Thumb on the Scales
Wednesday, May 30, 2018
THUMB ON THE SCALES: Canada’s Trudeau government will buy the Trans Mountain pipeline and related infrastructure for $4.5 billion, and could spend billions more to build the controversial expansion. Canada’s Finance Minister Bill Morneau announced details of the agreement reached with Kinder Morgan at a news conference with Natural Resources Minister Jim Carr this week.
“Make no mistake, this is an investment in Canada’s future,” Morneau told reporters.
The announcement and the federal government’s strong involvement strips away lingering doubts the pipeline project will be built, which will triple the amount of bitumen tar sands being transported from Alberta to the British Columbia coast. The financial guarantee was a requirement of Kinder Morgan to move forward.
Last week in Seattle, hundreds of “kayaktivists” took to the water to protest against the pipeline. They were part of a demonstration by the environmental groups like the Mosquito Fleet, Greenpeace, and Sierra Club that organized a rally in the city against Kinder Morgan’s proposed pipeline expansion.
The involvement of activists and the tribes made Kinder Morgan’s shareholders and private investors nervous. In the face of financial risk and uncertainty, Kinder Morgam gave the federal government of Canada a strict timetable to resolve outstanding financial and legal issues surrounding the pipeline. Last week, in order to appease the Texan oil company, Trudeau’s government announced that it will effectively give the Kinder Morgan a “blank cheque” “to indemnify” the pipeline “against any financial loss” suffered if they build the pipeline.
Morneau said the project is in the national interest, and proceeding with it will preserve jobs, reassure investors and get resources to world markets. He said he couldn’t state exactly what additional costs will be incurred by the Canadian public to build the expansion, but suggested a toll paid by oil companies could offset some costs and that there would be a financial return on the investment, Canadian news sources reported.
Kinder Morgan had estimated the cost of building the expansion would be $7.4 billion, but Morneau insisted that the project will not have a fiscal impact, or “hit.”
Morneau said the government does not intend to be a long-term owner, and at the appropriate time, the government will work with investors to transfer the project and related assets to a new owner or owners. Investors such as indigenous groups and pension funds have already expressed interest, he told reporters.
Canada’s aggression seems to emboldened everyone fighting the pipeline, building a growing awareness not only of the threat that the pipeline poses to the climate, but also to marine life as it would massively increase the tanker traffic up the West Coast of Canada and United States.
The worst-case scenario—a massive oil spill at the Trans Mountain tank farm in Burnaby or in Vancouver’s harbor entrance to the Salish Sea—is a potential catastrophe with unknown consequences.
“It’s not just about the spills, it’s not just about the orcas,” said Graham Clumpner one of the paddlers with the Mosquito Fleet: “The bigger issue that we are all facing is climate change,” he said. “We are going to not allow Kinder Morgan to finish this pipeline.”
Ben Smith from Greenpeace USA added “It would make climate change worse, it would trample indigenous rights, it would run over our clean water here, and it would decimate the final 76 remaining orcas, the Southern Resident killer whale in our waters.”
At the Seattle rally, one of the speakers was Cedar George-Parker from the Tsleil-Waututh Nation, who have been leading the community opposition to the pipeline in British Columbia.
“They want to bring that oil through here, but we say that we will stop Kinder Morgan,” George-Parker said. “It is not happening.”
Not only is the resistance growing from the local community, indigenous rights groups and environmental groups to the pipeline, but even the financial community warns the economics and changing energy market is stacked against it as the world continues to shift to a new energy transition. Critics say the promised investment would be better spent developing opportunities to adapt to a changing energy portfolio.
Canada’s Conservative Leader Andrew Scheer said the decision does nothing to advance the project, since the legal questions and barriers still remain. He said the government has failed to take action to ensure certainty around the expansion by resolving jurisdictional issues.
“This is a very, very sad day for Canada’s energy sector. The message that is being sent to the world is that in order to get a big project build in this country, the federal government has to nationalize a huge aspect of it,” he said.
Currently, two court cases pose the potential to delay or even derail the project, while the National Energy Board, responsible for the initial environment impact review, has since been stripped of those responsibilities for future energy projects by the Trudeau government.
Yet Canada’s role as financier, regulator and litigator places a large thumb on the scale in favor of the project.
While the conflict over the future of the Trans Mountain pipeline is centered in British Columbia, more than half of the pipeline’s flow currently goes to Washington, not British Columbia. Five miles north of the international border, a branch called the Puget Sound Pipeline leads south. It sends Alberta tar sands oil to four refineries in Whatcom and Skagit counties. Last year, that pipeline carried 60 million barrels of Albertan oil to Washington’s Andeavor, BP, Phillips 66 and Shell refineries.
An alternate route proposed for the pipeline could cut right through productive Whatcom County farmland. A threat percolating just across the border just got very local.