a result of oil being redirected to Asia on Northern Gateway, and the international determination of crude prices, will push up prices for all supply bought by Canadian refiners.

"In your view then, if Northern Gateway was to improve the price - or reduce the discounting of Canadian crude, put it that way - by $2 a barrel, the price of crude delivered by OPEC would increase by $2 a barrel. That's your evidence?," Neufeld said.

Allan did not argue that point, saying she derived her contentions by taking numbers and assumptions in Enbridge's expert reports to their "logical conclusion."

"Based on the analysis that was provided in both the Muse and the Wright Mansell reports, the redirection of supply takes oil out of markets and when the supply goes down, the price goes up," she said. "With the ... fact that the oil is going to be redirected from Ontario and Quebec, that is going to affect the Eastern Canadian market."

However, her written evidence criticizes Enbridge's reports, saying they leave out a number of aspects that raise questions about their reliability. Those include analysis of sensitivities to prices, currency exchange rates, changes to supply as well as other risks to the forecasts.

"All of those are standard business practice that would be undertaken if the proponent's analysis was delivered to an investor or a lender. In any of the other places where it needs to prove its case, those standards would have been delivered," she said.

Rueters, Tues Sept 25 2012
Byline: Jeffrey Jones

The late Peter Lougheed's enduring legacy in Alberta's oil industry was evident Monday as the former Alberta premier was cited by both proponents and opponents of the contentious Northern Gateway pipeline during regulatory hearings in Edmonton.

Both sides claimed support from the widely respected Lougheed, who died Sept. 13.

"In one of his last interviews, didn't he say the (Northern Gateway) pipeline was essential for Alberta?" Enbridge lawyer Rick Neufeld asked at one point during his cross-examination of Alberta Federation of Labour president Gil McGowan.

McGowan responded that Lougheed shared the federation's concerns about the pace of oilsands development, that too many oilsands projects exported raw bitumen and there are not enough benefits to Alberta from upgrading and refining the bitumen into consumer products locally.

"Lougheed took an activist approach to ensure we had a value-added industry," he said, according to a story from The Canadian Press. "It (the oilsands industry) wouldn't have been here without government policy and intervention."

Here's a thought: both sides should cease and desist with the Lougheed references.

Lougheed was a champion of oilsands development but he was also concerned about the rapid pace of development. He has been widely lauded since his passing as one of Canada's greatest politicians and statesmen. His family and friends continue to mourn his passing even as his name is being bandied about the hearing room for one of the most contentious public policy debates in Canada in years.

To be clear, it's as far from speaking ill of the dead as possible. There's presumably nothing but respect for the former premier from everyone involved in these exchanges, but it still comes off as ill-timed at a minimum.

The allure of an "endorsement" from Lougheed for either side is obvious.

Third-party endorsement - especially from a credible and respected source - is invaluable to any communication campaign. Make no mistake, every word uttered during the hearings is part of a broader communications strategy by all sides in the campaigns for or against regulatory approval and public support for any pipeline.

Regardless, it seems inappropriate to cite, or even imply, support from Lougheed as if it was some sort of message from on high or death-bed confession simply be-cause it serves your political or commercial endeavour.

It's not as if the current premiers - from Alberta's Alison Redford, among the proponents, and B.C.'s Christy Clark, for the opponents - haven't provided enough commentary on the $6-billion pipeline project. Both have offered up more than enough observations to provide fodder for lawyers at the Joint Review Panel for weeks.

They can also explain or defend their positions and not leave it to others to interpret and infer what may, or may not, be relevant.

The references to Lougheed came as Enbridge and some oil producers that have secured ship-ping on the 525,000 barrel a day pipeline got to cross examine witnesses before the Joint Review Panel for the first time in the hearing process.

The Edmonton portion of the hearings, which addresses economic issues, are scheduled to conclude this week. The hearings will resume in October in Prince George, B.C., to address concerns about the environment and First Nations along the 1,172 kilometre route. Finally the panel moves on to Prince Rupert, B.C. to address maritime issues once bitumen is moved onto ocean-going tankers.

A decision from the Joint Re-view Panel is expected in 2013.

The federation has said the pipeline taking bitumen from the Edmonton area to the B.C. coast at Kitimat for export to Pacific Rim markets will make it harder to create upgrading and refining jobs in Alberta and increase fuel prices throughout Canada. Enbridge contends that isn't the case.

Neufeld noted there is plenty of bitumen available in Alberta and Enbridge has never said it would restrict bitumen for refineries or upgraders.

McGowan also said export pipelines would add to an already overheated economy with higher labour and material costs.

Neufeld challenged economist Robyn Allan over her statements the 550,000-barrel-per-day pipe-line would push up the price of crude oil by $2 to $3 a barrel annually in Canada. Enbridge said Northern Gateway would create a one-time boost of $2 to $3 per barrel if it comes on stream at the end of this decade.

Allan responded: "When you take oil out of North America and take it to Asia the price increase is going to affect all markets in the long run."

And that is exactly the difference.

Allan, McGowan, Neufeld and the others can all speak for themselves. Lougheed cannot and, as a sign of respect, he should be left out of these hearings.

