Enbridge faces battle over Asia pipeline

Share

Fresh from fighting off oil sands producers who questioned the necessity of a major new pipeline to the United States, Enbridge Inc. now faces a battle with one of its competitors over a plan to ship Canadian crude to Asia.

Kinder Morgan Canada has filed a letter with the National Energy Board asking that the regulator not consider Enbridge's Northern Gateway project until Enbridge can prove it is commercially needed.

Northern Gateway is a $5.5-billion project that would see Enbridge deliver 525,000 barrels per day of Alberta crude to Kitimat, B.C., where it could be loaded onto tankers and delivered to Asian markets. Enbridge filed a massive, 7,500-page application for regulatory approval on the project last Thursday.

Gateway will form an important link between the oil sands and fast-growing Asian markets, Enbridge has said. The company has received $100-million in funding from a group of Asian refiners to gain approval for the project, and is working to sign preliminary agreements with the oil companies who might ship on it. But it has not acquired any commercial shipping agreements. Company executives have said it is difficult to convince shippers to sign on to a project that has not yet been approved.

But Kinder Morgan argues that without proven commercial support, Enbridge is wasting the time of the regulators who have to sift through the mountains of paperwork the company has assembled to prove the project's environmental safety and community benefits.

Kinder Morgan has a keen interest in the outcome of Gateway, because it has long worked to prepare a competing proposal to deliver crude to Asia. It currently runs the only Canadian pipeline system delivering crude to the West Coast, through its Trans Mountain system, which runs from Alberta to Burnaby, B.C.

Expanding that system -- and its existing right-of-way -- is a more politically and environmentally palatable option than building a new crude pipeline, Kinder Morgan has argued.

Kinder Morgan also plans to expand its system only once it is convinced the capacity is needed, spokesman Andrew Galarnyk said in an interview.

"We're not filing an application until we have commercial support," he said. "We are pursuing discussions with interested parties, and when that market demand exists, we will file an application for expansion."

Enbridge executives have argued that Gateway is needed, and that it is the only project currently on the table, since Kinder Morgan's proposal has not yet been submitted for regulatory approval.

An Enbridge spokesman declined comment on the Kinder Morgan letter.

"The matter is now before the regulators, so it would not be appropriate for us to comment," said spokesman Alan Roth.

The dispute carries echoes of another battle Enbridge fought with oil sands producers, who argued that its new Alberta Clipper pipeline, which will deliver 450,000 barrels per day of crude to U.S. markets, is also not needed. In the U.S., a group of companies led by Suncor Energy Inc . argued that they should be given a break on increases in pipeline tolls until Enbridge can prove the necessity of that project. Those companies had, however, initially agreed to the toll hike, and U.S. regulators ruled that they must abide by that agreement.