Abstract: BC stated it did not support Trans
Mountain Pipeline, partly due to its environmental concerns. Many First Nations in BC are also against the expansion project. As
the dispute had put the line's financial viability at risk, Kinder Morgan
Canada suspended work on the project in April of this year. As Ottawa
has the constitutional authority to build inter-provincial projects like pipelines,
the Federal government announced in May of this year a deal to buy the Trans
Mountain pipeline, the expansion project and terminals from Kinder Morgan
Canada for $4.5 billion with an intention to export this portion of crude oil to Asian markets including
China as a "new way out" and to boost up oil prices and to protect
the “national interest”. Opponents were more united than the supporters in
their view that the government made the wrong decision by buying Trans
Mountain. The federal government should do more to disclose how it arrived at
the purchase price, what cost-benefits were conducted, what potential costs the
public is exposed to, and whether Kinder Morgan attempted to sell the pipeline
elsewhere. It seems China and other Asian countries have no plan to increase
oil imports from Canada, and NAFTA is also at a bottleneck with Mexico reaching
a mutual agreement with the US. Canada has to abide by various UNDRIP’s core
rights, and the decision of Canada's Supreme Court. Nevertheless, there are other
options such as BOT for the federal government besides the purchase. Though
there may be many benefits for the project, and many rules and regulations are
already in place to protect the environment, the project may still not necessarily
be purchased.
Key Words: Trans Mountain Pipeline, the federal
government, purchase, options
I.
General Situation
A new
Angus Reid Institute poll finds an equal number of Canadians (37 per cent) say
the purchase was the right decision as the number who say it was the wrong decision. Opponents
of the pipeline project were more united in their view that the government made
the wrong decision by buying Trans Mountain. An overwhelming majority of that
group — 80 per cent — said it was the wrong call. Only 56 per cent of Trans
Mountain supporters, on the other hand, said the Liberals made the right choice
in buying the project[1]. Trans Mountain Pipeline is a pipeline that carries crude and refined
oil from Alberta to the west coast of British Columbia, Canada. As the only
pipeline to run between these two areas, it has been owned by the Canadian
division of Kinder Morgan Energy Partners (Kinder Morgan) up to 2018 and has
been in use since 1953.
Trans Mountain has reported approximately
82 spills to Canada's National Energy Board since 1961. Although a majority
have occurred at contained zones such as pumping stations, and a majority were
below the mandatory reporting threshold of 1.5 cubic meters[2].
In 2013,
Kinder Morgan filed an application with the Canadian National Energy Board to
build a second pipeline under an expansion project with an investment of $7.4
billion. In 2016, BC stated it did not support Trans Mountain, partly because
Kinder Morgan has not provided enough information about its proposed spill
prevention and spill cleanup program. On November 29, 2016, Canada's federal
cabinet approved the expansion project, subject to 157 binding conditions. On January 30, 2018, the B.C. government proposed a restriction on
increases to the amount of diluted bitumen that can be imported into BC from
Alberta, until the completion of studies on whether potential spillage could be
mitigated. On April 16, 2018, the Alberta government introduced the Preserving
Canada's Economic Prosperity Act, under which any party exporting crude oil, natural
gas, or refined fuel from Alberta must obtain a license from the Minister of
Energy, who would have the right to approve or deny any application, and this could
be used to effectively ban the export of Alberta gas to British Columbia[3]. Many
First Nations in BC are against the expansion project. Those who support the
pipeline say that it will create jobs and that it has a lower risk of spilling
oil than transporting oil by rail, which pipeline proponents say would
otherwise have to be used. As the dispute had put the line's financial
viability at risk, Kinder Morgan Canada suspended work on the project in April.
As Ottawa has the constitutional authority to build interprovincial projects
like pipelines, on May 29, 2018, the Federal government announces a deal to buy
the Trans Mountain pipeline, the expansion project and terminals from Kinder
Morgan Canada for $4.5 billion. This deal is supposed to be closed in August or
sometime later[4].
The federal government may carry out the purchase and operate the pipeline via
a crown corporation if it cannot find a buyer in due time. The eventual owner
will be indemnified by the government for any delays or hindrances to the
project that result from legal actions by provincial or municipal governments.
