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NDP majority means it’s back to the pipeline drawing board

Some 15,000 pieces of pipe for TransCanada Corp.'s Keystone XL pipeline lie in a field in North Dakota on April 23, 2013. photo by Nathan VanderKlippe

The Globe and Mail

The push to expand markets for Alberta's landlocked oil is losing one of its biggest promoters as a new political establishment in the province seeks a clean break from a history of failed pipeline diplomacy.

A New Democratic Party majority government led by Rachel Notley has pledged to tone down Alberta's lobbying efforts for long-stalled pipeline proposals, a sharp detour after years of fruitless cheerleading under the Progressive Conservatives.

The PCs' 43-year dynasty collapsed in a stunning electoral defeat on Tuesday and leader Jim Prentice resigned from politics.

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Ms. Notley's win, and the rise of the labour-friendly NDP, has broken up the common front between Canada's energy-pumping heartland and the federal Conservative Party in Ottawa.

Prime Minister Stephen Harper's government has championed multibillion-dollar pipeline projects to Canada's east and west coasts for years, famously deriding opponents of major energy projects as foreign-funded "radicals." By contrast, Ms. Notley favours domestic refining and more stringent environmental controls in the oil sands, and supports some export schemes over others.

"Certainly, in the pro-pipeline quarters, there was a lot of optimism with the arrival of Jim Prentice, because of his background at the federal level, as well as his stated and very clear interest in engaging with First Nations on issues related to access and land-use and pipelines," said Joseph Doucet, dean of the University of Alberta's business school.

"I think there's probably trepidation now, both based on the change as well as some of the policies and preferences in the campaign."

The NDP win jolted markets on Wednesday, as investors and industry analysts parsed the unknown party's campaign pledges – which include reviewing energy-sector royalty rates and raising the corporate tax rate to 12 per cent from today's level of 10 per cent.

Ms. Notley has said she is not opposed to TransCanada Corp.'s $12-billion Energy East proposal and Kinder Morgan Inc.'s Trans Mountain project. But she has said she would end lobbying for Keystone XL and has cast doubt on the viability of Enbridge Inc.'s Northern Gateway – the only major pipeline proposal to obtain regulatory approval.

Canada's national energy regulator gave the $7.9-billion project the go-ahead last year, but it is subject to 209 conditions. The project also faces legal challenges and entrenched opposition from coastal aboriginal groups in British Columbia. If built, it would deliver up to 525,000 barrels a day of oil sands-derived crude to a super-tanker port at Kitimat, B.C., giving the energy industry long-sought access to richer global markets.

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Enbridge chief executive Al Monaco said on Wednesday the company has not spoken to Ms. Notley about the project. He said Enbridge and its partners are committed to the pipeline despite lingering questions about how well officials are prepared on the West Coast to respond to oil spills, and costs that have climbed to about $500-million.

"Frankly, we think the view is worth the climb here on this project, and hopefully with some further discussion the [premier-designate] would agree with that," Mr. Monaco said.

Some analysts doubt that the fate of any pipeline project hangs on provincial support.

Canadian oil shipments to the United States spiked to 3.1 million barrels per day in January, up 12.8 per cent over the same month a year ago, even as pipelines such as Keystone XL face delays.

The increase occurred in the midst of an aggressive lobbying effort by Alberta officials in Washington aimed at winning support for the controversial pipeline project.

"I'm not sure what it accomplished," Steven Paget, analyst at FirstEnergy Capital Corp, said of the lobbying. "I'm not sure pulling it back is going to change much."

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About the Author

Jeff Lewis is a reporter specializing in energy coverage for The Globe and Mail’s Report on Business, based in Calgary. Previously, he was a reporter with the Financial Post, writing news and features about Canada’s oil industry. His work has taken him to Norway and the Canadian Arctic. More

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