By Tristin Hopper Asia is hankering for energy and companies in Fort McMurray are looking for new markets for their oil. The only thing standing in the way of a consummation of the relationship is a 1,150-kilometre-long legal quagmire.

Alberta and China are getting downright chummy. The world’s largest manufacturer is now Alberta’s fastest-growing and second-largest trading partner. Every year, trans-Pacific freighters loaded with more than $2.39-billion of Alberta-made nickel, sulfur, plastics and antifreeze arrive at Chinese ports. But very little of the province’s most famous export makes its way to the Orient. In more than six decades of oil production in Alberta, only a trickle has ever made it to Asia.

It’s not that China doesn’t want the province’s liquid gold. China’s three largest oil companies all have offices in Calgary, and resource-hungry Chinese investors have poured more than $7-billion into oil sands joint ventures in the last five years. Last June, Chinese ambassador to Canada Lan Lijun even donned a hardhat and safety vest to tour Fort McMurray’s oil fields. Even with all this, more than 99 per cent of Alberta’s $30-billion in oil exports will go where they’ve usually gone: to buyers in the U.S.

Not for long, though, if Enbridge gets the go ahead on its much-debated Northern Gateway pipeline. Keen to quench Asian thirst, the Calgary-based energy giant has proposed building a pipeline that would cut a route from the oil sands to oil tankers on B.C.’s west coast, starting in Edmonton and ending in Kitimat, B.C. Pumping 33 Olympic swimming pools, or roughly 80 million litres, of Alberta crude per day, the $4.5-billion pipeline would singlehandedly bypass the 40-year U.S. domination of Alberta’s oil exports, and give Fort McMurray another, lucrative oil destination. The only thing standing between Fort McMurray’s oil and Shanghai is a 1,150-kilometre-long legal quagmire.

I n late March, a coalition of 28 B.C. First Nations convened in Vancouver to declare unswerving opposition to the Northern Gateway pipeline. “No good can come out of an Enbridge project in British Columbia,” said Art Sterritt, executive director of the Coastal First Nations. Opposition to an Enbridge pipeline is nothing new. Two years ago, a coalition of Manitoba First Nations took Enbridge to court over an Edmonton to Wisconsin pipeline planned to run through southern Manitoba. The case was ultimately thrown out. “There is no evidence before me,” wrote Justice Robert Barnes in his 31-page decision document, “that the Pipeline Projects would be likely to interfere with traditional Aboriginal land use.”

While that may be true for Manitoba, B.C. First Nations have an upper hand over their prairie counterparts: unsettled land claims. Most of Enbridge’s Canadian pipelines run through treatied territory, areas where First Nations have already surrendered their title to the land. In Alberta, what was once First Nations land is now Crown Land – which is usually open for business when it comes to new pipelines. This is not the case in B.C. If, during the 50-plus year lifetime of the pipeline, any one of the dozens of land claims along the pipeline route is settled, the Northern Gateway project could find itself with new landlords. “They haven’t [previously] dealt with the broad scope of environmental issues that we deal with here in B.C.,” says Grand Chief Stewart Phillip, president of the Union of B.C. Indian Chiefs.

Maybe so, but it’s not for lack of trying. In a joint venture with PetroChina, Enbridge first tried to get the pipeline approved in 2006. Before the environmental review could even start, a coalition of Prince George First Nations launched a protest suit in Federal Court. PetroChina had pledged to purchase 50 per cent of the pipeline’s capacity, but the delays spooked the company into pulling their support in 2007. “The environment is not comfortable,” said Song Yiwu, vice president of PetroChina’s parent company, to The Globe and Mail in 2007. “We tried to come here and we can’t.” The PetroChina withdrawal put the whole project on hiatus.

