Enbridge, Canada Won't Appeal Court Ruling on Northern Gateway

Enbridge Inc.’s plans to build a pipeline that connects the landlocked Alberta oil sands with the Pacific Coast are headed back to the drawing board after both the company and the Canadian government on Tuesday said neither would appeal a high-court ruling quashing the Northern Gateway project.

Returning Gateway to the consultation phase is latest setback for the Canadian energy industry, which is struggling with lower commodity prices and a lack of pipelines to move oil and gas reserves to the coasts and on to faster-growing markets overseas. Without new energy corridors, Canada will remain entirely dependent on U.S. demand, and energy analysts warn that prices for Canadian oil and gas will continue to trade at a discount to the U.S. benchmark price.

For Enbridge, the delay highlights pressure on the company to find other ways to grow. It agreed earlier this month to acquire Spectra Energy Corp. for $28 billion. Enbridge’s Canadian rival, TransCanada Corp., also agreed to acquire Columbia Pipeline Group Inc. after the White House rejected the Keystone XL project.

Calgary-based Enbridge said it remains committed to the Gateway project, valued at 7.9 billion Canadian dollars ($6 billion) and first approved by the former Conservative government in 2014. In June, Canada’s Federal Court of Appeal overturned the government approval, saying it didn’t fulfill its duty to properly consult aboriginals.

“We believe that meaningful consultation and collaboration, and not litigation, is the best path forward for everyone involved,” John Carruthers, president of Enbridge’s Northern Gateway unit, said Tuesday.

Enbridge’s struggles with Gateway highlight the clout that aboriginals are gaining in the construction of North American energy infrastructure. Aboriginals in British Columbia, Canada’s westernmost province, have been among the most vociferous opponents of the Gateway pipeline, arguing that its construction poses an environmental risk to their communities.

In the U.S., the Obama administration earlier this month halted construction of the Dakota Access Pipeline amid escalating opposition by Native American and environmental groups, led by the Standing Rock Sioux tribe.

Canada’s Resources Minister Jim Carr on Tuesday said he was reviewing government options on how to proceed. “The court was not critical of Enbridge or the energy regulator, but critical of the [Conservative] government because it didn’t do its job. So we are not going to contradict the court’s judgment in this case,” Mr. Carr told reporters in Ottawa.

Options could include a fresh round of consultations. On another western Canadian pipeline, Kinder Morgan Inc.’s Trans Mountain pipeline, Mr. Carr appointed a panel to speak to parties affected by the project, and their findings would influence the Liberal Cabinet’s final decision on Trans Mountain, due by end of the year.

Even before the court ruling, the Gateway project was under a cloud of uncertainty because of local opposition from aboriginals, environmentalists and lawmakers. Prime Minister Justin Trudeau also raised concerns about the proposed route traversing a Pacific Coast rain forest.

In May, Enbridge asked the country’s energy regulator for a three-year extension on the deadline to begin construction on Gateway, arguing that it needed time to strike partnership agreements with Pacific Coast aboriginal groups.

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