Hans Matthews spent much of 2012 criss-crossing Alberta and B.C. as a member of the federal-provincial panel conducting hearings on the contentious Enbridge Northern Gateway pipeline.

Those emotional hearings eventually overshadowed the proposal itself, leading then-natural resources minister Joe Oliver to accuse “environmental and other radical groups” of hijacking the process to “stop any major project, no matter what the cost to Canadian families in lost jobs and economic growth.”

Central to the controversy was opposition from First Nations along the route, many of whom felt they hadn’t been properly consulted during the development of the proposal. It was a social and political mess, all for a project that eventually died anyway. But Matthews, now the president of the Canadian Aboriginal Minerals Association, says it didn’t need to be that way.

“By embracing aboriginal knowledge, communities’ knowledge, it would have been a more balanced and fair process,” Matthews told The Narwhal.

Indigenous ways of life not contemplated by current system

That idea has come to the fore yet again with the Federal Court of Appeal’s rejection of the permits that allowed Kinder Morgan to proceed with its expansion of the Trans Mountain pipeline. In its decision, the court cited a lack of meaningful two-way consultation with First Nations in the planning process, along with other factors.

“Canada was required to do more than receive and understand the concerns of the Indigenous applicants,” wrote judge Eleanor Dawson in the court’s written decision. “Canada was required to engage in a considered, meaningful two-way dialogue.”

In other words, Canada pushed ahead with its own process, pausing only now and then to collect some feedback from First Nations. For the sake of those affected, the governments in charge, and even the project itself, it is now clear that that was not the right approach. But it didn’t have to be that way.

A new concept is emerging in the world of environmental decision-making: that it’s not enough for governments to loop Indigenous groups into their environmental assessments, and that instead Indigenous peoples should be able to conduct their own processes that run parallel to the non-Indigenous-led assessments.

A recent report by the Firelight Group, a consultancy founded to support the rights and interests of Indigenous communities, found Indigenous environmental assessments “rely on and protect Indigenous culture, language, and way of life in ways existing government legislated systems have either never contemplated or are still not accommodating.”

How is Indigenous assessment different?

In a traditional assessment, Indigenous peoples have some opportunity to contribute to the process and to be heard. But the decision is ultimately up to a government that may not share the worldview of the affected Indigenous communities.

“That means that people are engaged, but if they are busy on another file, or not meaningfully engaged or unable to get their point heard, then they are not able to be equal decision-makers or use their own set of values, worldview and Indigenous law to drive the process forward,” author of the Firelight report, Ginger Gibson, told The Narwhal.

“Indigenous EA [environmental assessment] means Indigenous governments are setting the terms, they’re conducting the review with their worldview and their Indigenous laws — they’re making decisions about the project themselves.”

“It’s a fundamental difference,” Gibson added.

The result is an assessment that from the get-go is steeped in the ideas that are not as well recognized in Eurocentric processes.

“You’re probably going to get a more realistic, pragmatic approach,” Matthews said.

“It would be a community-driven process from the very beginning.”

Indigenous assessment isn’t brand new

The report, which includes three case studies, highlights one example of a fully independent Indigenous impact assessment of a proposed LNG plant that was conducted by the Squamish First Nation in B.C.

The First Nation conducted the assessment after determining the scope themselves.

As opposed to the British Columbia government process, which only allowed submission of archaeological evidence, Indigenous law was incorporated throughout the Squamish-led assessment, as well as the First Nation’s knowledge and culture.

Eventually the First Nation-led process ruled in favour of the project, attaching 25 conditions including some that would mitigate the impacts on cultural practices such as hunting and fishing.

“This more holistic approach is much more conducive to — and reflective of — the type of communal decision-making of many Indigenous people,” the report concluded.

Matthews says this approach allows Indigenous communities to feel their values are being respected by potential developments.

“It’s also a matter of showing respect for the people that have occupied and used the land since time immemorial,” he said.

Gibson says no matter what the outcome of the assessments, the result is a more robust look at the proposed project.

