Enbridge pipeline joins Keystone XL in wait for U.S. permit

Fri Feb 14, 2014 4:26pm EST
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Scott Haggett

CALGARY, Alberta (Reuters) - A second Canadian pipeline project to the United States is now facing delays as operator Enbridge Inc (ENB.TO: Quote) awaits a U.S. presidential permit, a development that may strain prices for Alberta oil sands crude and relations between the two countries.

Enbridge, Canada's largest pipeline company, said it no longer expects to get the permit amendment it needs to expand its Alberta Clipper line in time to start pumping extra oil on it at midyear as it had planned. It applied for the permit in November 2012.

"Based on where we see things at the moment and over the last few weeks, we feel the permit amendment will take longer than midyear issuance that we had expected," Enbridge Chief Executive Al Monaco said on a conference call. "That being said, we are undertaking some temporary system optimization efforts that pretty much mitigate any impact on throughput."

Enbridge's plan to increase capacity on its existing Clipper line by 120,000 barrels per day (bpd) in the initial stage is a far smaller project than rival TransCanada Corp's (TRP.TO: Quote) controversial Keystone XL oil pipeline from the oil sands to the U.S. Gulf Coast.

But it has recently started to face opposition from environmental groups that hope that blocking exports will slow expansion of the oil sands, where they say production is carbon-intensive.

In Washington, an official at the State Department said the delay is procedural, not political. The original contractor who was to conduct the necessary environmental impact study withdrew, and a search for another contractor is underway, the official said.

Enbridge said it can tweak its massive mainline system, which delivers the bulk of Canada's oil exports to the United States, to handle additional shipments until it has the permit in hand.

But a lengthy delay could further pressure Canadian crude prices, which trade at a discount to U.S. grades, as rising production of crude from the oil sands is running up against limited pipeline capacity. That discount stood at $25.25 below the U.S. West Texas Intermediate benchmark price on Friday.   Continued...