Enbridge overstates economic benefits of Northern Gateway pipeline: Haisla First Nation lawyer

By Sheila Pratt, Edmonton Journal September 18, 2012

EDMONTON – Enbridge is overstating the economic benefits — and underestimating costs — associated with the proposed Northern Gateway pipeline project to take Alberta bitumen to the west coast for shipment to Asia, said a lawyer for British Columbia’s Haisla First Nation.

Enbridge gives a much rosier picture of growth in oil production in Canada in its pitch for the pipeline than it gave to its investors at a shareholder meeting last fall, Hana Boye told the Joint Review Panel conducting hearings in Edmonton Tuesday.

The higher growth forecast, in public documents filed with the National Energy Board, results in a higher calculation of benefits to the oil industry from the proposed $6 billion pipeline, said Boye.

Boye said the lower growth forecast given to investors at a meeting in Toronto means as much as 500,000 fewer barrels per day by 2020 and therefore much less benefit to the oil industry from the pipeline that aims to carry 525,000 barrels a day of bitumen from the Edmonton area to Kitimat, B.C.

If Enbridge had used the internal, lower forecast it gave to investors, the much touted “price lift” for bitumen that gives oil companies their benefit would not be as robust, said Boye. Enbridge argues the proposed pipeline will secure higher prices for bitumen by opening up new markets in Asia.

Enbridge officials dismissed the difference in the two forecasts as not substantial. The higher forecast comes from the Canadian Association of Petroleum Producers.

The numbers will vary depending on when the forecast is done but the difference is too small to have an impact on whether the project is economically viable, said John Carruthers, top manager of the separate company building the Northern Gateway pipeline.

“There could be differences as forecasts change over time, but they all show substantial growth in oil supply from the western Canadian basin,” said Carruthers.

At the October 2011 investors meeting, an Enbridge executive described that forecast as “bullish” and told investors the company’s growth forecast is lower at 4.4 per cent growth in oil production over 20 years.

Boye also said the company has ignored another major cost that comes with the project — the cost of importing large amounts of condensate needed to dilute the thick, sticky bitumen so it will flow in the pipeline.

Until 2008, Canada produced enough condensate to meet demand in this country, said Boye. But it now imports 60,000 barrels a day and that will increase significantly to support the increase in bitumen exports in the Northern Gateway pipeline.

Each barrel of bitumen shipped in the pipeline must be diluted by about 30 per cent. Some producers may also use light crude oil to blend with bitumen, says an Enbridge report.

In its cost-benefit analysis, Enbridge did not calculate the cost of importing condensate because that is a cost borne by companies that ship the bitumen, said Paul Fisher, Enbridge executive.

“We anticipate a need to import condensate but that decision will be made by shippers,” said Fisher.

Enbridge also confirmed it did not do a separate study on the impact of Canada’s growing dependence on condensate imports from the U.S.

Meanwhile, Enbridge told the panel that the company has reversed a pipeline that in the past carried crude oil into the U.S. The Southern Light pipeline will now ship 180,000 barrels a day of condensate to Canada.

Enbridge also confirmed it is applying for two separate permits at the hearing, the export pipeline to ship bitumen and the import pipeline to import condensate into Canada. Each pipeline could go ahead separately depending on what the review panel board rules.

The $6 billion price tag includes construction and operation of both pipelines.

The hearings continue until Sept 28.

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