ELI5 - the pipeline situation

Back in August, someone on Reddit asked:

Please excuse my ignorance on this topic (I only arrived in Canada recently) - but can someone explain like I'm five the whole pipeline situation?

I think of it as an irresistible force (there's $15 billion/year at stake) meeting an immovable object (the opposition of the BC government).

Canada produces and exports a lot of oil, especially from Alberta. An ongoing problem is lack of transport capacity, resulting in a big discount on Canadian oil exports. This will cost the Canadian economy more than $10 billion in 2018 alone, and $15 billion/year after that, although that can be reduced by shipping some oil by rail. Scotiabank.

The Trans Mountain expansion (TMX) is one of four major pipeline projects that have been proposed in recent years. (Keystone XL, expanding an existing pipeline to the US, is still ongoing. Northern Gateway's approval was overturned by the courts, and Energy East was cancelled because it doesn't make economic sense with both KXL and TMX under way.) It will triple the capacity of the existing Trans Mountain pipeline from Edmonton to Vancouver, which carries both crude oil (for export) and gasoline (for BC). In particular, it means that Canada will be able to export crude oil to refineries in Asia. Most of the new capacity is already booked for the next 15-20 years.

Alberta will get the bulk of the economic benefit (although not all, since the oil sands tend to push up wages across Canada), while BC gets the increased risk of an oil spill. It's true that Vancouver's already a busy commercial port, but people are concerned about the expected increase in tankers, basically from 1/week to 1/day.

Besides the risk of an oil spill, pipeline projects are strongly opposed by many people who are concerned about climate change. A common line: "Climate leaders don't build pipelines." (As a climate change voter myself, I think they're overlooking a critical point here. Trying to reduce global emissions by withholding supply seems like it should work, but it's actually ineffective, because oil-importing countries will just buy their oil elsewhere: If I buy all my groceries from my local Safeway, and it closes down, I won't starve. The price of oil won't even rise, because OPEC keeps the price of oil in a target range.)

Pipelines are under federal jurisdiction, and the federal government has to consider the interests of the country as a whole. The Trudeau government went ahead and approved the Trans Mountain expansion. A big reason was that the Alberta government, under Rachel Notley, was willing to support the national climate change plan: basically, there's a federal carbon price floor of $20/t rising to $50/t in 2022, which will reduce Canada's CO2 emissions by 20%. Each province can either do carbon pricing itself or the federal government will do a carbon tax and return the money to the province. With a carbon price, it's no longer free to dump fossil CO2 into the atmosphere, so this reduces demand for fossil fuels; unlike trying to withhold supply, this is effective in reducing emissions. Alberta's always been the main obstacle to climate policy, so this was a big deal.

The BC government (under Christy Clark) was initially opposed, but eventually came on board, after negotiating annual payments ($25 million/year) with the pipeline's owner, Kinder Morgan.

Consultation with First Nations is also a key legal question. In BC, unlike the rest of Canada, the First Nations never ceded their territorial claims by treaty. Northern Gateway was overturned by the courts because of failure to consult with First Nations. On TMX, there was more consultation (they learned from the failure of Northern Gateway), although it's still possible that the courts will rule it wasn't sufficient.

So even before the 2017 BC election, there was opposition to TMX. But the 2017 election resulted in a new government - an NDP minority supported by the Green Party, led by John Horgan - which was strongly opposed to the Trans Mountain expansion. They probably can't block it outright (because it's under federal jurisdiction), but they asked the Supreme Court to rule on the exact limits of their jurisdiction. Earlier this year they attempted to restrict any expansion of crude oil shipments, leading to a war of words with the Alberta government. (Did I mention that the BC government and the Alberta government belong to the same political party?)

From BC's point of view, Alberta is asking them to take on the increased risk of an oil spill, while Alberta gets the economic benefit. From Alberta's point of view, BC is trying to block Alberta's key export, at the exact same time that BC depends on Alberta's oil to run our fleet of gasoline-burning vehicles.

Eventually Kinder Morgan had had enough of the political uncertainty, and sought to get out. The federal government ended up buying both the existing pipeline and the expansion project. Their plan is to get it built, then sell it back to the private sector.

Trudeau's consistent argument has been that we can't ignore either the environment (unlike Harper) or the economic and political impact (unlike Horgan). He's taking a compromise position - carbon pricing to reduce fossil- fuel emissions and getting a better price for Canadian oil exports. Naturally, he's getting attacked from both sides.

It's a very Canadian political situation, with a large number of factors (federal government, provincial governments, national unity, exports to the US and Asia, the environment, First Nations, the courts), and Trudeau is taking a very Canadian position, aiming for a compromise. We'll see in 2019 if it works or not.