In early November, the Trudeau government tabled a ministerial panel report on the Trans Mountain Expansion Project proposed by Kinder Morgan, a Houston-based energy corporation.
The government struck the panel due to falling oil prices and lack of public trust in the National Energy Board’s May 2016 approval of the project.
The NEB, for example, refused to examine the project’s impacts on climate change beyond direct greenhouse gas emissions, and declined to consider latest research on the extraordinary risks and liabilities associated with spills of diluted bitumen.
The panel noted that many Canadians felt the NEB’s approval “left gaps — in knowledge and public confidence — that were so significant that the Board’s recommendation could not, of itself, support a government approval of the Trans Mountain Pipeline project.”
Earlier this year, the three-member panel held 44 public meetings with 2,400 Canadians to identify what the controversial NEB review missed or excluded.
After reviewing submissions and the facts, the panel expressed its findings not as a series of recommendations, but as six unanswered questions on everything from basic economics to First Nations’ rights.
The basic facts are these:
Kinder Morgan, a U.S. company with $43 billion worth of debt, has NEB approval to twin its pipeline, increasing capacity from 300,000 barrels per day to 890,000 barrels per day.
The expansion, together with other proposed pipeline approvals, would help double oil sands production of 2.4 million barrels a day to 4.8 million barrels a day by 2040.
As a result of the Kinder Morgan project, oil tanker traffic along the B.C. coast would increase from four or five a month to 34 tankers.
The best science to date concludes that there is no established or competent method for cleaning up diluted bitumen once it has been spilled in any aquatic environment.
The tar sands produce among the world’s most costly oil, and are already the largest source of greenhouse gases in the nation.
The International Energy Agency says in its latest Oil Market Report that, “There is currently little evidence to suggest that economic activity is sufficiently robust to deliver higher oil demand growth.”
Nearly 60 First Nations and 22 municipalities oppose the project, including the cities of Vancouver and Burnaby.
The panel noted that “the issues raised by the Trans Mountain Pipeline proposal are among the most controversial in the country, perhaps in the world, today: the rights of Indigenous peoples, the future of fossil fuel development in the face of climate change, and the health of a marine environment already burdened by a century of cumulative effects.”
Here, then, are the key unanswered questions for a project whose fate the Trudeau government will decide by Dec. 19:
1. Can construction of a new Trans Mountain pipeline be reconciled with Canada’s climate change commitments?
The ministerial panel noted that a report by Vancouver lawyer David Gooderham captured the essence of the problem: “Canada has promised to reduce greenhouse gas (GHG) emissions 30 percent from 2005 levels by 2030, while at the same time proposing to double production from the oil sands, the country’s largest point source of GHGs, by 2040.”
As the panel summarized Gooderham’s point: “‘We’re being invited to acquiesce to a pipeline expansion that offers no chance at all’ of keeping the commitments that the federal government made in the 2015 Paris climate talks.”
The panel then added these remarks:
“One of the most often-quoted experts on this question is Mark Carney, former Governor of the Bank of Canada and current Governor of the Bank of England. In a speech to the insurers at Lloyds of London in 2015, Carney said the world cannot safely — or profitably — continue to exploit fossil fuels.
Carney said: “Take, for example, the IPCC (Intergovernmental Panel on Climate Change) estimate of a carbon budget that would likely limit global temperature rises to two degrees above pre-industrial levels: That budget amounts to between one-fifth and one-third of the world’s proven reserves of oil, gas and coal. If that estimate is even approximately correct it would render the vast majority of reserves ‘stranded’ — oil, gas and coal that will be literally unburnable without expensive carbon capture technology, which itself alters fossil fuel economics.”
2. In the absence of a comprehensive national energy strategy, how can policy makers effectively assess projects such as the Trans Mountain pipeline?
The ministerial panel noted that, “It’s clear that the Government cannot create a national energy strategy overnight, nor can it put every project proposal on hold pending the establishment of such a strategy. Similarly, the federal-provincial agreements necessary for a national climate strategy also impose an inevitable delay.
“But as the Ministerial Panel heard, from project proponents and opponents alike, a broader and more transparent planning regime would offer certainty to industry and reassurance to those who are worried about the social, environmental and economic consequences of huge new resource-related developments. It leaves the difficult question of how to plan in the meantime in a way that gives these groups comfort that a broader vision is being considered.”
3. How might Cabinet square approval of the Trans Mountain Pipeline with its commitment to reconciliation with First Nations and to the UNDRIP principles of “free, prior, and informed consent?”
The panel wrote: “As we heard from Indigenous presenters all along the route, the pattern in recent years has been for government to devolve the obligation to consult to others and in this case to the NEB and Trans Mountain, which negotiated benefit agreements with several First Nations whose rights would be impacted by the project. However, this delegation of responsibility for consultation was rejected in the June 2016 Federal Court decision that rejected the NEB approval of the Enbridge Northern Gateway Pipeline on the basis that the federal government had not adequately consulted First Nations.