“They are sometimes reaching similar decisions, sometimes reaching different decisions,” she says. For example, both the Tłı̨chǫ government, in the Northwest Territories, and federal government reached the same conclusion, to approve a proposed cobalt-gold-bismuth mine in the First Nation’s territory.

“Our finding from our research is that each process is always better because of the parallel review. There’s more information, there’s more known about the project, there’s more unearthed about the impact on Indigenous people — and there’s a stronger buy-in to the outcome of the process.”

What would this mean for Indigenous-Canada relations?

The history of Canada and its dealings with Indigenous communities on resource issues is fraught with missed opportunities for fulsome conversations.

The Gwich’in of the Northwest Territories and Yukon are a prime example of this lack of engagement.

“There was a lot of oil and gas development and we really didn’t have a say in what was happening,” said Jordan Peterson, deputy Grand Chief of the Gwich’in Tribal Council, which commissioned the report from the Firelight Group.

“We haven’t always been fully consulted or engaged or involved in these processes.”

The Gwich’in Tribal Council is particularly concerned about the Porcupine caribou herd, a vital cultural and economic resource that, like all caribou, is sensitive to the kind of habitat fragmentation and disturbance oil and gas development can create on the landscape.

Peterson and Matthews agree that Indigenous-led environmental assessments would be one way to bring Canada and First Nations, Métis and Inuit closer together, and undo some of the impacts of colonial processes.

“By engaging communities in the assessment process, you’re meeting the goals of free, prior and informed consent,” Matthews says, contributing to the federal government’s stated goal of complying with UNDRIP and the Truth and Reconciliation Commission’s calls to action.

“Ninety-nine per cent of the time it’s an aboriginal community that will have some impact from a resource project.”

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Politicians and industry have long boasted of the ability for an expanded Trans Mountain pipeline to get oil to lucrative Asian markets from Burnaby’s Westridge terminal.

But experts in Washington State are increasingly concerned that the twinning of the Edmonton-to-Burnaby pipeline may in fact lead to an expansion of the Puget Sound Pipeline, a 111-kilometre “spur line” from Trans Mountain that branches southward at Abbotsford to carry oil to four large refineries in the Puget Sound region.

If Kinder Morgan shareholders vote to approve the deal, Canada will purchase the Puget Sound Pipeline as part of the $4.5 billion deal for the existing Trans Mountain line — meaning the decision to expand the spur line would eventually fall to Ottawa.

Trump may use Puget Sound Pipeline to punish Canada for trade conflict

According to a recent analysis from the Cleveland-based Institute for Energy Economics and Financial Analysis, the presence of the Puget Sound Pipeline in the $4.5 billion sale to Canada may end up being the very thing that scuttles the deal.

That’s because the U.S. government is required to approve the purchase as it crosses the border, including review by both the Committee on Foreign Investment in the United States and State Department.

President Donald Trump would ultimately decide the verdict of the deal — which he may oppose given his erratic approach to addressing ever-growing trade tensions between the two countries.

The reports authors conclude the Puget Sound Pipeline could theoretically be removed from the deal, but it’s no easy task.

“It would probably further delay this,” Kathy Hipple, financial analyst at the institute and co-author of the report, told The Narwhal.

“They would have to work again, re-draft the contract. Lawyers would have to be involved, new documents drawn up, a new price tag put on the deal,” she said, adding the change would raise a new tranche of questions: “what is the valuation of [the Puget Sound Pipeline] and how does that reduce the price from the $4.5 billion if it’s not included?”

“It’s not as simple as an eraser on a pencil and taking the price down,” she said.

Despite the potential challenges of the transaction, others say there is an appetite for an expanded pipeline south of the border.

“I could see it happening very easily,” Mike Priaro, a Calgary-based independent oil and gas consultant, said in an interview with The Narwhal.

“Those refineries in Puget Sound would want to get the cheapest crude they could get their hands on. Sending it by pipeline from the oilsands directly to the refinery is the cheapest way to get crude there.”

The Trans Mountain pipeline meets the Puget Sound pipeline in Abbotsford, where the oil can be carried south into Washington State. Graphic: Carol Linnitt / The Narwhal

A report by Morningstar Commodities Research in January 2017 concluded that “some if not all Washington State refiners are very keen to get their hands on Canadian crude” and that the Trans Mountain expansion “will end concerns about limited crude supply for Puget Sound refineries.”

