We are disappointed that the Liberal government caved when U.S.-controlled Kinder Morgan Canada Ltd. presented its April 8 ultimatum April, essentially a form of corporate blackmail.
Faced with legal, physical, and environmental roadblocks, and what many experts say are dim prospects for financial success, Kinder Morgan threatened to pull the plug on the planned expansion of its existing pipeline between Edmonton and Burnaby on the B.C. coast unless it receives guarantees that the project can proceed and shareholder protected.
With the B.C. government challenging the project in court, the company lost interest in moving ahead. We believe the pipeline expansion, which will triple daily capacity to 890,000 barrels of diluted bitumen for eventual shipment to Asian market, is wrong for economic and environmental reasons.
Leaving bitumen in the ground until such time as it pays to refine it in Canada, if that ever occurs, is far preferable. Instead Ottawa has agreed to spend $4.5 million to buy Kinder Morgan’s Trans Mountain project – the existing pipeline, the terminal assets, the current management team and workforce and the right to build the expanded pipeline.
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It hopes to find a buyer, but as Jeff Rubin, senior fellow at the Centre for International Governance Innovation says, the private sector doubts the project is commercially viable, and finding a buyer is problematic. The rationale for the pipeline expansion – the desire to diversify the customer base by shipping diluted bitumen, or dilbit, directly from the B.C. coast to Asia and being less dependent on the American market where most of our oil goes – is not borne out by the statistics. (Dilbit usually is a mixture of 20-30 per cent diluent and 70 to 80 per cent bitumen, the diluent usually a lighthydrocarbon mixture.)
Asian markets show little interest in importing crude from Canada, let alone dirty bitumen. Crude exports from Vancouver to China maxed out at 28 per cent of outbound shipments in 2011, dropping to six per cent in 2014 and close to zero in 2016. India was at two per cent in 2013. The price of oil that would justify extracting, refining, and shipping bitumen from Alberta to Asia is now and likely will remain uncompetitive in the foreseeable future.
The main obstacle: the glut of cleaner product as a result of fracking in the U.S., and moves by Russia and Saudi Arabia to lower the price whenever sales lag. If the line is expanded, a pipeline break or tanker spill is not a question of “if” but “when”. Any oil spill is catastrophic to the land, fresh waterways, and the ocean – and they happen all the time.
As Jeff Rubin has noted, “Far from needing new pipelines, the oil sands industry will soon have problems filling the capacity of existing ones in tomorrow’s emission constrained world.” This decision enrages environmentalists and is set to haunt the Trudeau government.