This time around, the Northern Gateway project has more committed investors, but they’re still navigating a dangerous course. The project could already be “heading for the courts,” says Jennifer Coulson, a manager with Vancouver-based Ethical Funds, an investment group with approximately $17.5-million in Enbridge holdings. At the company’s May 2009 shareholders meeting, Coulson, along with two other investment groups, proposed Enbridge hold off on the project until obtaining complete consent from all First Nations along the pipeline route. The proposal was voted down. Enbridge chairman David Arledge told investors it was up to regulators to decide whether Northern Gateway is in the “Canadian public interest.”

Unfortunately, it’s the regulators that have Coulson worried. You don’t get into the $4.5-billion Ethical Funds portfolio without a good corporate record, and Enbridge’s is solid, she says. The company has put money into wind energy, they’ve resolved to become carbon neutral and their corporate transparency is first-rate. If an Enbridge pipeline ever bursts, it’s Enbridge that reports the details and does the cleanup. The riskiest part of Northern Gateway isn’t Enbridge, she says, it’s the federal government. “Enbridge is certainly doing what’s within its power and influence,” explains Coulson. “Unfortunately, it does come down to a government issue, and the government is not necessarily fulfilling its obligations.”

A Joint Review Panel comprising both the National Energy Board and the Canadian Environmental Assessment Agency is scheduled to evaluate Northern Gateway this summer. As Enbridge is quick to note, it’s the highest degree of scrutiny an economic development project can undergo. B.C.’s First Nations, on the other hand, see the panel as a deliberate government evasion of the constitutional duty to consult and accommodate First Nations. Coulson would like to see the government do its job and address First Nations concerns before Enbridge ends up in court. Enbridge declined to comment for this story, saying it would be inappropriate to conduct in-depth media interviews so soon before their official filing to the National Energy Board.

Impending lawsuit or not, none of the opposition to Northern Gateway seems to be affecting Enbridge’s bottom line. When the TSX closed only a few hours after the Coastal First Nations’ March 23rd anti-pipeline gathering, Enbridge’s stock had climbed by a full percentage point. In the last 16 months, Enbridge shares have risen by more than 40 per cent.

And it may be that the company has nothing to worry about. Northern Gateway is being touted as one of the largest North American petroleum undertakings since the 1960s. Over three years of construction, the pipeline would train and employ more than 4,000 welders, pipefitters and labourers throughout Central B.C. It’s a region hungry for jobs. The proposed pipeline route passes by beetle-killed forests, closed sawmills and areas of high unemployment. The promise of a few thousand construction jobs and a few hundred ongoing positions is indeed a tantalizing offer. “This is an opportunity that’s going to affect an area of B.C. that’s been probably the most severely hit in British Columbia,” says Colin Kinsley, chair of the Northern Gateway Alliance, an Enbridge-funded coalition of 500 pro-pipeline mayors, residents and business owners.

Kinsley was mayor of Prince George for 12 years, from 1996 to 2008. Even fifty years after pipes first went into the ground, Prince George’s coffers are still supplemented by pipeline tax revenue. If you want to grow your tax base without taxing your citizens, says Kinsley, build a pipeline.

As Canada’s fastest-shrinking jurisdiction, Kitimat certainly needs something. Since the 1980s, the town’s main employer, aluminum producer Alcan Inc., has steadily cleaved away more than 1,000 jobs from its Kitimat smelter and now employs about 1,600 workers. In the past 20 years, the town’s population has shrunk from about 14,000 to fewer than 9,000. The West Fraser Eurocan paper mill closed its doors in January, putting another 535 people out of work. Northern Gateway can’t save the town, but it would inject Kitimat with a much-needed whirlwind of construction activity. Once the dust settled, 100 workers could find permanent employment at the expanded oil port facility.

While it’s safe to say the town’s many avid fishermen don’t want to see oil washing up on the beaches, most residents think the risk is small enough to justify diversifying the local economy with a new pipeline. “I’d say it’s a 70-30 split,” says Tony Brady, president of the Kitimat Chamber of Commerce, with the larger percentage in favour of a new employer in the area and the smaller wanting a tanker-free harbour.