Kinder Morgan Canada’s prospectus for an initial public offering a few months later, in May of 2017, referenced the possibility of a Puget Sound Pipeline expansion — five times.

Specifically, it reported that the Puget Sound pipeline system is capable of being expanded from approximately 240,000 barrels per day to approximately 500,000 barrels per day.

Two-thirds of oil shipped on Trans Mountain ends up in Washington State

Most of the oil transported on the existing Trans Mountain pipeline already ends up going to refineries in Washington — either by pipeline or tanker.

According to data from the National Energy Board, an average of 295,600 barrels of oil per day was transported on the Trans Mountain pipeline in March 2018, the most recent month of reporting.

About 62 per cent of the oil went to Washington State via the Puget Sound Pipeline.

Another 21 per cent went to the Westridge terminal, while the remaining 17 per cent was transported to Burnaby for distribution, refining or storage. The Burnaby refinery, recently sold to Parkland Fuel by Chevron, has long complained about lack of supply because most of the oil is designated for exports.

Washington State’s Department of Ecology reported that between January and June 2018, an average of 163,500 barrels per day of oil was transported from Alberta via the Puget Sound Pipeline.

All of the oil that made it to Westridge was “domestic heavy,” or diluted raw bitumen from Alberta.

That’s opposed to “domestic light,” which includes conventional oil and bitumen upgraded into high-quality synthetic crude — and is primarily shipped to Washington refineries via the Puget Sound Pipeline. Some diluted bitumen also arrives at Washington refineries by tanker or barge from Westridge, with more shipped to California. Some oil is also transported from Alberta to Washington by rail.

Between January and June 2018, 1.55 million tonnes of crude oil (the Port of Vancouver measures oil in tonnes rather than barrels) was shipped from Westridge on tankers and barges. Of that, 92 per cent went to the United States (while 4.8 per cent went to South Korea in April and three per cent went to China in May).

This is an overall increase from previous years. For comparison, only 1.77 million tonnes of crude oil was shipped out of Westridge in all of 2017.

Washington State has limited ability to process heavy oil — but that could change

Historically, Washington refineries have relied on oil from the Alaska North Slope.

But production has collapsed in recent decades, down to only 525,000 barrels per day (bpd) in 2018 from over two million barrels per day in 1988. About a quarter of Alaska Slope supply was replaced by oil from the North Dakota shale boom, transported by rail.

Imports from Canada almost doubled in that time, from an average of 110,000 bpd in 2009 to 195,000 bpd in 2016 via the Puget Sound Pipeline.

Only two of the five refineries in Washington State have “coker units” that are required to process non-upgraded bitumen from Alberta. Combined, the two refineries have 83,000 bpd in coking capacity, which limits the amount of heavy oil the region can process. As a result, most of the Alberta oil imported to the region has been conventional or synthetic crude (already upgraded in Alberta).

Morningstar advised the two other refineries to upgrade their facilities to accept heavy oil.

Alberta oil processed by a coking refinery was much more profitable than other types of oil in 2016 at Puget Sound refineries: $24 per barrel, compared to $10 per barrel for Bakken oil and $6 per barrel for Alaska oil.

Washington ports deeper than Vancouver’s, allowing bigger tankers

If there’s not currently much demand for heavy oil in Washington State, what’s the concern?

For starters, an expanded Puget Sound Pipeline would allow refineries to rely far more heavily on Alberta oil, encouraging them to invest in coking units that maximize returns. The future of Alaska North Slope oil is currently uncertain compared to oilsands imports, which offer a stable long-term option.

This alone could justify an eventual and significant increase in capacity.

But there’s also speculation that Puget Sound could become an export terminal of its own.

The Westridge terminal in Burnaby — which will soon belong to the Canadian government, pending approval from Kinder Morgan shareholders — has serious depth restrictions that limit loading to Aframax-size tankers, which can only be partially filled with about 500,000 barrels.

