The latest oil spill from Enbridge Inc.'s (ENB) Mainline pipeline system is bad timing for Canadian pipeline companies, which are trying to gain public support for new oil projects in Canada and the U.S.
The spill of some 1,200 barrels of oil in Wisconsin Friday occurred almost two years to the day after Enbridge spilled 20,000 barrels of oil into Michigan's Kalamazoo River in the most costly onshore spill in U.S. history.
The latest spill may undermine Enbridge's efforts in Canada to get support for its Northern Gateway pipeline from Alberta to the British Columbia coast. In the U.S., it gives the oil industry's critics more ammunition against pipeline projects awaiting approval, such as the $6 billion of oil pipeline expansions planned in the U.S. by Enbridge and TransCanada Corp.'s (TRP) Keystone XL pipeline awaiting approval.
"It creates more resistance for any kind of greenfield operations they're trying to do, including the Northern Gateway pipeline," UBS analyst Chad Friess said. "It's equally harmful for any of the other companies trying to push through greenfield projects, such as the Keystone XL or anybody else."
In Canada, Enbridge is trying to get native groups on board by offering a 10% equity stake in the Northern Gateway project, estimated to cost 6 billion Canadian dollars (US$5.99 billion), which would ship up to 525,000 barrels of oil a day by 2017 from Alberta to a British Columbia port.
"It's going to be a lot harder to get Northern Gateway done," after the Wisconsin spill and one of similar size in Alberta last month, said Jack Mintz, a public policy professor at the University of Calgary. The cost of getting public acceptance for new Enbridge oil pipelines goes up every time they spill oil, he said.
Enbridge's reputation is already being questioned in the U.S., where the National Transportation Safety Board in July likened the company to the "Keystone Cops" in its handling of the 2010 Michigan spill.
In Washington D.C., the ranking member of the House Committee on Natural Resources Ed Markey said the Wisconsin spill "call(ed) into question the ability of pipeline companies and systems to safely deliver oil from Canada to the United States."
Mr. Markey, a Massachusetts Democrat, plans to call for Congressional hearings on the spill when lawmakers convene in September, a spokesman said.
Any political opposition could slow Enbridge's progress in expanding its pipeline network from the Canadian border to the Gulf Coast, as scrutiny of environmental safety increases, said Latha Ramchand, dean at the University of Houston's Bauer College of Business.
"Any time an event like this happens, it makes the caution index go up," Ms. Ramchand said.
TransCanada's Keystone XL pipeline is also awaiting a decision from the U.S. executive branch, expected early next year.
Enbridge didn't respond to a request for comment, though it said in a statement on the Wisconsin spill that its safety and environmental standards are stringent and that protecting people and the environment are its highest priorities.
Brenda Kenny, president of the Canadian Energy Pipeline Association, an industry group that represents Canadian pipeline companies like TransCanada and Enbridge, said pipeline spills are still relatively infrequent and that technology has improved safety. The association's members have about 3.3 incidents a year on average over the last 10 years. "Given that our member companies transported 5.3 trillion cubic feet of natural gas and 1.2 billion barrels of crude oil and refined products in 2011, this number is relatively small," she said.
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