The Big Show: Enbridge Pipeline Hearings Are The Grandaddy Of 'Em All

Today marks the beginning of the lengthy, and most certainly costly, legal hearings regarding Enbridge’s [ENB – TSX] Northern Gateway pipeline. The proceedings take place at the final stop of the proposed 1,176km pipeline, which is set to traverse the mountains and connect the oil sands to the coastal sands of the Pacific in Kitimat, BC.

And in typical fashion, the media is enthralled with the idea of vilifying all that is supposedly corporate and evil, and deifying the opposition. In truth, it’s going to be a tough sell for the Enbridge team to convince the more than 4,300 individuals including 50 First Nations groups and academic environmental experts that their plan is sound.

Coming off the heels of TransCanada’s [TRP – TSX] woes regarding its proposed Keystone XL pipeline that was put on hold for rerouting, the precedent for David slaying Goliath has been set. Enbridge and its legal counsel have their work cut out for them, as they face the onslaught of anger coming from all types of groups that want their share of time in the courtroom.

Sadly, the image of the devious, cruel and uncaring pipeline company backed by an even more evil empire in the form of the oil industry continues to pervade. What’s being missed is the fact that as costly as these legal hearings will inevitably be for Enbridge going forward, the financial burden that an environmental disaster would cause for the company would be far, far worse, and the planners know this. As much as the pipeline could mean billions in added revenue for the Canadian economy, the cleanup and ensuing penalties from an oil spill would rapidly evaporate any kind of financial boost the Northern Gateway brings with it.

Damages don’t come cheap. I know this, because I spent a good deal of time settling them during my tenure as a surface landman in Alberta. That said, among the hundreds of kilometres of pipeline I negotiated for the rights to put underground, not one had a spill. No leaks. No fractures. No problems.

At most, we’d typically be settling for the delayed time it took for topsoil disturbances to return to their normal state. Sometimes we’d be compensating for hours lost returning a cow that got out of a field. Other times we’d be apologizing and shelling out for the imposition posed by the slovenly nature of a crew that may have left behind a little too much garbage in their wake. But ultimately, regulations were followed, and landowners were left happy with the transaction.

All things considered, pipelines are relatively safe in today’s world. Even when they cross rivers and streams (of which, the Northern Gateway is set to cross over 700), pipelines can be designed to pose very little impact. We are talking about 36 inches of pipe, which once set into the ground represents an opening up to the world for Canada’s oil.

Now, when and if the idea of pipeline crossing the water is sufficiently dealt with, next will come the even bigger task of selling the safety of oil tankers near Kitimat’s coastal shores. In a post-Deepwater Horizon and post-Exxon Valdez world, it’s fair to say there are concerns surrounding the water. It’s quite understandable, as the costs, images and losses are of upmost importance to avoid.

Going forward it’s going to be a bumpy ride for both parties. The legal might of Enbridge is set to face-off against a bevy of opponents with possibly enough muster to achieve their goal of blocking the project from happening. But should the pipeline plan make it through this impasse, the implications for the oil sands sector will huge. Not only would Enbridge stand to benefit for its efforts, but junior oil sands players would as well.

Foreign dollars have been dangled lightly so far, with China’s PetroChina International Investment Co. snapping up the remaining 40% of its partner Athabasca Oil Sands’ [ATH – TSX] interest in the Mackay River project for $680 million earlier this month. Entities from both South Korea and China have expressed interest in securing some of Canada’s energy resources, especially with the potential for International shipping possibly around the corner. If and when the pipeline receives approval, other junior entities under a billion market cap like Alberta Oilsands [AOS – TSX.V], Connacher Oil and Gas [CLL – TSX] and Ivanhoe Energy [IE – TSX] could be up for grabs.

Given yesterday’s acquisition of SilverBirch Energy [SBE – TSX.V] for $435 million by Teck Resources [TCK – TSX], the buyout environment for oil sands takeovers appears ripe. This sellers market would only continue to ramp up if the pipeline did indeed go through, with the low hanging fruit like Habanero Resources [HAO – TSX.V] (mkt cap of $8 million) and Poplar Creek Resources [PCK – TSX.V] certainly up for grabs. For investors looking at the potential, one must look back to the SilverBirch deal and remember that SBE had a market cap of $293M six months ago, and went on to net $435M yesterday.

The Northern Gateway pipeline represents a huge impact for all involved. From Enbridge to oil sands producers, from environmental advisors to radicals, this pipeline is the SuperBowl, Royal Wedding and OJ Simpson verdict all rolled into one, and we’ll all be glued to our seat until it’s done.

G. Joel Chury
Editor in Chief
VantageWire.com

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Disclaimer: The author does not currently hold shares in the companies mentioned in this article.