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After Upset Election, Route for Tar Sands to Pacific Doesn't Close

Anti-pipeline candidate ahead in the polls loses British Columbia election, but pipeline projects still face hurdles.

May 16, 2013
Christy Clark, Premier of British Columbia.

Environmentalists suffered a setback on Tuesday when British Columbia re-elected a premier who left the door open for approval of two oil pipelines that would carry tar sands oil across B.C. to the Pacific Coast, where it could be exported to the world market.

Despite trailing in the polls, incumbent Christy Clark, the leader of B.C.'s Liberal Party, defeated Adrian Dix and his New Democratic Party. Dix had opposed both pipelines, and environmental groups had hoped his win would signal the end of the projects.

The two Canadian pipelines—along with the proposed Keystone XL pipeline across the United States—are crucial to the expansion of Canada's oil sands industry, which is based in the province of Alberta. The industry hopes to double in size over the next decade, but because Alberta is landlocked, more pipelines are needed to get the oil to the coast.

Like the Keystone project, the Canadian pipelines face grassroots opposition from local landowners and environmental groups.

In Canada, the office of premier is analogous to a governor in the United States. Because provincial leaders hold considerable influence over natural resources management, experts say it would be virtually impossible for the federal government to push through projects that are opposed by the B.C. government.

Although Clark is more willing than Dix to consider the pipeline proposals, her win doesn't guarantee that either project will be built.

About a year ago, when Dix announced his opposition to one of the pipelines, Clark said pipeline operators in B.C. would have to meet five conditions in order to win her party's support. Those include "world-leading marine oil spill response" plans, participation and benefits for aboriginal First Nations and assurances that British Columbia would receive "a fair share" of the pipelines' economic benefits.

Matt Horne, climate change program director at the Pembina Institute, which supports clean energy, said it's unclear whether the Liberal government will ultimately approve the pipelines, because there's little information on what pipeline operators would have to do to meet the five conditions.

Peter Howard, president of the government and industry-funded Canadian Energy Research Institute, said the biggest obstacle might be Clark's insistence that British Columbia receive a cut of the revenue, because Alberta Premier Alison Redford has repeatedly refused to share the royalties generated from the oil shipped through the lines.

Clark's demand is essentially a transit tax, Howard said, and it "opens the door for commodities that up until now have crossed provincial borders without taxation—everything from coal to potash to manufactured goods...It's a situation I'm not sure governments would like to see."

Each of the proposed pipelines would carry millions of barrels of oil sands crude to the coast.

The Northern Gateway pipeline proposed by Enbridge, Inc. has a capacity of 525,000 barrels per day and is in the midst of contentious hearings before Canada's National Energy Board.

Kinder Morgan's Trans Mountain project involves building a new pipeline next to an existing line to increase the capacity from 300,000 to 890,000 barrels per day. (A barrel holds 42 gallons.) The company has yet to formally apply for its project, so most of the attention remains on Northern Gateway.

"Unless [Clark] absolutely changes her mind [about sharing the royalties], I think Northern Gateway doesn't have a chance, and Trans Mountain will be challenged. The advantage it has is that it's an existing operation," Howard said.

Kinder Morgan did not respond to questions before this story was published.

In a statement, Enbridge spokesman Graham White congratulated the newly elected premier and said, "British Columbians have sent a strong message…[they] want a strong economy to ensure people have jobs and the social services they value most. They have also said a strong economy cannot come at the expense of the environment. Enbridge agrees with British Columbians…In response to the five conditions, we look forward to working with the government to build confidence in our safety and emergency response measures."

Environmental groups say the Liberal Party's victory doesn't mean most British Columbians support the pipeline projects.

"The issue of pipelines, tankers and climate change is front and center in the public debate, and that was very apparent in B.C. over the past few months and it's happening more generally across Canada," said Gillian McEachern, campaigns director at Environmental Defence Canada. "I think this means all elected officials need to pay attention to that, and they need to figure out how to address these growing concerns."

Horne of the Pembina Institute said that although the Liberal Party hasn't ruled out the projects, as the New Democratic Party did, the Liberals have never been strong pipeline supporters. "They have always said, 'let's wait until the outcome of the [Enbridge] hearings before making any pronouncements one way or another.' About a year ago, they adopted these five conditions, and in the Enbridge hearings, I'd say they've taken a fairly adversarial approach to Enbridge."

Horne said the Liberals increased their scrutiny of the project in response to the growing opposition in B.C., along with high-profile pipeline spills in Canada and the United States.

Uncertainty over Canada's pipeline projects has made the Keystone XL project even more important to the oil industry. That 830,000-barrel-per-day pipeline would ship a form of crude oil known as dilbit across the U.S.-Canada border and travel through six states to the U.S. Gulf Coast. The Obama administration is expected to approve or reject the project by early 2014.

"Right as we stand here today, the Canadian pipelines that feed the U.S. are basically full," Howard said.

According to his group's research, projects that could produce 2 million barrels of oil sands crude a day are "waiting for a market signal" to start construction—and Keystone is "the next logical connector."

The Keystone is also the project closest to construction.

If the Northern Gateway were approved by the end of the year, it wouldn't be on stream until 2016 at the earliest, Howard said. But if the Keystone is approved by Christmas, it could be up and running by 2015 and "would be a signal to oil sands developers to start building more projects."

The industry's need for Keystone contradicts the U.S. State Department's claim that the project would have little impact on the growth of oil sands production. The agency is under intense pressure from environmental groups that say the project would "lock" the country into using a dirtier form of fossil fuel. Compared to conventional crude, Alberta's oil sands produce 20 percent more greenhouse gases. The heavy oil is also harder to clean up when it spills in water. Oil from a 2010 Enbridge pipeline accident is still being removed from Michigan's Kalamazoo River today, nearly three years later.

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