Friday, January 11, 2013

B.C.'s Pipeline Politics

Ever since China's economy started booming British Columbia has been billing itself as Canada's gateway to the Pacific.  Billions of dollars of investment has been made by China into western Canada, especially with regards to resource extraction.  Canada with the odd exception has by and large welcomed this investment in order to make our nation's economy less dependent on that of The United States of America.

Some of this investment has included access to Alberta's oil sands.  Having purchased a portion of this resource, China is anxious to get the oil that is produced to its country by the shortest route possible.  That means transporting it from Alberta across northern B.C. to a terminal in Kitimat and from there by supertanker to China.

In 2010 Enbridge submitted a proposal to build a twin pipeline to the National Energy Board.  The proposed project consists of two parallel pipelines running between Bruderheim, Alberta, and a marine terminal near Kitimat.  The two pipelines would be 1,177 kilometers (731 miles) in length.  One pipeline would pump Crude oil from Alberta to BC while natural gas condensate would move in the opposite direction. Condensate would be used to dilute the heavy crude oil and make it easier to transport by pipeline.

The crude oil pipeline would have a diameter of 36 inches (910 mm) and a capacity of 525 thousand barrels per day. The condensate pipeline would have a diameter of 20 inches (510 mm) with a capacity of 193 thousand barrels per day. The project, including a marine terminal in Kitimat, is projected to cost $5.5 billion and would be up and running by 2015 at the earliest if it is approved.  Given the political climate in B.C. that is a very big if.

The first problem the project faces is competition.  Kinder Morgan Energy operates the 1,150-kilometre (710 mile) long Trans Mountain pipeline system from Edmonton, Alberta to terminals and refineries in central British Columbia, Vancouver and the Puget Sound region in Washington State.  Kinder Morgan would like to increase their pipeline's capacity by twelve times, up to 600,000 barrels per day.   They believe their project is more cost efficient and by building along an existing pipeline route they hope to avoid the controversy that the Enbridge Project has suffered from.
Another competing project is TransCanada's Keystone XL pipeline which US President Barack Obama is expected to soon give approval to.  This project would  transport synthetic crude oil from Alberta's oil sands to refineries in Illinois, the Cushing oil distribution hub in Oklahoma and then finally connect to refineries along the Gulf Coast of Texas.
The problem for China is for both strategic and practical reasons, they don't want the oil they have purchased from Alberta flowing through the US and they don't want the extra cost and expense of shipping it by tanker from the Gulf of Mexico through the Panama Canal and then diagonally across the Pacific to China.

That brings us back to the Enbridge proposal.  BC NDP leader Adrian Dix has promised to pull B.C. out of the federal review process if he’s elected Premier in the upcoming May election.  Prior to recently being elected a federal MP for Victoria, B.C., Dix had hired constitutional lawyer Murray Rankin to consider a legal challenge on who has jurisdiction over pipeline approvals in B.C.

Rankin has argued that B.C. should withdraw from the federal government’s Pipelines review process and set up a made-in-B.C. environmental assessment process.  Adrian Dix meanwhile has stated that within a week of forming government he will withdraw B.C. from the 2010 agreement that left the environmental review of the project under federal government control.
Meanwhile the current Premier of B.C. Christy Clark has squabbled with Alberta Premier Alison Redford over concerns that BC will receive only a $6.1 billion share of the pipeline project that is expected to earn $81 billion in government revenues over 30 years, while having a majority of the environmental risk.

Last but not least many First Nations and Aboriginal Groups located along the proposed pipeline route have expressed their opposition to the Enbridge Project while there have been public opinion polls showing significant concern about increased tanker traffic along B.C.'s northern coastal waters.

All this has made getting Enbridge's Northern Gateway Pipeline Project approved all the more unlikely.  It is worth keeping in mind that this $5 billion to $6 billion project would be the largest private sector investment in British Columbia's history.  In addition to over $200 million per year in tax revenues for B.C., Enbridge's pipeline project would create 3000 jobs during the construction phase and 560 long term jobs.

There is one final point that few in the media have commented on.  Although pipelines are the most efficient ways to transport oil they are not the only means.  A more expensive option in terms of shipping costs, would be transport the oil by tanker cars on both the CN and CP rail tracks that go from Alberta to Kitimat.  From there the oil could still be loaded onto supertankers for shipment to China.

One thing is certain, having purchased a sizeable stake in Alberta's oil sands, China will get its oil shipped home.  The only question is whether or not the supertankers carrying that oil will be docking in Kitimat, Vancouver or the Gulf of Mexico.

Michael Geoghegan is a government relations consultant based in Victoria, BC