The government will also have the option to cover costs or purchase the
pipeline back if the new owner is unable to complete the project due to legal
pressure, or, despite reasonable efforts, cannot complete the project by an
established deadline. The head of Kinder Morgan Canada says work is to resume
in August of 2018 to prepare a route for the Trans Mountain pipeline expansion.
This attitude is shown to demonstrate to Canadians and to the prospective new
owner that this project can be executed in a manner that serves the interests
of everybody[5].
II.
Discussion
1.
Need
or Necessity
As
far as need is concerned, the purchase will gain access to the Asian market and
higher global prices. There will be more than 400 permanent jobs to operate the
line, and the vast majority of the pipe will come from Evraz Steel in Regina[6]. According
to news from the US CNBC News, the Canadian government’s purchase proposal is
to ensure that the amount of crude oil that Canada sends to the West Coast can
be "doubled." By then, the Canadian government intends to export this
portion of crude oil to Asian markets including China as a "new way
out". It is in the “national interest,” as asserted by the federal
government. It will create thousands of jobs, and delays in the project are
costing Canada $15 billion per year[7].
The
original owner of Trans Mountain Pipeline Kinder Morgan announced in April that
it would suspend all expenditures on the expansion of energy pipelines across
the mountain. The reason is that "the differences between the governments cannot
be resolved." Canadian Prime Minister Justin Trudeau hoped that Canada could
export crude oil to the new Asian market. Jackie Forest of ARC Financial Group
said, the new pipeline expansion plan would help Canada transport more than
300,000 to 890,000 barrels of oil per day, and will earn another ten dollars
per barrel of oil[8].
Annual
operating revenues of some 200 million will accrue to taxpayers[9]. However,
most of the jobs created would be for the construction of the pipeline and end
with completion in late 2019 or 2020. According to some other source, with two
other approved pipelines likely to be built in the same timeframe, Trans
Mountain delays are not costing Canadians anything[10].
Moreover,
the Organization of Petroleum Exporting Countries (OPEC), headed by the Persian
Gulf countries such as Saudi Arabia, accounted for 56% of China's total crude
oil imports in 2017, which has fallen from a peak of 67% in 2012. Russia and
Brazil’s market share in China has grown faster than any other country. There
will be more countries, and the share of Russia in China will increase from 9%
in 2012 to 14% in 2017. The share of Brazil in China will increase from 2% in
2012 to 5% in 2017. In February of this year, Sinopec and the Chinese Academy
of Sciences jointly issued the Oil Blue Book of 2018, saying that "China
will further increase its crude oil imports from Russia, the United States, and
Brazil." There is no mention of Canada[11].
2.
Morality
and Acountability
According
to a new filing with the United States Securities and Exchange Commission, two
executives at the Canadian unit of Texas-based Kinder Morgan are poised to each
cash in with $1.5 million bonuses[12] after
Ottawa offered to bailout their west coast oil pipeline system and expansion
project. Finance Minister Morneau said in an interview with Evan Solomon from
CTV's Question Period that was aired on Sunday morning. The finance minister's
office has declined to say whether he knew about these bonuses prior to the
federal cabinet's decision to approve the offer to buy the Kinder Morgan assets[13].
With the
growth prospects of the oilsands in the latter half of the next decade, Canada’s
ability to sell the pipeline without a loss, is in doubt because it has already
expressed explicitly it is a involuntary buyer. Morneau would not commit to a
timeline on either when the expansion could actually be operational or how long
the government could be stuck owning the project if it can’t find a buyer. The federal
government should do more to disclose how it arrived at the purchase price,
what cost-benefits were weighed, what potential costs the public is exposed to,
and whether Kinder Morgan attempted to sell the pipeline elsewhere.
III.
