About Leadnow’s Top-5 Reasons to Stop Kinder Morgan

No.  Not only is this claim flat out wrong, but it is egregiously so.

• Cap
• False Claim
• Climate Strategy
• Paris
• Ending Oil

First, some context:  part and parcel with the federal approval for TMX, came a commitment from the government of Alberta to cap oilsands GHG emissions at 100 Mt/year CO₂-equivalent.

The question has been asked about whether a cap at 100 Mt/year is low enough, given that current oilsands emissions are in the vicinity of 70 Mt/year;  nevertheless, it remains that because of the TMX agreement there is now an emissions cap where before there was none at all.

This claim falsely attributes the entirety of that cap on oilsands emissions — as projected emissions by TMX itself, or insinuates that they wouldn’t occur without TMX  (wrong, again).

But even if you do choose, bizarrely, to attribute the emissions, not to the actual emitters, the oilsands producers, but to the particular means of transporting their product, one should also recognize that the Trans Mountain pipeline is not the only such transport.

There is Line-3, for instance, which runs eastward to Wisconsin  (and is being upgraded and modernized), and Keystone XL, taking oil south, and others, and a considerable capacity by rail in addition to what is consumed locally.  (Rail transport has increased in recent years — impacting the capacity to ship grain and other products — due to insufficient pipeline capacity.)

The current Trans Mountain pipeline already carries up to about 300,000 barrels a day.  TMX will add about 600,000 to this — so to attribute the whole of the oilsands GHG footprint to shipping this extra 600,000 barrels is simply absurd.

Some say that we have to stop TMX because it encourages oilsands production.  Not so.  Oilsands investment and production are driven by price and by demand — not pipelines.

© Shutterstock

As long as Alberta can sell it at a profit, they will ship all the oil that they can produce, right up to that 100 Mt/year cap (if it remains, and beyond, if it doesn’t).  And if they can’t ship by pipeline, they’ll ship by rail.

There is also an argument that TMX will enable an increase to oilsands production.  There is some merit to this, for if the product cannot be transported it cannot be sold.  As noted, however, while production is driven by demand and profitability, it is limited to the lesser of:  production capacity, allowed production/emissions levels (the cap), or total transport capacity.  Though even without TMX there is considerable transport capacity (to non-tidewater destinations), this is why that emissions cap is so important.

If for some reason the TMX approval gets set aside, we might expect that the 100 Mt/year cap would be repudiated also, as well as putting Alberta’s now-willing participation in the Pan-Canadian Framework on Climate Change and Clean Growth and other aspects of our national climate-change strategy in general at risk, such as:

• Putting a price on GHG emissions;
• Ending pollution from coal-generated electricity by 2030;
• Developing more renewable energy;
• Reducing methane emissions by 45% by 2025.

In any case, in the final analysis, TMX itself contributes nothing of any consequence to our GHG footprint.  There will of course be GHGs emitted during construction (for which as a condition of the approval the company is required to obtain offsets), and perhaps negligible amounts to operate it — but even here the GHG overhead from transport by pipeline is less than by rail.

© Pavel Chagochkin / Shutterstock

What happens if we take TMX out of the picture?  Do the oilsands shut down, or slow down?  No — it will simply be business as usual;  they’ll just ship the product a different way.

What happens to the problem of climate change if we take TMX entirely out of the picture?  Again, nothing — the oilsands keep working, the oil keeps flowing;  they’ll just ship it a different way, though perhaps not at the best price.

Ultimately, TMX itself doesn’t move the dial on climate change one way or the other, and so doesn’t put our Paris commitment at risk.

In a very real sense, however, in helping to get buy-in on our overall climate-change goals, it will help us to achieve them.

Would it be easier to meet our Paris commitments without oilsands production?  Of course — but that’s a problem of oilsands production, which originates in a continuing worldwide thirst for oil, and is not fairly attributable to TMX.

If we want to shut down the oilsands, we need to reduce the demand for oil;  we need to to reduce our dependence upon it.

Being concerned about climate change, there is a legitimate focus here on the oilsands as a significant contributor to Canada’s GHG emissions.

