Could This Pipeline Be the “Greenest Ever”?

And does that make it more likely to get approved?

| More on:
The Motley Fool

Investors in Enbridge Inc (TSX:ENB)(NYSE:ENB) have without doubt been following the many twists and turns regarding the company’s Northern Gateway pipeline proposal. Most recently, in December, the National Energy Board’s Joint Review Panel recommended that the Canadian government approve the project, subject to 209 conditions. But that does not mean the pipeline will become a reality. And there are also concerns among shareholders about the potential liability that such a pipeline would bring.

In the latest issue of Oilweek, a well-respected trade magazine on Canada’s oil and gas industry, R.P. Stasty suggested that Enbridge’s Northern Gateway could be the “greenest pipeline ever”. Environmentalists contend that there is no such thing as a green oil pipeline, but such assertions could make the project easier for the government to approve. And hopefully they could set Enbridge investors’ minds at ease.

Preventing spills

Enbridge is certainly going above and beyond to prevent a pipeline rupture. To start, the pipe used will be 20% thicker than normal. At water crossings, the pipe will be even thicker, and will be laid at a greater depth than is custom. The company will also tunnel through two mountains to reduce the risk of landslides damaging the pipeline. Isolation valves, which are critical for stopping the flow of oil in the event of a leak, will be installed across shorter intervals. Enbridge also plans to follow the “10 minute rule”, which states that if there’s an abnormal reading for 10 minutes, the pipeline gets shut down.

The panel estimated that the pipeline, on average, would rupture once every 464 years.

Accountability

Enbridge will be required to maintain a $950 million reserve to cover potential oil spills, and if that is not enough, then the company will have to use its cash flow, debt markets, equity markets, or the sale of assets. This is in addition to $1.35 billion available under regulatory marine arrangements, as well as any money covered by insurance contracts.

Foolish bottom line

Clearly if there is a major accident with a pipeline like Northern Gateway, that will create a very large liability for Enbridge. Such a risk should not be ignored by investors. Investors in TransCanada Corporation (TSX:TRP)(NYSE:TRP) are facing similar risks with the Keystone XL pipeline.

But given all the precautions that Enbridge is taking, there is certainly an increased likelihood of the project getting approved. And if it does, then investors should still be able to sleep
easily.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair holds no positions in any of the stocks mentioned in this article.

More on Investing

Aerial view of a wind farm
Energy Stocks

Is There Any Hope for Brookfield Renewable Stock?

Brookfield Renewable stock (TSX:BEP.UN) may be going through a rough patch, but recent moves suggest more is yet to come.

Read more »

Growing plant shoots on coins
Dividend Stocks

Better Buy in August: Passive-Income or Growth Stocks?

With a steady mix of passive-income and growth stocks, investors can create a prime portfolio even during market volatility.

Read more »

Woman has an idea
Stocks for Beginners

Why Canadian Investors Should Consider Investing in U.S. Stocks

In my opinion, U.S. stocks should be a large component of a Canadian investment portfolio.

Read more »

Money growing in soil , Business success concept.
Tech Stocks

The Smartest TSX Growth Stocks to Buy in July 2024

If you are looking for some smart growth stocks, here are four to look at right now.

Read more »

a person prepares to fight by taping their knuckles
Dividend Stocks

3 Defensive TSX Stocks for Lower-Risk Investors

These three TSX stocks are all high-quality companies with defensive businesses, making them ideal for low-risk investors.

Read more »

Paper Canadian currency of various denominations
Investing

Where to Invest $10,000

These companies have strong fundamentals with the potential to deliver solid capital gains.

Read more »

healthcare pharma
Investing

Up 23% This Year, Is WELL Health Technologies a Good Stock to Buy Right Now?

Given its long-term growth prospects and attractive valuation, WELL Health's uptrend could continue.

Read more »

ETF chart stocks
Dividend Stocks

2 Canadian ETFs to Buy and Hold Forever in Your TFSA

ETFs like iShares Canadian Quality Dividend ETF (TSX:DIV) have delivered admirable total returns.

Read more »