Enbridge, Gateway pipeline foe spar over impact

Tue Sep 25, 2012 5:32am IST

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* Enbridge lawyer says economist wrong on impact

* Opponent says her analysis is based on Enbridge's reports

By Jeffrey Jones

CALGARY, Alberta, Sept 24 (Reuters) - A lawyer for Enbridge Inc said on Monday that a prominent economist opposed to its Northern Gateway oil pipeline to Canada's West Coast is wrong in her contention that the project will raise costs for refiners, regardless of where their crude comes from.

At public hearings into the C$6 billion ($6.1 billion) project, Enbridge attorney Rick Neufeld told British Columbia economist Robyn Allan the company's market experts have shown that Northern Gateway will not restrict crude supplies in other markets on the continent, as she has concluded.

Allan, former chief executive of the Insurance Corp of British Columbia, provided an economic assessment of Northern Gateway early this year for the Alberta Federation of Labour, which opposes the 525,000 barrel a day pipeline from Alberta to Kitimat, British Columbia, for crude oil shipment to Asia.

Neufeld took issue with Allan's evidence that the export pipeline would result in $2-$3 per barrel annual increases in oil prices across the country between 2016 and 2046, including for Eastern refineries now supplied almost exclusively with imported oil priced against international benchmark Brent oil.

"Indeed that's what you've told people around the country, and I'm suggesting to you, Ms Allan, that that's not the evidence of these witnesses," Neufeld said at the proceedings in Edmonton. "They did not suggest that Northern Gateway would increase the price of Brent crude, and you were here for that."

The exchange was part of the first opportunity Enbridge has had to cross-examine its opponents. Most of the testimony in hearings before a federal Joint Review Panel into the contentious Northern Gateway project has so far been about environmental issues, but the Edmonton proceedings are delving solely into economic impacts and benefits.

One aim of the project is to remove a price discount on Canadian oil that currently exists due to an oversupply of oil in traditional markets such as the U.S. Midwest. Enbridge said Canadian producers would benefit by diversifying their markets to include Asia, where prices are higher.

The Alberta Federation of Labour opposes the pipeline because, the group says, it would mean the loss of oil processing and refining jobs in Canada as the raw material gets shipped across the Rockies to the Pacific.

Neufeld said Enbridge's evidence, prepared by consultants Muse Stancil and Wright Mansell Research, did not show that the pipeline would restrict oil supplies in North America, push up gasoline prices for consumers, or have any impact on oil prices in other parts of the world, as Allan has concluded.

Allan has argued that restricted supply in North American markets as a result of oil being redirected to Asia on Northern Gateway, and the international determination of crude prices, will push up prices for all supply bought by Canadian refiners.

"In your view then, if Northern Gateway was to improve the price - or reduce the discounting of Canadian crude, put it that way - by $2 a barrel, the price of crude delivered by OPEC would increase by $2 a barrel. That's your evidence?," Neufeld said.

Allan did not argue that point, saying she derived her contentions by taking numbers and assumptions in Enbridge's expert reports to their "logical conclusion."

"Based on the analysis that was provided in both the Muse and the Wright Mansell reports, the redirection of supply takes oil out of markets and when the supply goes down, the price goes up," she said. "With the ... fact that the oil is going to be redirected from Ontario and Quebec, that is going to affect the Eastern Canadian market."

However, her written evidence criticizes Enbridge's reports, saying they leave out a number of aspects that raise questions about their reliability. Those include analysis of sensitivities to prices, currency exchange rates, changes to supply as well as other risks to the forecasts.

"All of those are standard business practice that would be undertaken if the proponent's analysis was delivered to an investor or a lender. In any of the other places where it needs to prove its case, those standards would have been delivered," she said.

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