Comparatively, BP’s Cherry Point terminal in Washington State’s Whatcom County can receive Very Large Crude Carriers (VLCC), with tankers docking in late 2017 carrying 900,000 barrels — almost double the capacity of Westridge.

“The reality is those Aframax boats are not great for international shipping,” Clark Williams-Derry, director of energy finance at Sightline Institute, told The Narwhal.

“Westridge is always going to be a crummy place for the Government of Canada to be shipping oil out of because you’re going to boost the cost by a few bucks a barrel, at least.”

A BP spokesperson recently told The Seattle Times that it “plans to process any additional Canadian crude coming to the Cherry Point refinery within the facility.” However, the refinery only has 57,500 bpd in coking capacity, so it’s unclear how it could process a significant increase in imports.

Either way, the idea of increased availability of various products from the Alberta oilsands would likely appeal to both producers and refiners.

Considerable opposition to fossil fuel expansion in Washington State

But a doubling of the Puget Sound Pipeline wouldn’t be an easy thing to pull off.

The owner — soon to be Canada — would have to twin the pipeline, add some additional pumping stations and build a tank farm at a refinery.

“It would be one of the most unpopular things you could do in Whatcom County,” Alex Ramel, extreme oil field director with the environmental advocacy group Stand.earth, said of the prospect.

Washington Governor Jay Inslee has condemned the Trans Mountain expansion but as Victoria Leistman of Sierra Club points out, he hasn’t specifically addressed the potential of a Puget Sound Pipeline also being widened or twinned.

“If there’s any risk for this to be expanded, we need him to explicitly put that to bed,” she said.

Tara Lee, deputy communications director of Governor Inslee, said the Puget Sound Pipeline is on his radar.

“We have concerns about that expansion that mirror the concerns the governor has expressed about the Trans Mountain Expansion,” Lee told The Narwhal in an e-mailed statement.

“If there is a change in operations with the Puget Sound Pipeline expansion, then they must work with our state Department of Ecology spills program.”

Williams-Derry said it would be complicated given a recently renewed six-month temporary moratorium by Whatcom County Council on exports of unrefined oil from Cherry Point, which may eventually lead to a permanent ban.

And there’s precedent for activism stopping fossil fuel export projects in the area. In 2016, the local Lummi Nation successfully fought a proposed coal export terminal.

But Williams-Derry emphasized there are still potential profits on the table: “Just because there’s political opposition here — there may actually be a bunch of people in the oil industry who really want to make that happen.”

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For more than a week, the West Coast — and the world — have watched as a Southern Resident killer whale mother carries her dead calf in what experts describe as a display of grief.

The calf was born on July 24 and lived for only half an hour — not long enough to be named under the system researchers use to identify each individual member of this endangered population.

Since then, its mother, J35, has carried it — usually on her head, sometimes carefully in her mouth and with a deep dive to recover it every time she takes a moment’s break. She has been doing this without interruption for so long that researchers are concerned about the consequences for her own health.

Scientists say orcas aren’t the only animals that mourn their dead. Other whales and dolphins have also been known to “keep vigils” for deceased podmates.

But the depth of J35’s display of grief has been particularly striking.

“What is beyond grief?” Deborah Giles, a research scientist for the University of Washington Center for Conservation Biologist is quoted as saying in the Seattle Times. “I don’t know what the word for that is, but that is where (the mother) is.”

The loss also highlights the critical circumstances the Southern Residents face.

As of today, the endangered Southern Resident killer whale population numbers only 75. In addition to watching J35, researchers are anxiously monitoring a four-year-old female, J50, who is dangerously emaciated and may not survive.

These salmon-eating resident killer whales, whose critical habitat is located in the transboundary waters of the Salish Sea off British Columbia and Washington State, have not produced a surviving calf since 2015. Recent research shows that 69 per cent of pregnancies are failing, likely due to poor nutrition.

The federal government acknowledged in May that this killer whale population faces “imminent threats to its survival.” The main threats are the lack of availability of Chinook salmon prey, underwater noise that interferes with basic life functions and communication, and environmental contamination.