Kitimat Mayor Joanne Monaghan is on the 70 per cent side. The economic impact of Northern Gateway would be “huge,” she says. Still, she isn’t signing off on the project until she’s seen Enbridge’s environmental report. Monaghan believes there’s nothing wrong with caution, but adds some of the environmental opposition is moving beyond due diligence. “They’re saying ‘no more tanker traffic because of the Valdez,’” she says, referring to the infamous 1989 tanker spill. “[Which is like saying], ‘Well maybe we should stop all the ferries running up and down the coast because one sank.’”

Currently, the only way to get a barrel of oil from Alberta to Asia is through the 59 year-old Trans-Mountain pipeline. Every day, it pumps an average of 300,000 barrels of oil from Edmonton to tankers in the Vancouver harbour – less than one-quarter of what the Northern Gateway would move – but not much of this ships to Asia. This could change in the future, however. In 2008, pipeline owner Kinder Morgan spent $443-million upping Trans-Mountain’s capacity by 15 per cent. Currently, the comany is soliciting investors for a multi-billion dollar doubling of the entire system.

So why bother with Kitimat? For one, it’s on a much more direct route between Edmonton and Asia. It’s also less hectic. Port Metro Vancouver is the largest and busiest sea terminal in Canada. By the time an oil tanker winds its way into Vancouver, waits its turn and then winds its way back out a tanker from Kitimat would already be several time zones west.

This is a big draw for resource hungry China. While Northern B.C. is already lined with thousands of kilometres of pipelines, none go to the ocean. This is, of course, exactly what worries B.C. First Nations, but if the Exxon Valdez disaster did one good thing, it was to prompt dramatic changes in oil shipping. When the 301-meter tanker struck Alaska’s Bligh Reef the ship had no pilot aboard, it wasn’t tethered to tugboats and the vessel wasn’t double-hulled. Today, supertankers sailing out of Kitimat would be double-hulled, piloted and winched to two tugboats. If the ship lost power, one of the tugboats would pull the vessel out of harm’s way.

Indeed, petroleum tankers are relatively common along B.C.’s west coast. Port Metro Vancouver has brought in oil tankers for more than 50 years. Anacortes and Cherry Point, Washington – both a quick boat ride from Vancouver Island – have been bringing in Alaskan oil for decades. Even Kitimat has handled its fair share of petroleum. Over the last 30 years, more than 1,500 tankers have run petrochemicals into Kitimat for industrial use. So far, B.C.’s record on oil tankers is clean.

None of this has swayed B.C.’s Coastal First Nations. “The big ticket right now,” says director Gerald Amos, “is the danger of an oil spill on the coast.” For Amos, and others, a dedicated Kitimat oil port is still too much of a risk. Every year, Northern Gateway would pump 192 million barrels of oil into Kitimat. If only a small fraction of that oil gets spilled into B.C. waters, it would be a disaster of Valdez-ian proportions. There is also the risk of a pipeline rupture on land. In 2008, Enbridge experienced 80 leaks on its 12,990 kilometres of North American pipelines. Combined, the incidents spilled a total of 2,682 barrels of oil.

By the end of this year, China’s oil consumption is expected to surpass that of the U.S., at more than 20.8 million barrels of oil per day, more than enough to fill Vancouver’s B.C. Place Stadium. And it’s not just China. Most of Asia is on the lookout for Canadian oil, says Gordon Houlden, director of the University of Alberta’s China Institute. “Japan is thirsty, Korea is thirsty, Taiwan is thirsty,” he says. “An outlet for Alberta oil is an outlet to Asia.”

It’s also about time Fort McMurray stop putting all its eggs in the U.S. basket, Houlden adds. Wooing some non-American oil buyers would help fetch a more competitive price for Athabasca oil and mitigate the U.S.’s growing oil sands squeamishness. If Fort McMurray’s oil ever gets hit with a U.S. carbon tax, oil companies may just find themselves scrambling for buyers. With China, Fort McMurray has an opportunity to hedge its bets and stop the scramble before it even begins. Besides, if the oil rich town can learn anything from its poorer coastal cousin, Kitimat, it’s that it’s never too early to diversify.