Feasibility for the Purchase
1)
Economic
The
cost to purchase the 65-year-old assets is $4.5 billion. David Hughes, a former
federal government scientist and research expert with the Canadian Centre for
Policy Alternatives, said it was $1.2 billion overpaid[14]. Also,
other costs have to be added, like financial assurances for spills, it has been
estimated that the real cost could be as high as $15-to-$20 billion. Kinder
Morgan has long said it would cost $7.4 billion to build a second pipeline
parallel to the first in order to triple its capacity, but the financial
documents now say the company expects a $9.3-billion price tag. Ottawa said it
hoped to find a partner from the private sector willing to come in on the deal
alongside the Canadian government. The deadline to find such a buyer was July
22, 2018. No such interested party stepped forward[15].
2)
Technical
As
admitted by Kinder Morgan Canada, there are many obstacles to the viability of
this expansion scenario, including the availability of power along the route,
as well as limited space for tanks and terminal infrastructure at Edmonton,
Sumas, B.C., and Burnaby. Capacity of the company’s Puget Sound pipeline
through Washington State and the ability of Burrard Inlet in Vancouver to
accommodate additional vessel traffic would also present challenges[16].
3)
Legal
Various
United Nations treaty bodies have tried to persuade states like Canada to abide
by UNDRIP’s core rights, and have even recommended moratoriums on further
pipeline approvals in both Canada and on the United States’ Dakota Access
pipeline until Indigenous rights are properly addressed. The Treaty Alliance
against Tar Sands Expansion is an alliance of Indigenous Nations in Canada and
the U.S. against pipelines and have been active in protesting on the ground.
Moreover, Trudeau also promised to implement all of the Truth and
Reconciliation Commission’s 94 calls to action, focusing first on implementing
the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP)
into law. UNDRIP’s Article 19 specifically provides that states must obtain the
free, prior and informed consent of Indigenous peoples prior to implementing
any decisions that would impact them[17].
Canada's
Supreme Court recently dismissed an application by the City of Burnaby, British
Columbia to appeal a regulatory decision that allowed expansion work on the
Trans Mountain oil pipeline to skirt some bylaws. The Supreme Court decision removes
some legal uncertainty about whether the Trans Mountain expansion can be built.
The project still faces other legal challenges - particularly a federal court
case on whether there was adequate public consultation[18].
However,
the Federal Court of Appeal has on August 30, 2018 overturned the Trudeau
government's approval of the contentious Trans Mountain pipeline expansion[19]. In a
unanimous decision by a panel of three judges, the court says the National
Energy Board's review of the project was so flawed that the federal government
could not rely on it as a basis for its decision to approve the expansion. The
court also concludes that the federal government failed in its duty to engage in
meaningful consultations with First Nations before giving the green light to
the project.
IV.
Other Options
Without
Kinder Morgan Canada Ltd, producers are left with two main alternatives:
TransCanada Corp’s Keystone XL pipeline and Enbridge Inc’s Line 3 expansion to
Superior, Wisconsin. Neither is a silver bullet for Canada’s growing supply
glut. The two projects would allow Canada to export more than a million
additional barrels a day combined, which is “plenty of new capacity for growth”
through 2023, according Mike Walls, a Genscape Inc. analyst[20].
As the
federal government’s involvement deals mainly with BC’s opposition, there are several things that
the federal government could do without buying the pipeline[21].
Ottawa could withhold discretionary funds from B.C.
such as spending on regional economic diversification, innovation or other
monies. Secondly, the federal government could, counter-intuitively, require further
environmental controls on the project, say double-walled pipelines or increased
marine protections to further address Indigenous and environmental concerns —
beyond the $1.5-billion oceans protection plan it already promised to address
the previous B.C. Liberal government’s concerns — in exchange for some kind of
guarantee the B.C. government would cease its opposition. Thirdly, in
theory, Ottawa could disallow a B.C. law or regulation that it declares as
contrary to the national interest, but that kind of sledgehammer hasn’t been
used since the 1940s, and legal experts say convention suggests it should not
be used.
In order to secure the project, the
federal government may also engage Kinder Morgan to a BOT project, which the
federal government can stipulate certain conditions for KM to meet and yet not get
financially involved.
Even if the federal government goes
ahead with the purchase, the purchase offer may include certain conditions to
meet, such as to complete the environmental assessment, a condition subject to
financing, and a requirement for KM to top up the yearly construction cost if
it exceeds the budget.
V.