We must maintain perspective, however.  As the following graphic shows, there are a number of other even-higher-contributing areas of concern: transportation, buildings, and electricity, for example.  We must take these seriously into account, as well.

In all these areas, the world is moving away from oil as a fuel, as it must, and this trend is picking up steam.  But it can’t change overnight.

You can help:  buy an electric car, or a hybrid, next time (depending on how emissions-free your electricity is generated);  convert your home-heating from oil (or natural gas) to a heat-pump or solar or geothermal, if you can, next time you have to replace your furnace, and so on.  It will all help, but this, too, takes time;  you, if you are in any way a consumer of oil, or goods or services fuelled by oil, are part of the problem — and the solution.

And as we and the rest of the world phase-out our gas- and diesel-guzzling cars and trucks, and find other ways to heat our homes, cook our food, and power our factories, the market for oil, particularly oilsands oil, which is expensive to produce, will diminish.

As we and the world wean ourselves off oil, Alberta, too, will wean itself off its dependence on the oil industry.

Pincher Creek — Wind Energy capital of Alberta

There’s money to be made and many livelihoods to be had in the evolving and emerging developments in sustainable and renewable energy, and that’s where we’re focusing public funds.

In addition to a long preamble, the United Nations Declaration on the Rights of Indigenous People (UNDRIP) has 46 Articles (with sub-articles).

To say we’re violating UNDRIP is a rather broad claim, and hard to evaluate fairly if we don’t know what argument is actually being put forward.

In what way or ways does this project violate Canada’s commitments to UNDRIP?

Ultimately these are legal questions to be adjudicated by courts of competent jurisdiction, but the matter is nowhere near as cut-and-dried as the claim asserts.

Indigenous Relations

The other significant part of this narrative is the allegation that the approval “will damage our relationship with indigenous groups“.

It is important to recognize that there are indeed strong indigenous voices on both sides of the question, and some in-between — just like for everyone else.  Unfortunately, TMX opponents tend to ignore this, and portray as the whole story only those voices that shore up their own narrative.

No part of this is simple, and no matter what comes of it, there will be many people who are not happy with that particular result.  This is the burden of Leadership — to weigh carefully these difficult and competing interests and ultimately render a decision that will not, can not, please everyone.

On balance, the whole matter of indigenous relations is broad and complex, and is in fact being engaged meaningfully across a wide spectrum of issues, including, but not limited to TMX.  It is unreasonable and unrealistic to hold TMX as the sole issue defining this relationship.

2013 © Moffat & Nichol

Seven times! — Sounds like a lot!

Let us first note that what matters regarding the well-being of the Orca population is not tankers, specifically, but overall shipping in their range.

So, right from the outset, this claim sets itself dramatically out of context, for it looks only at tanker traffic, and only at traffic as calls at Westridge terminal itself — where we’re going from typically five a month to around 34 a month, depending on market conditions.

In short, the impact on the Orca population from this expansion is nowhere near “seven times” higher, as the claim proposes, and while there is real risk to the Orca population, such risk as relates to shipping is due to the large (and increasing) overall traffic through the whole area, and must be addressed as such, irrespective of TMX.

It is not useful or reasonable to single out a single company or project, such as TMX, as the cause of it.

The Trans Mountain pipeline has been operating for over 60 years, delivering diluted bitumen, in fact, for the past thirty, and, yes, in this time, along its route, there have indeed been spills.  And, sure, it’s not unreasonable to expect occasional similar such spills going forward.

So what about that catastrophic devastation that  “could destroy some of the most fragile ecosystems, forever?”  We just don’t see that.

We don’t see that, because even with an over-sixty-year history, it’s just not happening.  It’s not happening because the pipeline is well monitored, well managed, and well maintained.

Such spills as do happen, happen in places that are designed for them, such as bermed tank sites, and the like, or, if they happen elsewhere, they are proactively detected, stopped, and the given site remediated.

• Marine
• Emergency
• Avoiding Spills
• Risk Analysis
• But, Still!

The more engaging concern in my mind, however, has always been the possibility of a spill — not from the pipeline itself — but a spill in the harbour involving the tankers that transport the various grades of oil through our coastal waters.