Calgary Herald, Tues Sept 25 2012
Byline: Stephen Ewart

AFL on witness stand at Northern Gateway hearings; President available to speak to media after testimony ends

Edmonton – AFL President Gil McGowan resumes his time on the witness stand today at the National Energy Board hearings in Edmonton, at the Westwood Conference Centre, 18035 Stony Plain Road.

McGowan is expected to deliver evidence until this afternoon and will be available to the media when he is finished.

The AFL opposes the Northern Gateway pipeline because it is designed to ship unrefined bitumen to China. Thousands of good jobs in refining and upgrading will be lost down the pipeline; the project is therefore not in Canada's public interest.

"Northern Gateway is not Canadian infrastructure. It is Chinese infrastructure," says McGowan.

"Enbridge compared this pipeline to the Canada Pacific Railway. It is certainly a nation-building project; it is certainly designed to guarantee energy security, but it will do those things for China, not Canadians," adds McGowan.

Northern Gateway will connect Chinese-owned oil sands production in Northern Alberta with refineries in China via the pipeline and oil tankers through Kitimat, BC. The National Energy Board must assess whether the project is in the public interest, and is empowered to reject the proposal under the broad definition of the "public interest" contained in Section 52 of the National Energy Board Act.

"The oil industry has told us this pipeline is about chasing a higher price for bitumen in Asia.

"The benefits are only for big, foreign-owned oil companies. Canadians lose the jobs and the industry. Northern Gateway makes northern Alberta into China's gas tank," says McGowan. McGowan adds that federal and provincial governments ought to cooperate to create refining jobs across Canada, and support pipelines that reach "our east, not the Far East."

The Northern Gateway pipeline creates only 224 permanent jobs and about 1,850 short-term construction jobs. Upgrading and refining those resources in Canada would create tens of thousands of permanent jobs.

"Evidence submitted to the NEB shows that if this pipeline is built, in addition to all the other bitumen pipelines that have already been approved, Alberta will only be upgrading 26 percent of its bitumen in 2025, down from about 60 percent today," says McGowan.

"That means that tens of thousands of quality jobs will be lost down the pipeline to places like China. Oil companies and the Chinese government may be happy with this situation. But this is clearly not in the best interest of ordinary working Canadians."

-30-

For more information or to arrange for an interview with AFL President Gil McGowan, after he is finished delivering evidence, contact:

Shannon Phillips at 403-330-9878

Bitumen pipeline placement

Both sides in the debate tried to claim the support of the former Alberta premier who died Sept. 13.

Rick Neufeld, lawyer for pipeline proponent Enbridge (TSX:ENB), suggested Lougheed backed the line's construction.

"In one of his last interviews, didn't he say the [Northern Gateway] pipeline was essential for Alberta?" he asked while cross-examining Gil McGowan, president of the Alberta Federation of Labour.

In response, McGowan suggested Lougheed was sympathetic to the federation's concerns that too many oilsands projects were exporting raw bitumen and robbing Albertans of some of the benefits they would reap from upgrading it in the province.

"Lougheed took an activist approach to ensure we had a value-added industry," McGowan told the National Energy Board. "It wouldn't have been here without government policy and intervention."

The federation's previous testimony that the $6-billion project would make it harder to create upgrading and refining jobs in Alberta, as well as increase fuel prices throughout Canada, came under repeated attack in Monday's cross-examination.

No shortage of bitumen

Neufeld pointed out there is no shortage of bitumen currently available for anyone interested in building a refinery. Nor has Calgary-based Enbridge ever said it would restrict access to bitumen.

He disputed the notion that pipelines encourage the export of raw natural resources. He noted that the Transmountain pipeline originally built to transport crude now moves both oil and refined products.

McGowan responded that the labour group believes projects such as Northern Gateway help price Alberta out of the market for new industrial development. He said the pipeline would only help speed oilsands development, creating demands for labour and materials that drive up their cost.

Neufeld also grilled federation adviser Robyn Allan over her testimony that the 550,000-barrel-a-day pipeline would drive up fuel costs in the rest of Canada.

"So if Canadian producers get higher netbacks in Edmonton, refineries will have to pay more in New Brunswick?" he asked.

Allan responded that oil shipped to Asia would no longer be available to North Americans, which will eventually raise its price.

"When you take oil out of North America and take it to Asia the price increase is going to affect all markets in the long run," she said.

Enbridge analysts have argued that the price of oil is set globally and the Gateway pipeline wouldn't change the price of the Venezuelan, European and Middle Eastern oil on which refineries in Central Canada rely.

In afternoon testimony, federation lawyer Leanne Chahley revisited potential Chinese ownership shares in the pipeline.

Cross-examining a panel of energy producers who hope to ship on Gateway, Chahley pointed out that one of them — Nexen — is being bought out by the Chinese National Offshore Oil Corp. Nexen holds one of 10 shares that give it an option for a five per cent ownership stake.

MEG Energy — owner of another of the ownership options — is about 15 per cent owned by the Chinese corporation.

Chahley also pointed out that Total E and P Canada, another hopeful Gateway shipper, is involved with two developments that include some level of Chinese investment.

CBC News and iPolitics, Mon Sept 24 2012
The Canadian Press