Conclusion
Scott
Simms mentioned, a few decades ago, the Government of Canada decided to invest
to save the Hibernia project off the coast of Newfoundland and Labrador. It
turns out that it saved the whole project, which has returned dividends since
then, as it is now turning a healthy profit[22]. However,
this is not the same as said by Elizabeth May[23]. As put
by David Hughes and some other experts, pushing through this purchase based on
a false premise in order to save face, win favor of Alberta and preserve
political capital is a disservice to the long-term interests of Canada, and Canada
needs an energy plan based on more than politically motivated rhetoric.
There
is already some foundation laid. 89% of all new construction will take place
within the existing right-of-way. A new Pipeline Safety Act and a $1.5 million
Ocean Protection Plan are in place. The project fits within the terms and
limits of Canada’s GHG/Climate Change Plan, including national carbon pricing.
$363 million will go to Indigenous communities and their pipeline monitoring
committee[24].
If the expansion goes ahead, it could mean oil transport by pipes other than by
the more dangerous railway with the prospect of derailment, joint-venture
projects for First Nations development agency, upgrades to the fire hall,
security jobs and training for the band members, upgraded maritime protection,
spill response and co-management of fisheries[25]. However,
the project may not necessarily be purchased, let alone some conditions around
it.
跨山管道工程的选项：一个第三方的客观视角（摘要）
部分由于对环境问题的担心，卑诗省表示它不支持跨山管道工程。卑诗省的许多原住民也都反对该扩建项目。由于争议使该线的财务可行性处于危险之中，加拿大金德摩根公司于今年4月暂停了该项目的工作。然而，由于渥太华拥有构建跨省管道项目的宪法权力，联邦政府于今年5月宣布以45亿美元收购加拿大金德摩根公司的跨山管道、扩建项目和码头，并计划出口部分原油到包括中国在内的亚洲市场，作为一个“新出路”，并提振油价和保护“国家利益”。然而，跨山管道工程的反对者比支持者更团结，他们认为政府收购跨山管道的决定是错误的。联邦政府应该做更多的事情来披露它如何决定其购买价格，进行了哪些成本效益比较分析，研讨了哪些公众面临的潜在成本，以及金德摩根是否试图在其他地方出售该管道。中国和其他亚洲国家似乎没有计划增加从加拿大进口的石油，而北美自由贸易协定在墨西哥与美国达成共识后也形成瓶颈。加拿大必须遵守各种UNDRIP的核心权利以及加拿大最高法院的决定。联邦政府除了购买之外，还有其他选项，例如BOT。虽然跨山项目可能有许多好处，并且已经有许多规则和法规来保护环境，但项目可能仍未必需要购买。
关键词：跨山管道、联邦政府、收购、选项
[1] Jessica
Chin: Canadians Divided On Government's Purchase Of Trans Mountain Pipeline:
Angus Reid Institute Poll, Huffington Post, June 19, 2018, please click the
link to read the whole article https://www.huffingtonpost.ca/2018/06/19/canadians-trans-mountain-purchase-poll_a_23462799/.
[2] Trans Mountain Pipeline, please click the following link to view
the entire article:
https://en.m.wikipedia.org/wiki/Trans_Mountain_Pipeline?from=groupmessage&isappinstalled=0.
[3] Trans Mountain Pipeline, please click the following link to view
the entire article:
[4] John Geddes: Who will build the Trans Mountain pipeline—and at what
cost? MacLeans, May 29, 2018.
[5] The Canadian Press: Trans Mountain pipeline work to resume in
August: Kinder Morgan Canada boss, July 27, 2018, please view the entire article by clicking the
link below: https://www.ctvnews.ca/mobile/politics/trans-mountain-pipeline-work-to-resume-in-august-kinder-morgan-canada-boss-1.4031023?from=groupmessage&isappinstalled=0.
[6] Decisive Federal Action to Expand the Trans-Mountain Pipeline, the
Goodale Report, Summer 2018, Page 2.