But here, too, we have history.  In their over sixty years  (thirty years of diluted bitumen)  of moving loaded tankers through our waters, there has not been a single incident involving transportation by sea.

There are reasons for that, of course, such as competent, well trained, and professional personnel.  Such as practices and processes designed to reduce or eliminate dangers, and to deal effectively and efficiently with such circumstances as might still arise.

The only incident of any consequence was in 2007 and involved the terminal itself, but, significantly, no tankers:

2007 © CBC

An excavator working on a sewage line pierced a pipeline in July 2007, releasing more than 250,000 litres of crude oil.  About 70,000 litres flowed into Burrard Inlet, sparking a $15-million cleanup.  — CBC

So, not from shipping — but, in any case, successfully cleaned up.

This is the worst-case scenario that I hear expressed most often:  “what about a spill in the inlet, or the strait?“, and particularly involving diluted bitumen:  “we don’t know how to clean it up!”

But we do know, and this knowledge was factored into the decision to approve the expansion.

We know that diluted bitumen behaves similarly to other forms of crude oil and that existing spill response methods are effective in recovering it.

And, while we continue to have confidence in these existing processes and technologies, we continue to strengthen our preparedness, requiring, before the expansion begins operation, that existing legally-required response capabilities be doubled, and we continue to conduct wide-ranging research into the behaviour of diluted bitumen and how different petroleum products behave in varied marine and freshwater environments.

The following excerpt summarizes some of the further enhancements to marine safety and emergency response capability that we are achieving through the five-year, $1.5 billion, Oceans Protection Plan (OPP):

© Karoline Cullen /Shutterstock

• Boost marine emergency prevention and response capacity — the Canadian Coast Guard will establish four new radar stations on the West Coast, including one in Victoria, and modernize emergency response equipment.
• 24/7 emergency management and response capacity within the Coast Guard’s three existing Regional Operations Centres across Canada, to better plan and coordinate effective response during an incident.
• Two large tow vessels will soon be on-call on the BC coast, and several Coast Guard vessels will be equipped with specialized tow kits, which means improved ability to respond to situations where tow is necessary.
• Primary Environmental Response Teams composed of dedicated, specially trained personnel will further strengthen the Coast Guard’s existing on-scene operations.
• Reopened the Kitsilano Coast Guard Station with new rescue boats and specialized pollution response capabilities.
• Strengthen the polluter-pay principle, to ensure that adequate industry-funded compensation is available for those affected by oil spills.  Canadians should not be responsible for cleaning up spills in our oceans.

In addition, from the industry itself:

The industry-funded Western Canada Marine Response Corporation is investing $150 million in enhancements to respond to increased tanker traffic — doubling capacity and halving response time, adding six new bases, 120 new employees, 43 new vessels and response resources along the shipping route.  — Jonathan Wilkinson MP, Parliamentary Secretary to Minister of Environment and Climate Change

Still, it’s better to avoid a spill in the first place.  To that end, in addition to improved coast guard traffic surveillance, and improved support and resources as noted above:

• Ship movements in the port are traffic-controlled.
• Within the port, and indeed within Canadian waters, the vessels will be under the control of qualified, experienced BC Pilots, who know the waters, are familiar with traffic control procedures, speed and channel constraints, and the appropriate notices and regulations, and who will not allow any vessel to leave the dock if it is not fully correct.
• Tankers must be double-hulled — so that if they’re holed, such as by a grounding or a collision, there is very little chance of a spill.
• In the inlet, loaded tankers will move at slow speed, further reducing the potential for collision, as well as further reducing the likelihood of vessel damage in the event of a grounding or collision that could result in a spill.
• Loaded tankers will transit the narrows in daylight hours only, and only at the correct state of the tide.
• At least two tethered tugs will accompany loaded tankers from the terminal, through the narrows, and past the port boundaries.
• And, instead of leaving tankers to navigate the rest of the way through the Strait of Juan de Fuca on their own, tugs will escort ships through the strait and out to sea.

All the above notwithstanding, it should give further comfort to know that a competent, comprehensive, and thorough risk evaluation was in fact done for this project.