Now that they’ve found that there are imminent threats to survival, the Ministers of Fisheries and Oceans and Environment and Climate Change are legally obligated to recommend that Cabinet issue an emergency order to protect the Southern Residents, unless there are already equivalent legal measures in place.

Ecojustice petitioned the ministers to do this in January, on behalf of the David Suzuki Foundation, Georgia Strait Alliance, Natural Resources Defense Council, Raincoast Conservation Foundation and World Wildlife Fund. The petition identified specific measures that an emergency order should include, including the creation of feeding refuges closed to fishing and whale-watching, and measures to address underwater noise from shipping.

Rather than recommend an emergency order to ensure urgent the suite of protections needed, the ministers have taken limited steps on some issues by implementing fishery closures in some of the whales’ foraging areas and by clarifying, in long-overdue amendments to federal regulations, that commercial and recreational whale watchers must stay 200 metres away from killer whales. The other actions announced are voluntary, research-oriented, yet to begin,and/or lacking timelines. More is needed, and urgently.

Meanwhile, the federal government is contradicting its partial measures to protect the whales by pushing forward with the Trans Mountain pipeline, which would add 816 oil tanker trips per year — a sevenfold increase — through the whales’ critical habitat.

The National Energy Board found that the marine shipping aspect of the project would have “significant adverse effects” on the species and that an oil spill would be “potentially catastrophic.” The lack of any measures to address those effects in the board’s report and in the government’s approval of the project is the subject of ongoing litigation by Ecojustice on behalf of Raincoast Conservation Foundation and Living Oceans Society.

J35 is unwittingly putting on a prolonged, public display of the devastating consequences of inaction on these issues. We will see this sad scene repeated again and again unless meaningful action is taken.

If this week’s heart-wrenching images don’t inspire action, what will?

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B.C. Premier John Horgan took the call from Prime Minister Justin Trudeau at 6 a.m. Tuesday, “before the coffee had made its way through,” as Horgan told the media four hours later. Horgan had risen at 5:45 a.m. to await significant news about the Kinder Morgan Trans Mountain Pipeline project his government came to power determined to stop.

Trudeau’s big news — that the federal government has arranged to purchase the pipeline outright  — places Kinder Morgan Canada on smooth financial seas, Ottawa in the captain’s seat and Canadians on the hook for a $4.5 billion pipeline purchase that many view as a needless subsidy to the fossil fuel industry.

“This decision represents both a colossal failure of the Trudeau government to enforce the law of the land, and a massive, unnecessary financial burden on Canadian taxpayers,” Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said in a statement.

Kinder Morgan, a Texas-based corporation with $80 billion in assets whose Canadian directors earned millions last year, called it a “great day” for the company and Canadians.

Canada pledged to end ‘inefficient fossil fuel subsidies’

But while the celebratory corks might be popping out of the bubbly in the prime minister’s oak-panelled office two days ahead of Kinder Morgan’s controversial deadline for resolving the pipeline impasse, Trudeau will have to answer to his global counterparts when Canada hosts the G7 summit late next week in Charlevoix, Quebec.

At a G7 gathering two years ago this month in Japan, Trudeau and leaders for the first time set a deadline for terminating most fossil fuel subsidies, saying government support for coal, oil and gas should be discontinued by 2025. Canada and other G7 nations encouraged other countries to join them in eliminating what they referred to as “inefficient fossil fuel subsidies.”

“Given the fact that energy production and use account for around two-thirds of global greenhouse gas emissions, we recognise the crucial role that the energy sector has to play in combatting climate change,” the leaders’ declaration said.

Trudeau’s Kinder Morgan announcement is an “embarrassment” for the country in light of that commitment, said Alex Doukas, a spokesperson for Oil Change International, a Washington-based organization focused on exposing the true costs of fossil fuels and facilitating a transition to clean energy.

“Other governments are going to be coming to the table expecting to see leadership from Canada on this file and just days before the summit Canada is plonking down a massive subsidy for the oil industry,” Doukas told The Narwhal.

