Pipeline Proposal Raises More Questions than Answers

Resources | BCBusiness

A joint proposal involving a First Nation company and the Aquilini Group offers a fresh take on plans to move Alberta oil to the B.C. Coast, but the economics are unproven and in the absence of named participants support remains unknown

One of the biggest hurdles standing in front of the Enbridge Inc. proposed Northern Gateway oil pipeline has always been First Nation opposition. While the company says it has support of 60 per cent of the impacted groups along the route, many vocal bands remain strongly opposed. So the announcement this week of a First Nation-led alternative pipeline to carry Oil Sands petroleum to the north B.C. coast sounds promising, at least on the surface.

“It’s heartening to see an alternative to Northern Gateway,” says Kenneth Green, a senior director of natural resource studies at the Fraser Institute. “But once I read the details I was less sanguine.”

Project proponents Eagle Spirit Holdings Ltd. and the Vancouver-based Aquilini Group have released few specifics about the project—including cost and route—beyond the intention to build a one-million-barrel-a-day pipeline from Alberta to the Pacific, probably ending near Prince Rupert. While the new proposal shares the general route of Northern Gateway that’s where the similarities end, says Calvin Helin, chair and president of Eagle Spirit.

Apart from partnering with First Nations on the project, the biggest difference between the Eagle Spirit and Enbridge proposals may be in what the pipes will carry. Where Northern Gateway would pump diluted bitumen bound for refineries in Asia or California, Eagle Spirit proposes building a refinery along the route to turn the bitumen oil into a light synthetic crude, which is believed to be easier to clean up in the event of a spill.

This is where Green’s enthusiasm for the project begins to wane. “If it made economic sense to refine the bitumen in Canada don’t you think the capital would be moving here to build these things?” he asks. “If it did they would be planning them, building them and doing it. They’re not.” Instead, he says, the refining industry is moving closer to major markets and the industry is consolidating, not diversifying.

Plus, shipping synthetic crude is not going to sway environmental opposition. “I don’t think environmentalists aren’t going to change their opinion because they’re shipping synthetic instead of diluted bitumen,” says Green. “It’s still oil to them.” 

That leaves First Nation support as the project’s big advantage. Helin says Eagle Spirit can’t reveal which bands do support the project because of non-disclosure agreements, but at the news conference he was joined by representatives from two small bands, including the Nee Tahi Buhn First Nation, which says it revoked its support for the Northern Gateway in favour of the Eagle Spirit project.
It was this idea of a First Nation cooperation that convinced the Aquilini Investment Group, the Vancouver-based private company that owns the Vancouver Canucks, a real estate development and construction arm, blueberry and cranberry farms and a golf course, to get on board, says its president David Negrin. In addition, several oil and gas companies have contacted Eagle Spirit about getting involved in the project, says Negrin. However, the fact that none of them were named during the press conference says a lot to Green.

“It suggests the model does not produce high enough profits to attract investment,” he says.

Which then raises the question of building the pipeline. Helin suggested the expertise can always be hired, but cobbling together several small operators versus partnering with a large, experienced pipeline firm, is questionable for a project of this size, says Green. Big companies know how to keep costs low, have learned from past mistakes and have the assets to tap in the event of an accident.

But despite his initial concerns, Green stresses Eagle Spirit remains a big question mark. “There’s very little data available,” he says. “It’s blue sky theoretical. Until they concrete the issues we can’t really evaluate it properly.”