It’s a large report, with a lot of engineering detail, and a hard slog for the non-engineering-inclined.  It’s well summarized, however, by (local) blogger “A Chemist in Langley“:

Now unlike the Port, the fuel barges or the BC Ferries, the NEB required a detailed risk analysis of the TMX.  The critical document on this topic is the report Termpol 3.15 — General Risk Analysis and intended methods of reducing risk which evaluated the risks of the project.  It concluded that “with effective implementation of risk reducing measures most of the incremental risk resulting from the project can be eliminated“.

To put a number on it:

• Without the project the risk of a credible worst case oil spill is estimated in 1 in every 3093 years….  If all the risk reducing measures discussed in this report are implemented the frequency will be one in every 2366 years.
• This means that after the Project is implemented, provided all current and future proposed risk control measures are implemented, the increased risk of a credible worst case oil spill in the study area from the Trans Mountain tanker traffic will be only 30% higher than the risk of such an occurrence if the Project did not take place.

By increasing the number of tankers by 7 times, but also implementing the changes that were ultimately mandated by the NEB, the risk of a spill is less than one event every 2000 years.

So no, the risk does not increase by 7 times, it increases by barely 30% and 30% more of almost zero remains almost zero.

Essentially they are saying that the project provides no significant increase in risk over those risks we accept every day… — “A Chemist in Langley”

The bottom line, then, is that we’re taking an already-small risk and further reducing and managing any potential harm that could flow from it.

Nevertheless, some still say “But wait — the risk is still there;  our pristine coasts are too important;  we cannot tolerate any risk!  It’s not safe!”

So lets talk about what it means to be safe:  we know, for example, that people die on our roads and highways in terrifying, horrific, violent ways.  We know that despite our utmost care there is always a risk.  We know that what’s at stake is crucially important — lives:  often, indeed, the lives of our own loved-ones.  We know that for each of us, there could be nothing more catastrophic, more devastating, than the loss of a child or other loved-one.  Yet, still, we put our children in cars and buses and send them off into the world.

We do this because it’s how we must, as reasonable, practical, caring people, living our lives on a day to day basis.  We do this because we know that through law, regulation, and enforcement, through evolutions in engineering and design in our vehicles and roads, and through education, experience, and proper training, that we have striven to eliminate risks, and otherwise keep them small and well managed.

We do this because we recognize these systems as safe, even with a non-zero level of risk;  we know, even with something as ultimately important as the lives of our children and loved ones, that “no risk whatsoever” is not a reasonable, practical, standard.

It’s not a reasonable, practical, standard for TMX, either.

“Safe”  does not mean the absence of all risk.  It means taking conscientious and reasonable care to minimize risk, and to manage whatever risk remains.  As we have done, and as we will keep doing.

As to the risk to jobs, this concern typically relates to the potential loss of jobs in the coastal fisheries, both commercial and recreational, as well as tourism-related jobs in general that might conceivably be at risk in the event of a catastrophic major spill in coastal waters.

I’ll refer you back to Claim 4, above, however, regarding how such risks are brought as close to zero as is reasonably possible, and managed.

For the other part of the claim…

• Public-Sector Business Case
• Corporate Business Case
• Jurisdictional Issues

I cite here remarks from the Minister of the Environment and Climate Change, the Hon. Catherine McKenna, to the Vancouver Board of Trade (2018-03-15):

Hon. Catherine McKenna

As everyone here knows, the Trans Mountain pipeline already exists.  It has been delivering oil to and through the Port of Vancouver safely for over 60 years, and carrying diluted bitumen for three decades.

The current expansion project would simply add capacity to the existing pipeline.  And doing that comes with significant benefits for the economy and jobs here in BC, and nationally:

• During construction, and for the first 20 years of expanded operations, the project is expected to generate nearly $47 billion in government revenue.
• BC’s share — roughly $5.7 billion — would go a long way to help pay for hospitals and health care programs, schools, and other priority issues here in BC.
• Kinder Morgan’s $7.4 billion in capital investments will spur economic activity and create thousands of well-paying jobs in BC — in fact, a quarter of the employment benefits of this project would go to BC.

So it’s really not as simple as “us” versus “them” — in Canada, we’re all in this together, and we need to avoid any kind of zero-sum thinking.

