Commentary: BC election offers pipeline lifeline

VANCOUVER — Pipelines have become a hot topic across Canada. The debate over TransCanada’s (TRP-T, TRP-N) Keystone XL continues to rage as decision day inches nearer. The idea to reverse Enbridge’s (ENB-T, ENB-N) Line 9 to carry bitumen east rather than moving refined products west is earning supporters and opponents. Pipeline protests have become common and Canadians from coast to coast debate the merits of Alberta’s heavy oil at dinner tables and parties.

But the debate is loudest in B.C., the land mass blocking Alberta’s
bitumen from reaching Asian markets. British Columbians have long been an environmental lot, so the raucous opposition to cross-province bitumen pipelines is of little surprise.

The opposition is loud and widespread, and one would think that British Columbians are a united front against pipelines. 

But the noise distracted from a quieter group of people in B.C. open to the idea of pipelines. Without trying to out-shout the pipeline protestors, this group sat back and thought about the situation in the lead-up to the recent provincial election, where pipelines were front and centre. 

This latter group thought about how to balance the need for jobs and economic growth with the necessity of protecting the environment. They thought about the benefits B.C. has received from resource extraction and how a careful but pragmatic approach could mean continued prosperity. They acknowledged a cautious faith in the provincial and federal environmental review processes. They looked at their friends and calculated how many families owe their security to jobs that stemmed from exploring for, developing, extracting or moving the natural resources.

And they decided that, as unpalatable as pipelines may be, they are necessary.

It was that thought process, unseen by pollsters and pundits alike, that turned into a tsunami of support for the B.C. Liberals, who returned to office with a majority in the face of near-unanimous predictions of at least a minority win by the New Democratic Party (NDP). 

The Liberals aren’t exactly pipeline promoters, but NDP leader Adrian Dix’s increasing opposition to pipelines apparently scared away many of these latter voters. 

A common theme in the pile of post-election analysis was that Dix’s change of heart against  Kinder Morgan’s (KMI-N) proposed Trans Mountain pipeline expansion to Burnaby near Vancouver probably cost him the election. For months Dix had promised to withhold judgment on the proposal until Kinder actually filed its application. Then, two weeks before election day, when still leading in the polls, he tried to woo Green voters by coming out against Kinder’s concept. 

It was his biggest campaign flop. Instead of recruiting Green votes, the decision seems to have affirmed in voters’ minds that the NDP would choose environmentalism over  development. In a province that runs on resources — and one that saw the economy suffer significantly under the last NDP government becuase of its mishandling of the resource file — many voters ran back to the Liberals. 

An NDP government would have made new oil pipeline development near impossible. That being said, continued Liberal rule in B.C. is no guarantee that any more heavy oil will be allowed to move across the province. 

Premier Christie Clark is adamant that any pipeline proposal meets her government’s five conditions before she will give a green light. The conditions start with gaining approval from the National Energy Board (NEB), and that first hurdle may well be enough to trip up the most contentious of the proposed pipelines. 

Enbridge’s Northern Gateway line, which would ferry 550,000 barrels per day of bitumen from the oilsands to the coastal port of Kitimat, has been struggling through the NEB review process for almost three years against widespread opposition. A decision is expected by year-end, but the odds of a green light seem pretty slim. 

The second and third conditions demand world-leading prevention, response and recovery systems for marine and land oil spills. The fourth requires that Aboriginal and treaty rights are addressed and that First Nations are provided with opportunities to participate and benefit from a heavy oil project. 

Those conditions, while still challenging, outline requirements that have become the norm for resource development in Canada. Every project has to meet high environmental standards, be prepared with robust response plans and include First Nation rights and desires from day one.

The fifth condition, however, could be the most contentious of all. The B.C. government says it requires that “B.C. receives a fair share of the fiscal and economic benefits of a proposed heavy oil project that reflects the level, degree and nature of the risk borne by the province, the environment and taxpayers.”

In other words, Clark is not willing to have heavy oil pumped across B.C. without the province getting paid for the risk. 

That presents a conundrum, because Alberta Premier Alison Redford isn’t interested in further sharing her province’s oil wealth. Clark described their last discussion on the topic as “frosty,” and there’s been no progress since.

The financial stakes are high, but both provinces need to co-operate to max out the potential gains: Redford needs to negotiate new outlets for Alberta’s bitumen and Clark knows that monies from heavy oil transit tolls and taxes on coastal bitumen facilities would help balance her province’s budget.

Clark’s position is somewhat stronger, because bitumen transport is not the only source of potential energy revenues for B.C. In fact, Clark’s number-one focus on the energy front is liquefied natural gas (LNG). There are vast natural gas reserves in northern B.C. that could feed LNG terminals on the west coast. As Clark said on the campaign trail, developing LNG pipelines and terminals is “something we can do — and we don’t need the federal government, and we don’t need Alberta.”

Analysts gravitated towards this contrast in their reports. Robert Kwan of RBC Capital Markets says that the Liberal government will likely remain supportive of the “entire LNG chain,” but that getting oil pipelines approved might still be an “uphill battle.”

He adds that “while the NDP winning would have resulted in outright opposition to Northern Gateway and the Trans Mountain expansion, the Liberals’ commentary has not been particularly supportive. Even if the Liberals end up supporting one, or both, of the oil pipes, we note that there are still numerous issues that could pose a significant impediment to either project proceeding.”

The Liberal win is still a wildcard for Canada’s energy industry. Premier Clark provides pipeline proponents with more room to manoeuvre than a Dix-led government would have, but the hurdles are still high.

But at least under Clark the conversation can continue.