UPDATE 2-Northern Gateway panel issues draft pipeline conditions

Fri Apr 12, 2013 2:28pm EDT

* Release of conditions does not signal approval of project

* Conditions include C$950 mln to pay for spills

* Conditions on environment, construction, aboriginals

* Enbridge declines comment on whether conditions onerous

* Enbridge shares fall 0.5 pct

CALGARY, Alberta, April 12 (Reuters) - Enbridge Inc must provide at least C$950 million ($937 million) in guarantees, including C$100 million in ready cash, to cover the cost of oil spills and accidents from its proposed Northern Gateway pipeline, according to draft conditions released on Friday by the panel assessing the project.

Canada's Joint Review Panel issued its draft list of conditions Enbridge must meet before it approves construction of the controversial C$6 billion pipeline, a decision that must come by year end.

The list of 199 potential conditions cover how construction would proceed, environmental protection and aboriginal participation in the line, as well as how the company would pay for the clean-up of spills and other environmental damage.

The federal government and oil companies seeking an alternative to their reliance on the U.S. Midwest refining market and higher prices for Canadian crude have championed the project.

However Northern Gateway, which would carry 525,000 barrels per day of oil sands crude from near Edmonton, Alberta, to the deepwater port of Kitimat on British Columbia's northern Pacific coast, is bitterly opposed by environmental groups and aboriginal communities along the line's route who are concerned about the risk of oil spills.

The preliminary conditions include a number of steps Enbridge must meet prior to and during construction in order to prevent and mitigate potential environmental damage, offer benefits to aboriginal communities and lessen the risk of spills.

However, should a spill occur, the company must ensure it has set aside enough funds to pay for a clean up. That includes C$600 million in third-party insurance, C$100 million in ready cash and C$250 million in other guarantees and insurance.

The panel said in a release the conditions are a necessary preliminary step so that interested parties can comment or suggest additional conditions.

Enbridge spokesman Todd Nogier declined to comment on whether any of the conditions might be onerous.

The preliminary conditions will be part of the proceedings during final hearings on Northern Gateway, which are scheduled to start in June.

Enbridge will give its reaction first to the regulatory panel, Nogier said.

"Our team is taking a look at them, and really, out of respect to the process, characterizing any of the potential conditions in any way outside of the process would be inappropriate," he said.

Enbridge shares were down 21 Canadian cents at C$46.08 by midafternoon on Friday on the Toronto Stock Exchange

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