“This may be particularly the case if interim agreements or side consultations are used — or even just seen — to undermine Indigenous rights. As Chief Bryce Williams of the Tsawwassen First Nation said in an online submission to the panel: ‘We do not see significant value in discussing ‘mitigation’ or other initiatives to reduce the potential impact... as we are concerned that our participation in those initiatives will be used as evidence that we are active participants in the process — and de facto, that we have been ‘consulted’ or ‘accommodated’ with respect to the project.’”
4. Given the changed economic and political circumstances, the perceived flaws in the NEB process, and also the criticism of the Ministerial Panel’s own review, how can Canada be confident in its assessment of the project’s economic rewards and risks?
Throughout its report, the ministerial panel cites evidence questioning the economics of the project.
“Robyn Allan, a former President and CEO of the Insurance Corporation of BC and, before that, senior economist at the BC Central Credit Union has done considerable research that challenges the economics of the Trans Mountain proposal, for the industry and for Canada. For example, she documented that the companies that signed take- or-pay shipping contracts in support of the Trans Mountain Pipeline did so before the 2014 fall in oil prices. “And while demand for pipeline capacity has since fallen commensurately (Allan documents 2.6 million barrels/day of proposed oil sands production that has been cancelled or deferred since 2014), the signatories are contractually bound to use the new pipeline should Trans Mountain build it — and are prohibited by the same contracts from speaking out against the pipeline in the meantime. Allan points out that her argument that new pipeline capacity is not needed accords with a leaked federal Finance Department document that suggests Canadian oil companies will not need new pipeline capacity before 2025 at the earliest.
“As for an anticipated increase in government revenue, Allan points out that Kinder Morgan has been clear in its annual report communications to shareholders that it pays very little tax on its Canadian operation: during the five years between 2009 and 2013, Kinder Morgan reported average income of $172 million on which it paid an average $1.5 million in taxes. Accordingly, any government windfall would have to come from increased income on oil sales.
“On that count, University of British Columbia political scientist (and Acting Dean of Arts) Kathryn Harrison wrote, in her submission to the panel: ‘The economic analysis underlying the Trans Mountain proposal does not take into account the potential for policy changes to impact global demand for oil, particularly Canada’s relatively expensive and carbon-intensive oil. It is not credible that policies affecting demand for oil will remain stagnant for the 20-to 30-year life of the proposed project... It is already projected that petroleum consumption in California, Japan and South Korea will decline. In the case of China and India, there is greater uncertainty to be sure, but it is a fundamental flaw of the TMX proposal that it does not even consider the implications of possible climate policy initiatives in making the economic case for the project.’
5. If approved, what route would best serve aquifer, municipal, aquatic and marine safety?
From the report: “The route question came up again and again during panel meetings. Presenters along the proposed route complained about the risk to treasured places such as Jasper National Park or Surrey Bend Regional Park. They worried about a leak into the drinking water aquifers in the Fraser Valley. Residents of Burnaby complained about the prospect of Trans Mountain tripling the capacity of its tank farm at the foot of Burnaby Mountain and filling those tanks with a highly volatile substance — diluted bitumen — an explosion from which could strand more than 35,000 people. The students, staff and faculty of Simon Fraser University and the residents of the adjacent community, UniverCity, currently have no other way off the mountain in the event of a fire at the tank farm, which sits at the intersection of the only roads up or down the mountain.
“Presenters also questioned the positioning of an expanded oil export terminal in the least-accessible portion of the busiest port in Canada. They expressed their concern about the route through the Salish Sea and the inevitable impacts on marine mammals and other sea life — even if there was never an accident… More than one presenter suggested to the panel that the Trans Mountain route, as proposed, is an historical accident, not a first choice. They said they doubted that anyone, designing an optimal route today, would choose to thread the pipeline through some of the most densely populated parts of British Columbia and into the busiest waters.”
6. How does federal policy define the terms “social licence” and “Canadian public interest” and their inter-relationships?
The panel wrote: “The NEB offered no evidence in its report on the Trans Mountain proposal as to what specific elements of the Trans Mountain proposal fulfilled the public interest. Acknowledging its responsibility to weigh benefits against negative impacts, it stated: ‘The Board recognizes that there are burdens associated with this Project that cannot be completely mitigated and that these residual burdens rest primarily within the local and regional communities. This includes Aboriginal communities.’ The NEB further stated that while the benefits were ‘national or regional in scope,’ the burdens ‘would be shouldered by local and regional communities.’ This was the complaint most often put to the panel, that the communities that carry the most risk will not enjoy the benefits, many of which flow instead to an infrastructure company that is not even based in Canada.”
The ministerial panel identified these specific six high-level questions because it heard them repeatedly, and likely realized there could never be any social license for the project without their transparent deliberation.
The widely criticized NEB process failed to address any of these issues.
As a result, the panel has commended to the Government of Canada these as yet unanswered yet momentous questions “for serious consideration — if not resolution — as it considers the potential future of this project.”