Published: Sunday 2019-01-13
From here in BC, the Trans Mountain expansion project (TMX) seems like an
irresistible force meeting an immovable object. I think the Trudeau government
will still make it happen, but it won't be easy.
Lack of pipeline capacity is costing the Canadian economy something like
$15B/year, due to the increased discount on Canadian oil exports. Most of that
cost is borne by Alberta, but not all of it, since the oil sands bid up wages
On the other side, there's three major obstacles: the increased risk of a
tanker spill, opposition to climate policy in Alberta, and most importantly,
the delicate political situation with First Nations in BC.
Finally, there's people who are fine with the pipeline when it's the private
sector that's taking on the financial risks, but who don't like taxpayers
bearing the risk.
(1) Increased risk of a tanker spill
People in Vancouver are concerned about the increased risk of a tanker spill -
the number of tanker visits will increase from 1/week to 1/day. That said, the
Trans Mountain expansion is following an existing right-of-way to a busy
commercial port (unlike Northern Gateway, which would have been a new pipeline
to the north coast). Vancouver has 3200 large container ships and cruise ships
visiting each year, along with the ferries going back and forth. We've shipped
oil out of Vancouver for the last 60 years, and diluted bitumen for the last 30
years. The Trudeau government is aiming to boost marine safety for
commercial shipping in and out of Vancouver, not just the additional tankers.
It's probably worth noting that without new pipelines, Alberta will buy
thousands of tanker cars and ship the oil by rail, which is both more expensive
and less safe.
(2) Climate change
The Trans Mountain expansion also ties into people's concerns over climate
change, and Alberta's opposition to climate policy. It's great that the Notley
government has put a
serious climate policy
in place (with a broad carbon tax and phasing out coal-fired power), halting
Alberta's total growth in emissions. But Kenney's promising to reverse this if
he defeats Notley in May 2019.
This is where the federal backstop comes in. Under the national climate policy,
each province can either do carbon pricing itself, or the federal government
will do it for them, using a federal carbon tax starting at $20/t or 4.4 c/L
(and returning the revenues to households in the province). This starts April 1
in Ontario, Saskatchewan, Manitoba, and New Brunswick.
Why is carbon pricing so important? (There's other measures in the national
climate plan, like phasing out coal-fired power by 2030, but carbon pricing is
the centrepiece.) The basic idea is that first we cut emissions which are worth
less than $20/t, than those which are worth between $20/t and $30/t, and so on.
This is cost-effective, because we're always cutting the cheapest, least
valuable emissions first. And it's fair, because it distributes the costs
across the entire economy, rather than putting them all on a particular
province (Alberta) or a particular economic sector (the oil sands).
Andrew Scheer's vowed to end the federal carbon tax if he's elected in October
2019. But defeating Trudeau will be a much heavier lift than defeating Notley.
The other question is: okay, cutting emissions with a carbon tax is fine, but
shouldn't we also be trying to cut global emissions by not adding any more
supply? (The "keep it in the ground" / "climate leaders don't build pipelines"
It turns out that trying to cut global emissions by withholding supply is
ineffective as well as expensive. It's ineffective because oil-importing
countries will just buy their oil elsewhere. (If I buy all my groceries from my
local Safeway, and it shuts down, I won't starve.) Replacing a barrel of
Canadian oil with a barrel of oil from elsewhere isn't
because Canadian oil is somewhat
to extract than the world average - but most of the emissions come from
actually burning the oil. And it's expensive, of course, because of the
resulting discount on Canadian oil.
asked about this directly:
Most Canadians reject the argument that increasing the capacity of pipelines
to get our oil to new markets will end up meaning more oil will be used in the
world for longer. The majority (68%) believes that expanding our access to new
markets won’t affect global oil consumption but
will increase the economic
benefits for Canadians.
(3) First Nations
First Nations in BC never ceded their land by treaty, unlike the rest of
Canada. I think of them as our
landlords. Northern Gateway was overturned
by the courts because the Harper government had failed to consult with First
Nations, and in fact had really aggravated them.
( Eden Robinson,
writing in 2014: "If Enbridge has poked the hornet's nest of aboriginal unrest,
then the federal Conservatives, Stephen Harper's government, has spent the last
few years whacking it like a pinata.")
The Trudeau government, bearing this in mind, did more consultation. The
courts ruled that it was still inadequate - the
government had listened to First Nations concerns, but their duty is to assess
and respond to these concerns, not just listen.
Timothy Huyer explains.
The Trudeau government is working on remedying this, rather than trying to rush
the process and causing further delays. It's a stitch-in-time-saves-nine
To me, this is the biggest obstacle. It's primarily legal rather than
(4) Financial risk
Finally there's the view that it's fine if a private company (Kinder Morgan)
wants to build the pipeline and bear the risks, but the federal government
shouldn't be buying it for $4.5 billion (plus construction costs), putting the
financial risk on the taxpayer.
I understand people's concerns about the risk of a tanker spill, but I'm not so
worried about the financial risk. Shippers are desperate for more pipeline
capacity, so much so that they've already bought most of the capacity of the
pipeline for the next 15-20 years. Pipeline tolls are fixed, so there's no risk
of low prices. Tripling the capacity of the pipeline will bring annual revenue
up to about $1B/year.
Originally posted to Reddit:
What are some of your thoughts on the Trans-Mountain-pipeline?