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NEWS RELEASE · 18th September 2012
Ministry of Environment
B.C.'s tough cross-examination concluded at Edmonton hearings

Consistent with B.C.'s five requirements for heavy oil pipelines, the B.C. government has concluded its cross-examination at the Edmonton Northern Gateway Pipeline (NGP) joint review panel.

Questions posed to the proponent, as previously agreed to, focused on Enbridge's liability coverage and related financial matters to ensure B.C. taxpayers' interests are fully protected.

British Columbia focused on two main themes Friday, Sept. 8, specifically the ability of NGP to access sufficient funds, including insurance funds, to cover clean up costs; and the corporate structure of NGP and its relationship with Enbridge. Below is a summary of cross-examination highlights:

Under questioning from British Columbia, NGP stated that insurance coverage for its operations would likely amount to approximately $60 million. NGP maintained that that amount would be sufficient to cover the costs of a spill, given the other financial resources that would be available. NGP also predicted that no more than one spill would occur every 250 years.

Further testimony by NGP revealed that this amount falls far short of the estimated $767 million that the United States Transportation Safety Board (USTSB) calculated as the cost to clean up the Kalamazoo River and related areas following the 2010 Enbridge spill near Marshall, Michigan.

British Columbia's cross-examination also revealed that evidence presented by Enbridge estimated that an average cost of $14,000 per barrel for large diluted bitumen spills. Applying that figure to the approximately 20,000 barrels lost in the Michigan spill would result in an estimated cost of $281 million-or barely more than one-third of the cleanup costs estimated to date by the USTSB.

NGP officials did confirm that costs to date for cleaning of the Michigan spill have been in excess of Enbridge' pollution liability policy and that there could be scenarios for the Northern Gateway project where spill costs would exceed the limits provided under an insurance policy.

While the NGP representatives could not guarantee that there would not be a significant spill of the magnitude of that in Michigan, they did indicate that they were taking special precautions where there would be water crossings or difficult terrain to traverse in order to minimize the risk to the environment, including providing for extra-thick pipeline walls, an increased number of valves, more frequent inspections and tunneling to protect the pipeline in extremely difficult terrain.

British Columbia asked about the ability of NGP to raise sufficient insurance to cover losses associated with major spills. While NGP did not seem concerned about the ability to secure insurance based on Enbridge's experience, the company has not yet gone to the marketplace to identify potential insurers and gain commitments to insure against major spills.

British Columbia also asked about the ownership structure of NGP and ultimately who would be in control of the company. NGP representatives stated they anticipated Enbridge would be the majority owner, but that the actual ownership percentages are not yet confirmed.

Each funding participant who is helping support the $300 million in costs to date in return for access to the pipeline once in operation will also have the opportunity to purchase ownership in the bitumen pipeline, the condensate pipeline or both.

In addition, the Aboriginal community will have up to 10 per cent ownership of the pipeline, depending on the uptake in the NGP Aboriginal Equity program.

British Columbia wanted to understand the corporate ownership structure to determine whether or not, in the event of a catastrophic event, the full backing of Enbridge Inc. would be accessible to pay for required cleanup. However, as NGP is structured as a limited partnership, each partner's liability would be limited to the amount of money invested in the company.

In the event of a catastrophe, there would not be the ability for either Canada or British Columbia to seek full compensation from Enbridge Inc., as Enbridge's liability as limited partner would be limited to the extent of its investment in the project.

It would appear that while to Enbridge this corporate structure makes strong business sense, from B.C.'s perspective, it reduces the exposure of Enbridge as limited partner to its absolute investment in the pipeline itself.

However, NGP representatives did state they believed that, in the event of a major spill, the partnership would have sufficient resources available to cover the costs of the spill.

Our government will continue to ensure that any heavy oil pipeline proposal in British Columbia has world-leading policies and processes governing spill prevention, spill response and liability insurance that reduces government and public exposure to risk. B.C. will cross-examine NGP on all of these issues at the panel hearings as they progress through the fall and early winter.

B.C.'s five requirements for any and all heavy oil pipeline development remain:

* Successful completion of the environmental review process. In the case of the Northern Gateway Pipeline, that means a recommendation by the National Energy Board Joint Review Panel that the project proceed.

* World-leading marine oil spill response, prevention and recovery systems for BC's coastline and ocean to manage and mitigate the risks and costs of heavy oil pipelines and shipments.

* World-leading practices for land oil spill prevention, response and recovery systems to manage and mitigate the risks and costs of heavy oil pipelines.

* Legal requirements regarding Aboriginal and treaty rights are addressed, and First Nations are provided with the opportunities, information and resources necessary to participate in and benefit from a heavy-oil project.

* British Columbia receives a fair share of the fiscal and economic benefits of a proposed heavy oil project that reflects the level, degree and nature of the risk borne by the government, the environment and taxpayers.

Hearings of the Enbridge Northern Gateway Project Joint Review Panel in Edmonton will conclude Sept. 28. Further opportunities for B.C. to question NGP will occur later in the fall in Prince George and Prince Rupert.

In Prince George, matters concerning land-based spills will be addressed, and in Prince Rupert, matters concerning the marine terminal and aquatic spills will be questioned. B.C.'s cross-examination of NGP in Prince George will also include questions concerning spill prevention and response such as spill response planning in the context of geographic and climate challenges, and challenges specific to the nature of heavy oil. The practices of NGP in the wake of the spill in Michigan will also be probed.

In Prince Rupert, topics will include NGP's relationship with the response organization responsible for spills and nature and extent of the commitments Northern Gateway Pipelines has made to exceed regulatory standards for spill response.

To read the transcript in its entirety, please visit the Joint Review Panel's website at:
http://gatewaypanel.review-examen.gc.ca/clf-nsi/prtcptngprcss/hrng-eng.html

More information on the EA Certificate can be found at: www.eao.gov.bc.ca