Liberal win in Canada's British Columbia may raise pipeline odds

Wed May 15, 2013 6:02pm EDT

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* Surprise Liberal win in B.C. may boost pipeline plans

* Political opposition had pledged to block new pipelines

* B.C. premier will support lines that meet conditions

By Scott Haggett

CALGARY, Alberta, May 15 (Reuters) - The surprise re-election of the ruling Liberal party in the Canadian province of British Columbia might give a boost to energy industry plans to build oil pipelines to Canada's Pacific coast, lines the Liberals' opponents had pledged to block.

Although polls had widely forecast a resounding victory for the left-leading New Democratic Party after 12 years of Liberal rule, voters returned the government of Premier Christy Clark to power with a strengthened majority, although Clark lost her own seat to an NDP challenger.

Clark promised to approve pipeline projects that met a list of conditions, while the NDP, led by Adrian Dix, said it would halt the lines.

The Liberal win might boost the odds that at least one of two proposed pipelines that would carry oil from Alberta's oil sands to the Pacific coast will proceed, despite public misgivings.

"The clear opposition to the pipelines that Adrian Dix and the NDP put forward has now lost," said Kathryn Harrison, a political science professor at the University of British Columbia.

"Clark has her conditions, so she is not automatically saying yes. But she has definitely left the door open and I think after the election outcome, the door is probably a little further open."

Canadian oil producers are seeking new Asian markets for rising production from Alberta's tar sands. They hope to boost prices depressed by tight pipeline capacity and new domestic supplies in the United States, which currently receives almost all of Canada's exports.

The two oil pipelines have become contentious in B.C., particularly for environmentalists and aboriginal groups concerned that oil spills would mar the province's pristine landscapes and sully its coast.

Kinder Morgan Energy Partners LP is in the early stages of a plan to expand its 290,000 barrel per day Trans Mountain pipeline to carry nearly 900,000 bpd of oil sands crude from Edmonton, Alberta, to Vancouver.

Enbridge Inc's C$6 billion ($5.9 billion) Northern Gateway pipeline would take crude from Edmonton to Kitimat, on British Columbia's northern coast. It is awaiting a regulatory decision on whether the pipeline can proceed.

Although many in British Columbia are leery of the oil pipelines, other energy projects have received wide support. A host of new liquefied natural-gas plants are planned for the province's northern coast to take gas from the province's massive shale fields to Asian customers.

The Clark government has endorsed LNG development for its potential to boost government revenues, replace coal-fired power in Asia and provide employment in the province's north.

"The overall LNG export-supportive message from the Liberal party remains in place," Anthony Yuen, an analyst with Citi Research, wrote in a note to clients. "British Columbia is strongly supportive of gas exports because the province can receive the entire economic benefit, as many gas fields are located inside the province, and gas is perceived to be cleaner than oil."

While Northern Gateway faces united opposition from aboriginal groups along the pipeline's route, Enbridge said on Wednesday it expects to work with Clark's government to ensure the province backs the project.

"Our strategy is to continue to work with the government and help them to understand the project and what it is we are committing to and to work with the government so we can understand what their concerns are," said Janet Holder, executive vice-president of Western Access at Enbridge.

Trans Mountain could not be immediately reached for comment.

Clark laid out five conditions last year that must be met before the province will support construction of an oil pipeline. Those include a bigger slice of tax revenue than British Columbia currently receives, federal regulatory approval, top-notch spill prevention and clean up systems, and aboriginal consultations and benefits.

While her request for additional revenues from other governments has been contentious, Clark said on Wednesday she expects all her conditions to be met.

"There are five conditions, they are not going to change," she told reporters. "Any expansion of heavy oil will have to meet those five conditions. I am hopeful other governments will decide they want to engage on this."

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