A rift between two Canadian provincial leaders deepened Friday, with repercussions for a major oil sands pipeline that could send crude to Asia.

British Columbia Premier Christy Clark and Alberta Premier Alison Redford spent much of last week in a public spat over Enbridge's Northern Gateway, which would carry crude on twin pipes from Alberta's oil sands region to Kitimat, British Columbia, if constructed.

On Friday, Clark briefly walked out of a meeting at a major conference and refused to join other Canadian premiers in backing a national energy strategy until Alberta addressed her concerns over the project.

"It is extremely unusual to have one premier standing up this strongly against another province on a major energy project like this," said Simon Dyer, an analyst at the Pembina Institute, a Canada-based environmental think tank.

The pipeline's progress is being watched closely by climate advocates as one of Canada's main alternatives for the oil sands in the wake of uncertainty over Keystone XL, a pipeline that also would carry oil from Alberta. Interest in the Asia connection spiked last week with a $15.1 billion Chinese bid to take control of a Canadian oil sands producer (EnergyWire, July 27).

The dispute between the two leaders could sway public opinion and the dynamic of ongoing national hearings on the $6 billion Enbridge initiative, analysts said. The production of oil in Alberta releases more greenhouse gases than traditional drilling, a factor that has sparked pipeline protests in the United States and Canada.

The premiers were discussing a new national energy strategy at the annual meeting in Halifax, Nova Scotia, of the Council of the Federation, an umbrella group for Canada's provinces and territories, when Clark left the room, according to numerous press reports. The strategy, if implemented, would be an update of a 2007 action plan that guided energy policies across Canadian provinces.

Of risks and royalties

The premiers ultimately released a communiqué without Clark's backing outlining broad principles the provinces should follow, including a call for a "more integrated approach to climate change, reducing greenhouse gas emissions and managing the transition to a lower carbon economy." Work on the strategy will continue with work groups led by Redford and other premiers.

"British Columbia will not be participating in any of those discussions until after we've seen some progress that our requirements for the shipment of heavy oil will be met," Clark said at an impromptu news conference in Halifax after the meeting walkout.

The disagreement began earlier this month, after the U.S. National Transportation Safety Board released a report critical of Enbridge for a 2010 spill on a different oil sands pipeline in Kalamazoo, Mich. Clark immediately began expressing public concerns about the dangers of similar spills from Northern Gateway.

She released five conditions last week that would have to be met before the province could approve the project, including the caveat that British Columbia should receive its "fair share of the fiscal and economic benefits" of the oil line to protect itself from environmental risks. The province also said it needed "world-leading practices for oil spill prevention."

Simultaneously, the British Columbia government concluded in a study that the $6.7 billion it was expected to receive in royalties from Northern Gateway would not cover all of the risks to waterways and the landscape from potential spills. The province said it bears 100 percent of the "marine risk," even though it would receive 8 percent of the revenue generated by the project.

The move prompted a sharp retort from Redford, who said that the idea of Alberta sharing more royalties with British Columbia was off the table. Canadian federalism dictates that provinces have jurisdiction over natural resources and their revenues, she said.

Enbridge is dedicated to providing $500 million for "increased monitoring and safety measures" that weaken British Columbia's argument that it needs compensation based on "potential risk," Redford said in a statement.

"Leadership is not about dividing Canadians pitting one province against each another -- leadership is about working together," Redford said.

The wild card

The oil industry further contends that environmental concerns about spills and the pipeline's contribution to climate change are exaggerated.

It would be foolish for the company to build a multibillion-dollar pipeline "if it wasn't safe," Enbridge spokesman Paul Stanway said in a recent interview.

The significance of the Clark-Redford feud in terms of the ultimate approval of the pipeline is a matter of debate.

Clark does not have the legal power to force Alberta to hand over royalties, Dyer said.

Because the pipeline crosses provincial boundaries, its jurisdiction falls under a national-provincial review panel conducting hearings on the project. The national government -- a strong Gateway supporter -- also can override the panel.

A wild card is First Nations groups, explained Dyer. Many aboriginal groups have signed the Save the Fraser Declaration against the pipeline, declaring they will not allow Enbridge Gateway to cross any native lands in the Fraser River watershed.

Not all aboriginal groups are opposed to the project, but the ones that are believe they have a viable legal challenge against the pipeline via their constitutional power to hunt and fish on their lands. Much of British Columbia does not have settled land rights through treaties, making the issue ripe for lawsuits.

On Friday, the Yinka Dena Alliance, a group of five First Nations, released a statement saying Clark did not go far enough. They said she should have opposed the pipeline outright, rather than negotiate about royalties.

"You can't put a price tag on our future," the alliance said.

Accusations of playing politics

There is speculation that Clark's main motivation is a tough provincial election fight next year from the New Democrats, which are staunchly opposed to Northern Gateway. Members of the opposition party have hired a legal team to assess how to block the project, said Eric Swanson, an analyst at the Dogwood Initiative, a sustainability group in British Columbia.

British Columbia wields significant power over granting access to crossways over rivers, streams and land plots, said Swanson.

"British Columbia could really tie things up through permitting," Swanson said.

But another analyst said it would be "unprecedented" for a province to stop a pipeline through permitting.

Yet Jim Meek, a columnist for The Chronicle Herald in Nova Scotia, wrote that it would not take much for Clark to create public relations headaches for Redford and national leaders by offering support to First Nation complaints.

Premier Clark is "capable of driving almost everyone else crazy by putting a temporary roadblock or two between [Prime Minister] Stephen Harper and his vision of Canada's future," Meek said.

Meanwhile, Clark is facing pressure from environmentalists who say she is stalling progress on climate change. The interjection of the pipeline debate into the Halifax meeting sidetracked discussion of the topic there, they said.

"It is encouraging that climate change, renewable energy, and greenhouse gas emissions reductions are included in the communiqué about an energy strategy ... however, it is disappointing that Clark is playing politics rather than working with her colleagues," said Merran Smith of Tides Canada, a foundation that issues environmental grants.

But University of British Columbia business professor Werner Antweiler told The Vancouver Sun that the intent of the national energy strategy is still vague and likely favors oil and gas interests in Alberta.

In an op-ed Saturday in The Globe and Mail, Clark defended her position, saying that the inherent risks of moving oil are not the same as those for other commodities like wheat, copper or lumber. She said the province would submit notice this week of its intent to "cross examine" Enbridge at Northern Gateway hearings of the joint review panel this fall.

"If a train carrying wheat from Saskatchewan derails as it's moving to a B.C. port for shipment to Asia, the fiscal and environmental costs are manageable in relation to the benefits we receive," Clark said. "The same cannot be said with shipping heavy oil."