As to whether the industry is dying, we of course intend to join with the world in the coming years to help it to do so, by promoting the phase-out of our dependence on oil, and by putting public funds into the advancement of and conversion to sustainable industries and technologies, and renewable energy.

That is part of the context in which Kinder Morgan and Trans Mountain must evaluate their own business case for the project. Note that when we speak of “the” business case, we have to consider:  the business case for whom?

It is strictly up to Kinder Morgan and Trans Mountain to evaluate their own business risk, and whether they believe the likelihood of success, and the utility of the venture will be of sufficient duration to realize a satisfactory return on their considerable investment.

So for those who look at the expected $7.4 billion construction cost and worry that we shouldn’t invest in a “dying industry” — “we” are not;  it’s not our money;  it’s not our financial risk;  and it’s not up to us to decide whether the expected return is worth that risk.

Similarly, for those who say we should instead invest this $7.4 billion in wind energy, or geothermal, or… whatever — again, it’s not our money, and the choice of how to use it is not ours to make.

Though the previous BC government approved the project as well (subject to 37 conditions), the new BC government, which must honour the previous government’s approval or incur very expensive liabilities, is opposed to it.

As such, they’ve expressed intent to restrict what the pipeline can carry, citing concerns over the ability to clean-up diluted bitumen, and asserting local jurisdiction regarding environmental matters.

This puts them in a position of challenging exclusive federal jurisdiction over an interprovincial energy project. They have said, however, that they’ll refer the question to the Supreme Court, and abide by their decision.

But governments squabbling about jurisdiction introduce a whole new dimension of risk that, in a country of law, due process, and rule of law, no business should have to face.

Consequently, Kinder Morgan declared (2018-04-08) that they cannot proceed until the jurisdictional question is resolved — so that they can know fairly what are the rules by which they are required to operate, and be able to properly evaluate their business case. They identified May 31^st as their go/no-go date.

… A company cannot resolve differences between governments. While we have succeeded in all legal challenges to date, a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments…

While we are prepared to accept the many risks traditionally presented by large construction projects, extraordinary political risks that are completely outside of our control and that could prevent completion of the project are risks to which we simply cannot expose our shareholders… — Kinder Morgan Canada Limited, Announcement

Given the imminence of construction season, and the prospect of transitioning from a project spend on the order of $20 million per month to $250 million per month, this is an understandable and prudent business decision.

After meeting in Ottawa with Premiers Notley and Horgun (2018-04-14), and considering that a Supreme Court reference will take longer than the time remaining until the go/no-go date, the Prime Minister has instructed the Minister of Finance to engage with Kinder Morgan to consider measures to obviate this unusual impediment, so that the project can continue without this inordinate uncertainty.

Such measures, in my view, are unlikely to be any form of subsidy or “bail out,” but some form of limited indemnity to cover circumstances where this jurisdictional squabble puts the proponent’s on-going investment unfairly at risk.  In any event, we await developments…

Well.  Times do Change (2018-05-29)

The federal government did, as anticipated, offer a limited indemnity to protect the project against the unusual risk that arises out of the current jurisdictional dispute with the province of BC.

In addition, to save the construction season fast approaching, we also offered to buy the existing pipeline and related assets — on condition that the company immediately resume construction activities.

If this sale in fact closes (proposed for August 2018), and in the event that we haven’t by that time found other private interests to take this on, we will be in the pipeline business, after all, at least until the jurisdictional squabble is sorted out.

Some are concerned about this purchase, suggesting that there are better places to put the money.  But please remember that this not an “expense” — sunk funds that we will never see again.  And nor is it “instead of” things like investing in First Nations’ water systems, or many of the other things upon which many say we should have done “instead.”

It is “in-addition” to all those things and is in fact an acquisition of commercially valuable assests in a viable profitable business, which is the existing pipeline.

If we do in fact take ownership, we will recover all of this money, when we eventually divest.  Nevertheless, since the acquisition is to ensure that TMX proceeds despite the jurisdictional dispute, if you hate TMX, you’ll hate the acqusition, all of this (and the business-case) notwithsdanding.