[7] David Hughes:
The faulty math behind Trudeau’.s reasoning for buying Trans Mountain from Kinder Morgan, MacLeans,
May 29, 2018, please
view the article by clicking the link below:
[8] Qi’ang Xu:
the Canadian government intends to enter Chinese oil market by repurchasing the
controvosial pipeline project, June 8, 2018, please also see the article in
Chinese by clicking the link http://www.guancha.cn/internation/2018_06_08_459476.shtml.
[9] Decisive Federal Action to Expand the Trans-Mountain Pipeline, the
Goodale Report, Summer 2018, Page 2.
[10] David Hughes:
The faulty math behind Trudeau’s reasoning for buying
Trans Mountain from Kinder Morgan, MacLeans, May 29, 2018, please view the article by clicking the link
below:
[11] Qi’ang Xu:
the Canadian government intends to enter Chinese oil market by repurchasing the
controvosial pipeline project, June 8, 2018, please also see the article in
Chinese by clicking the link http://www.guancha.cn/internation/2018_06_08_459476.shtml.
[12] Mike De Souza: Kinder Morgan execs Ian Anderson and David Safari
offered $1.5 million bonuses under Trudeau bailout, National Observer, June 1,
2018, please click the link as below: https://www.nationalobserver.com/2018/06/01/news/kinder-morgan-execs-ian-anderson-and-david-safari-offered-15-million-bonuses-under.
[13] Dylan
Weisman: Andrew Scheer slams Trudeau's 'bailout' for Kinder Morgan millionaires,
Canada’s National Observer, June 3, 2018, please view the article by clicking
the link below: https://www.nationalobserver.com/2018/06/03/news/andrew-scheer-slams-trudeaus-bailout-kinder-morgan-millionaires.
[14] MATT MCCLURE: Experts say feds overpaid by $1.2 billion for Trans
Mountain pipeline, StarMetro Calgary, May 30, 2018.
[15] Cost to expand Trans Mountain pipeline now $1.9 billion higher,
Kinder Morgan says
National Post, Aug 7, 2018; Travis
Lupick: Canada fails to find a private-sector buyer for Trans Mountain, set to
purchase pipeline alone,
Straight, July 23, 2018.
[16] Jeff Lewis: Kinder Morgan blueprint for Trans Mountain pipeline
allows for another 240,000 barrels a day, Financial Post, May 27, 2018, please
click the like to view the whole article https://business.financialpost.com/commodities/energy/kinder-morgan-blueprint-for-trans-mountain-pipeline-allows-for-another-240000-barrels-a-day.
[17] Pam
Palmater: By buying Trans Mountain, the Trudeau government breaks an array of
promises, MacLeans, May 30, 2018.
[18] Julie Gordon and Rod Nickel: Top Canadian court quashes city's
challenge of Trans Mountain pipeline, Reuters, August 23, 2018.
[19] The Canadian Press: Appeal Court quashes approval of Trans Mountain
pipeline expansion, August, 30, 2018, please also view the article by clicking the link attached below:
[20] Robert
Tuttle: With or without Trans Mountain pipeline expansion, Alberta has oil
shipping options, the Star, April 11, 2018, please also view the article by
clicking the link attached below: https://www.thestar.com/business/analysis/2018/04/11/with-or-without-trans-mountain-pipeline-expansion-alberta-has-oil-shipping-options.html.
[21] TONDA MACCHARLES: How can Justin Trudeau solve his pipeline
problem? Here are his options, the Star, July24, 2018, please also view the article by clicking the
link attached below: https://www.thestar.com/news/canada/analysis/2018/04/13/how-can-justin-trudeau-solve-his-pipeline-problem-here-are-his-options.html.
[22] Debates of
May 31, 2018, please click the following link to view the comment https://openparliament.ca/debates/2018/5/31/elizabeth-may-2/?page=13.
[23] Zi-Ann Lum: Elizabeth May Calls Liberal Government's Kinder Morgan
Deal 'Completely Insane', Huffington Post, May 29, 2018, please click the like
to watch the video of Elizabeth May https://www.huffingtonpost.ca/2018/05/29/elizabeth-may-kinder-morgan-trans-mountain-pipeline-insane_a_23446352/.
[24] Decisive Federal Action to Expand the Trans-Mountain Pipeline, the
Goodale Report, Summer 2018, Page 2.
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