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PREVIEW-Day of decision for Canada's Northern Gateway pipeline

Scott Haggett and Randall Palmer
Wednesday, 18 Dec 2013 | 6:30 PM ET

CALGARY/OTTAWA, Dec 18 (Reuters) - Enbridge Inc will learn on Thursday whether Canadian regulators will recommend approval of its proposed C$6 billion ($5.7 billion) Northern Gateway oil pipeline, a project that has raised fierce opposition by environmentalists and aboriginals.

The joint review panel's decision is the first major regulatory hurdle for the project, which would carry crude from Alberta's oil sands to Canada's west coast for shipping to energy-hungry Asia. The federal government is eager to develop new markets for Canadian energy to reduce the country's dependence on the United States.

It comes more than three years after Enbridge, Canada's largest pipeline company, filed for regulatory approvals for the project and two years after the panel opened hearings throughout Alberta and the western province of British Columbia.

Time hasn't softened the project's critics. Environmental groups, the government of British Columbia led by Premier Christy Clark and aboriginal communities along the line's proposed 1,170-kilometer (725-mile) route are concerned that land or marine oil spills will damage the province's pristine landscapes and disrupt subsistence hunting and fishing.

Most observers see the panel recommending that the line go ahead as long as Enbridge can comply with the conditions regulators impose.

"We think it gets approved," said Steven Paget, an analyst at FirstEnergy Capital. "But it doesn't change the significant amount of local opposition."

A favorable recommendation and a subsequent federal government approval are expected to meet with a barrage of court challenges.

"Our first steps will be (to go) to the premier and insist that if it is the opinion of the province that the pipeline shouldn't be built then they should act on that," said Ben West, tar sands campaign director for the environmental group ForestEthics Advocacy. "There's also, of course, the legal option."

Northern Gateway will carry 525,000 barrels of oil sands crude per day (bpd) from Edmonton to the port of Kitimat on British Columbia's northern coast and return 193,000 bpd of condensate used for blending into the tar-like bitumen from the oil sands.

The line is backed by Canadian, U.S. and Chinese oil companies looking to tap high-paying Asian markets for oil sands crude and reduce their reliance on the over-supplied U.S. market, which now buys nearly all of Canada's oil exports but pays a steep discount to benchmark oil prices.

Pipeline companies like Enbridge have proposed a handful of new projects and expansions to get Canadian crude to higher-paying markets and to buoy prices that have been discounted because there is not enough existing pipeline capacity to transport supplies. The most prominent is TransCanada Corp's controversial Keystone XL project linking the oil sands to U.S. Gulf refineries. Last week, Kinder Morgan Energy Partners LP unveiled a plan to nearly triple the size of its Edmonton, Alberta-to-Vancouver Trans Mountain line to 890,000 bpd.

The Northern Gateway panel will release its decision on Thursday after markets close. It can recommend against construction or back the project with conditions aimed at limiting the pipeline's environmental impact.

But the ruling is merely a recommendation. The final decision rests with the cabinet of Canada's Conservative government, which strongly supports the concept of diversifying Canadian oil exports.

Under legislative changes introduced last year to speed what was seen as a needlessly slow regulatory process, the federal government has 180 days to make a decision based on the panel recommendations.

Over that time the government will consult with aboriginal groups and other interested parties. The file is within the purview of Natural Resources Minister Joe Oliver - who in 2012 characterized some of the line's opponents as radicals funded by foreign special interest groups - but the decision will be made by Prime Minister Stephen Harper's cabinet.

If the federal government approves the project after the review process, First Nations will respond swiftly with legal action, aboriginal leaders said.

"Those strategies are being worked out as we speak," said Art Sterritt, executive director of Coastal First Nations, an alliance of the province's coastal aboriginal communities. "People are looking at how to bring all our legal teams together to determine what the best strategies are."

The big worry for many native communities is the potentially devastating impact of a tanker accident along British Columbia's central and north coasts. A major spill would cripple fisheries, putting some 30,000 jobs and C$3 billion in annual revenues at risk, Sterritt said.

"Any government, democratically elected, cannot just run roughshod over one segment of a federation in order to promote the interests of another," he said. "One spill in that region would mean the end of all of that for generations to come, if not for all time."

Other leaders have said aboriginal groups will take direct action if Northern Gateway is approved, including street protests and blockades along the planned pipeline route.

The Conservative government streamlined the review process in 2012 to prevent what it saw as a seemingly endless series of environmental assessments by different agencies and jurisdictions. The revamped process provides a "one-window regulator" and requires recommendations within a set time frame, 18 months in the case of Northern Gateway.

Because the Conservatives have a majority in Parliament, they do not need the support of the opposition parties to make their decision, though that would smooth the path.

Both the Liberal and New Democratic parties oppose the Northern Gateway pipeline, though a spokeswoman for Liberal leader Justin Trudeau would not comment on whether he would continue to oppose it if the National Energy Board recommends its approval.

New Democratic Party leader Thomas Mulcair has said if he were prime minister he would respect NEB recommendations, but he said in this case he would never have let the pipeline go to an assessment.

Mulcair said on Wednesday the federal government had failed to respect aboriginal rights and engage in meaningful consultations with them as required by the Supreme Court.

"The Conservatives have totally ignored that and ... they're playing with fire when they do that, because this is not going to be allowed to go through without a peep. They're making a huge mistake in that regard."

($1 = 1.0606 Canadian dollars)

(With additional reporting by Julie Gordon in Vancouver; Editing by Frank McGurty and Tim Dobbyn)

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