"From the perspective of British Columbians, this doesn't look good," Elisabeth Graff told John Carruthers at federal hearings on the $6-billion line that would ship Alberta crude to B.C.'s coast.
Graf questioned Carruthers over the decision by Calgary-based Enbridge (TSX:ENB) to hive off the Northern Gateway project as a limited partnership, with Enbridge having a 50 per cent stake and private investors covering off the rest.
That, noted Graf, means Enbridge would only be liable for an equivalent amount of liability in the case of a major catastrophe, such as the $800-million oil spill on an Enbridge pipeline in southern Michigan in 2010.
"Are you willing to acknowledge this is a complex organizational structure that limits the liability of a corporate giant that definitely would have sufficient funds?" she asked.
"What we're left with is an entity which you tell us has the financial resources necessary to cover any type of spill, but we're still doubting whether that is possible."
"No, I just fundamentally can't accept that," replied Carruthers, adding Northern Gateway and its investors would not invest in such a megaproject only to see it sunk by a environmental catastrophe.
"Because of the investment, everyone would want to make sure there's proper funding available in case of a spill," he said.
He said the issue is not the corporate organizational structure but whether a spill will be cleaned up properly and paid for by the operators. That will happen, he said, through adequate insurance and in-house savings. The project is expected to realize an annual net income of more than $300 million.
"British Columbians would need to know there's an effective response to any spill (and) we're very much aligned with that," he said.
Carruthers and six Enbridge economists have been taking questions this week from interveners, including the B.C. government, as part of a federal joint panel review of the pipeline.
The three-member panel is to make a recommendation to the federal government by the end of next year on whether the pipeline is needed given oil supply and demand, and whether the line can be built and sustained safely.
Carruthers said the decision by Enbridge to hive off Northern Gateway and take on investors is simply sound and commonly accepted business practice.
Graf and Carruthers fenced for half an hour, and Graf pushed her point hard.
"Would Enbridge consider changing this ownership structure?" she asked.
No, replied Carruthers, adding there is already high interest among investors to take an ownership position.
"Would Enbridge consider backstopping Northern Gateway … serving as guarantor for instance in the event of a large spill?" asked Graf.
Isn't that the same question? Carruthers replied.
How about Enbridge guaranteeing a loan for Northern Gateway to clean up a spill? she asked.
Not realistic, Carruthers said.
"The structure is set to properly allocate the risk among the owners, including aboriginal," he said.
"If it was 100 per cent owned (by Enbridge), I concede we could structure it differently, but that wasn't the intent or expectation from Day One."
Your argument doesn't add up, Graff told him.
"If you're that confident that Enbridge would not have to backstop Northern Gateway in the event of a large spill, then why does Enbridge feel the need to limit its liability?" she asked.
At that point, an Enbridge lawyer stepped in and asked panel chair Sheila Leggett to intervene.
"I think it's been asked and answered," he said.
Leggett agreed. "The panel would ask you to move on," she told Graff.
Earlier Friday, Graff suggested to Enbridge economist Jack Ruitenbeek that the numbers the company is using to estimate the cost to clean up a Gateway spill is a small fraction of what it really cost Enbridge to clean up a massive oil spill in southern Michigan in 2010.
Enbridge estimates cleaning up a spill and repairing the environment costs up to $14,000 a barrel, noted Graff.
But she said the Enbridge spill that fouled the Kalamazoo River in 2010 released more than 20,000 barrels.
By Enbridge estimates of $14,000 a barrel, said Graf, the Michigan clean up should have cost $281 million. But the actual cost was almost three times that figure, at $767 million, and covered only the clean up and not the environmental rehabilitation.
"How do you account for this discrepancy?" she asked Ruitenbeek.
Ruitenbeek said the Michigan spill was a statistical "outlier" given it happened in the United States, where clean up costs are higher, along with a large population around the spill site to consider.
Northern Gateway has become a high profile, contentious issue in B.C. The line will traverse wetlands, wilderness, First Nations territories and hundreds of streams and waterways before reaching a marine terminal at Kitimat. From Kitimat, tankers will then have to navigate the rocky outcroppings of the Douglas Chanell to reach the Pacific Ocean.
Critics and some First Nations leaders say that given the delicate ecosystem and Enbridge's safety track record the project is not worth the risk.
B.C. Premier Christy Clark has said her government won't consider signing off on the deal until it gets a better percentage of the profits and it's satisfied with steps taken to prevent spills and clean them up should they occur.
Enbridge estimates that reaching markets in Asia via Northern Gateway would boost Canada's GDP by $312 billion over 25 years.
B.C. estimates $81 billion in tax revenue will be accrued by the pipeline over 30 years, with $36 billion going to the federal government, $32 billion to Alberta and just $6 billion to B.C.
On Thursday, B.C.'s Environment Minister Terry Lake underlined provincial concern by personally attending the hearings.
On Friday, Janet Holder, Enbridge's senior executive in charge of Northern Gateway, attended.
Outside the hearing, Holder told reporters the company has no intention of saddling B.C. citizens with a polluted mess or a large cleanup bill.
"We're doing everything in our power to mitigate against a spill," said Holder.
"Believe me, Enbridge doesn't want a spill. It's not what we're in the business for. We're in the business of moving very safely, environmentally sound and in a sustainable way, product from one spot to another."
When the hearings began Friday, there was some question whether Graff would be allowed to ask any questions at all.
Leggett shut down Graff's line of questioning Thursday. She said the Edmonton hearings are to focus on finances and economics and insurance issues would be better heard by an upcoming panel in B.C. that is to hear evidence about pipeline safety and emergency preparedness.
However on Friday, Leggett allowed broad questions on spill liability after Graff and Enbridge agreed the topics had sufficient stand-alone economic merit.