Canada’s Pipe Dream: Infighting threatens the Trans Mountain pipeline expansion

Canada’s Trans Mountain pipeline (TMP) expansion project is due to begin construction in December 2020 but infighting between provincial governments could push back the start date. The project faces an array of risks, including opposition from the British Columbia provincial government, environmentalists, and indigenous groups.

Canada Trans Mountain pipeline expansion

Background

The Trans Mountain pipeline project is run by U.S.-based energy infrastructure company Kinder Morgan and will cost around USD5.95 billion. In May 2016, the National Energy Board, a national government body, concluded its review and suggested that the federal government approve the project. In November 2016, the federal government granted approval. Canada currently lacks the pipeline infrastructure to move crude oil from the Alberta oil sands in the country’s interior to its ports for export to Asia or Europe.

The U.S. historically has been the top export destination for Canadian oil but as U.S. shale production increases, the demand for oil is decreasing. Therefore, Canada is focused on finding new export markets for oil. China has heavily invested in Canada’s oil sector and is the obvious destination. However, transporting the oil from Alberta to the Pacific coast is a challenge.

Most crude oil is transported by rail, which is slow and poses major risks, such as crashes and spills, as seen in the 2013 oil train derailment near the town of Lac-Mégantic that killed 47 people. The pipeline will go alongside the existing Trans Mountain pipeline, which runs 1,150km, and extend it by 980km. It will start in Edmonton in Alberta province and will run south-west through Jasper National Park, crossing into Pacific province British Columbia and the city of Kamloops, before reaching Burrard Inlet in Vancouver.

The pipeline will include 12 additional pump stations, 19 new tanks at storage terminals, and three additional berths at the Westridge Marine Terminal in Vancouver. The existing pipeline capacity is 300,000 barrels per day and the expanded pipeline will allow for 890,000 barrels per day.

Infighting: Alberta vs. British Columbia

The British Columbia government is in a battle with the government of Alberta, home to Edmonton and the oil sands, though both provinces are governed by the New Democratic Party (NDP). In late January, British Columbia’s environmental ministry announced updated rules in the event of an oil spill and created a scientific advisory panel to make recommendations on whether a bitumen spill in water can be cleaned. The environmental ministry has suggested the province ban the transport of crude oil until the panel has released its findings.

British Columbia decided to ban increased shipments of bitumen and Alberta responded by suspending talks regarding the purchase of CAD500 million worth of B.C. hydro-electricity. Alberta also temporarily suspended the importation of wine from British Columbia. Rachel Notley, Alberta’s premier, has threatened further economic sanctions and legal action against B.C.

The fight has highlighted the split within the B.C. legislature as the opposition right-of-centre Liberal party supports the pipeline. Luckily for John Horgan, Notley’s counterpart in B.C., his party governs in B.C. alongside the Green party, which is staunchly opposed to the project.

The fight has the potential to trigger a constitutional crisis, with both sides citing Canada’s constitution to support their claims. According to the constitution, provinces are able to take action against environmental threats within their borders, but it also grants the federal government the power to approve inter-provincial infrastructure projects. The fight is likely to result in a lengthy court battle.

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Prime Minister Justin Trudeau supports the TMP project and has vowed that the pipeline will be built, calling it ‘essential’ and in the national interest. With the U.S. set to become the world’s largest oil producer in 2019, according to the International Energy Agency, Canada must find a way to export its oil to Pacific markets in order to compete with its southern neighbour.

Before the shale boom, the U.S. purchased far more oil from Canada. Canada has now been forced to sell its oil for cheaper than the global average as it is unable to easily transport it to markets abroad. In 2016, Canada exported USD39 billion worth of crude petroleum, 98 per cent of which went to the United States. In 2015, crude exports totalled USD50.3 billion, with 99 per cent going to the United States.

As the U.S. continues to expand its oil and liquid natural gas production, American demand for Canadian crude will steadily decline, along with Canadian revenue. Canada’s energy sector accounts for around 7 per cent of GDP, directly employing more than a quarter of a million people.

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