The national debate over expansion of Trans Mountain pipeline grew even more heated last week. As expected, the British Columbia government asked the province’s highest court to rule on whether it can control transport of Alberta oil sands bitumen through its territory. On cue, Alberta premier Rachel Notley decried the move as creating economic gridlock for the country. And unhappily, the ongoing ritualized combat of the two NDP Premiers was accompanied by further indications that people in the affected provinces are themselves getting stirred up by the controversy.
The CBC, which is supposed to be a force for unity, strayed in the opposite direction, upping the pipeline stakes by conducting a poll to tell a familiar story. According to the CBC poll, 60 per cent of Albertans feel that “no matter who’s in charge in Ottawa, other parts of Canada will always be looked after first,” while 70 per cent of them believe Canada’s system of equalization payments is unfair to Albertans.
Not to be outdone on the polling front, NDP MP Kennedy Stewart, whose Vancouver-area Burnaby South riding includes the pipeline’s terminus, revealed that a survey of more than 1,000 British Columbians found that 12 per cent are willing to engage in civil disobedience to oppose expansion of Trans Mountain, owned by the Houston-based pipeline giant, Kinder Morgan. As if to underline the point, seven members from an inter-faith protest were arrested Sunday for impeding access to Kinder Morgan facilities in Burnaby. MP Stewart, a Halifax-born, Acadia graduate, was himself arrested in March for getting too close to the company’s Burnaby tank farm.
Meanwhile in Ottawa Trans Mountain dominated question period last week. The Conservatives claimed the Liberals weren’t doing enough to guarantee the pipeline gets built – despite the Liberals’ pledge to subsidize the thing. New Democrats, reduced to process issues by the two warring provincial NDP governments, cited reports from anonymous civil service insiders that call into question the integrity of the government’s consultation with First Nations on pipeline construction.
Although that particular angle was pretty much ignored in the amped-up mainstream media coverage of the story, failure to properly consult First Nations could violate the constitution, derailing the whole project. And consultation with First Nations is just one of many claims of unconstitutional behaviour being flung around. In response to the B.C. government’s constitutionally dubious opposition to Trans Mountain, the Alberta government has introduced equally dodgy legislation to restrict B.C.’s access to Alberta oil. Saskatchewan and Quebec have also weighed in, with the former weirdly embracing both sides of the argument –dismissing provincial rights when it comes to stopping a pipeline but asserting them when used to prevent a federal carbon tax.
The tragicomic thing about the multiple-ring political circus that is causing such stress to the country is that it revolves around a pipeline project that makes little or no economic sense. Almost two years ago (before the Trudeau cabinet approved Trans Mountain), I reported the analysis of Albertan David Hughes, an earth scientist who spent 32 years with Geological Survey of Canada. In a paper for the Edmonton-based Parkland Institute, Hughes debunked the whole rationale for the pipeline.
The Trudeau government is trying to sell the pipeline as a quid pro quo for the Notley government agreeing to both a carbon tax and a cap on greenhouse gas emissions from the oil sands. Hughes argued that if Alberta sticks to its commitment to hold emissions from the oil sands at 100 megatonnes (mt), new pipeline capacity will not be needed. According to his analysis, the 45 per cent increase in oil sands production allowed under the Notley government’s GHG cap will be able to reach markets through existing pipelines and rail connections.
Limiting emissions means limiting production, so where’s the need for added pipeline capacity? Trans Mountain proponents would argue that additional pipeline capacity to the coast is required to allow Alberta to sell its bitumen to the whole world, not just North America. Hughes’ report also disputed that claim, the one that has become central to the case being made for Trans Mountain, the idea that the landlocked Alberta oil patch needs a pipeline to tidewater to access world markets and the world price for its oil.
Price gap smaller
That argument had some validity four or five years ago when a glut of oil in the U.S. caused a gap of $15-$20 a barrel between the higher world price (the Brent price) and the North American price (WTI, for West Texas Intermediate). But by the time Hughes wrote his paper for the Parkland Institute, the glut was disappearing and the WTI price fetched by Alberta oil was returning to the historic price gap between the two benchmarks – less than $1 a barrel in favour of Brent.
Since Hughes wrote his report for the Parkland Institute, the likelihood of a recurrence of $15-$20 gap – the main rationale for the whole Trans Mountain project – has become more remote. The last two years have seen two pipeline approvals that could result in Alberta oil being able to reach overseas markets via the U.S. – Keystone XL to the Gulf of Mexico and an enlarged capacity Enbridge line to Lake Superior. But even without that added export capacity, the economic case for the Trans Mountain expansion remains shaky.
The large Brent-over-WTI gap still looks like a blip. According to the website YCharts, data from the Energy Information Agency showed the Brent international spot price $6.93 (US) a barrel higher than the WTI price on April 23, 2018. But that was unusually high. The spread bounces around, and the gap favouring Brent has been as low as $1.38 in 2018 and at different times over the last two years the WTI price has actually been higher than Brent. Add in hefty transportation costs to pay for the $8 billion Trans Mountain expansion and the additional expenses of shipping by tanker to Asia or wherever and its hard to see how moving a whole lot more bitumen through BC will ensure a better return for the product of the oil sands.
And considering that Trans Mountain expansion means construction across rugged environmentally sensitive terrain and suburban Vancouver neighbourhoods resulting in greatly expanded tanker traffic in the coastal fjord known as Burrard Inlet, you have to question whether even the mythical $15-$20 Brent-WTI gap is worth it.
Finally, there’s the dreary political calculation. It’s somewhat painful to say it, but a carbon tax and pipeline quid pro quo between the federal government and the NDP government of Alberta has a rapidly diminishing shelf life. The NDP’s victory in 2015 was more of an accident than a miracle, but its re-election in 2019 would be truly miraculous. That would leave the feds holding the bag for an economically dubious, environmentally dangerous pipeline in partnership with Jason Kenney – about whom the less said the better.
At this point, sanity may depend on a successful court challenge by one or more First Nations, or a good portion of those talking civil disobedience putting their bodies with their mouths are. Twelve per cent out of a population of 4.8 million souls makes for a lot of arrests. To paraphrase what SNCC (the Student Non-Violent Coordinating Committee) sang back in the 1960s in response to a segregationist Alabama governor: “Prime Minister, you never can jail us all; Prime Minister, Trans Mountain’s bound to fall.”