“And that’s not acceptable. That’s not climate leadership. It would never be a good time for the Canadian government to take on massive risk on the shoulders of Canadian taxpayers, but to do so days before they’re hosting the G7 and trying to wear the mantle of climate leadership is absurd.”

Calling the Kinder Morgan purchase “the great Canadian bailout,” B.C. Green Party leader Andrew Weaver said as a climate scientist he longs for the days when federal Conservative leader Stephen Harper was in power because at least Harper — notorious for his lackadaisical efforts to address global warming — was  consistent on climate change policy.

“Today will be remembered as Trudeau’s legacy,” Weaver told reporters.

“He came into office claiming that he was there as an inspiration for the next generation, claiming he was going to deal with climate change, claiming he was going to be there for the future. He betrayed that today.”

Weaver added: “Mr. Trudeau says one thing and does another and frankly should be ashamed of himself today.”

Major banks end oilsands financing

Doukas said while the entire pipeline purchase might not be a subsidy, the fact that Ottawa felt compelled to purchase the project suggests that “they’re taking risks and liabilities that the private sector is not willing to take on” and means that there’s “some degree of subsidy.”

Federal Finance Minister Bill Morneau said Ottawa is willing to provide the same type of indemnification against political risk to a future owner of the project that the federal government offered to Kinder Morgan.

“So they’re still going to indemnify any future potential component of the project against political risk resulting from actions at the provincial level,” Doukas said. “And that’s a form of subsidy. They’ve clearly indicated interest in continuing to provide a government backstop for the project.”

Doukas also pointed out that on the very same day Trudeau announced the pipeline buyout, the Royal Bank of Scotland (RBS) joined other major institutions — including HSBC, ING and BNP Paribas — by announcing it would no longer directly finance oilsands projects. The bank also tightened restrictions on lending to Arctic oil projects, thermal coal mines and coal-fired power stations.

Horgan said he viewed Canada’s G7 commitment as a “difficult target to realize based on today’s decision,” noting that the B.C. government will carry on with its climate action plan currently under development.

“We’re a sub national government that feels obliged to meet the national targets set by the federal government and it’s business as usual on that front as far as I’m concerned.”

“Mr. Morneau will have to answer to taxpayers, federal taxpayers, who also happen to be British Columbians and Newfoundlanders and people from the Yukon, about how he’s disposing of their hard fought tax dollars,” Horgan said.

Ownership of Trans Mountain pipeline not traditional subsidy: expert

Werner Antweiler, an associate professor at UBC’s Sauder School of Business, told The Narwhal that subsidies to the oil and gas sector in Canada consist mainly of tax write-offs. One study by four major environmental and policy groups, including the International Institute for Sustainable Development, pegs annual Canadian subsidies to the fossil fuel industry at $3.3 billion.

“The ownership of these [Kinder Morgan] assets itself isn’t really a subsidy,” said Antweiler, chair of the school’s strategy and business economics division. “But politically maybe it’s not the right signal to send that the government is getting into that sector when our long-term trajectory is to depart from fossil fuels and move towards forms of renewable energy. So the optics are certainly less appealing.”

Antweiler said demand exists for the diluted bitumen that will be shipped through the Kinder Morgan pipeline expansion, and that Canadian taxpayers are unlikely to be on the hook for a failed business model or a stranded asset.

“Honestly if these were stranded assets you would see the stock prices of these companies collapse and they’re not. The oil business is still going strong.”

“That is not what environmentalists would like to hear and I consider myself on that side of the spectrum but the reality is we all still continue to use fossil fuels. The demand is there and it won’t go away for the next decades while we are transitioning to other types of fuel,” he said, adding that he would prefer a faster transition to renewable energy.

“That process is a lot slower than we would like it to be and what we can do about it is to put a price on carbon and other emissions related to these fuels so that helps this transition. The pipeline here is a very small piece of the puzzle and it’s not what’s going to decide the outcomes in terms of climate change. That depends on many other policies, in particular whether or not we really price carbon.”

Horgan pointed out that the federal government is now fully responsible for the pipeline “from wellhead to tidewater and beyond,” saying “that’s probably a good thing.”

“That allows me to have candid discussions with the owners of the pipeline that I wouldn’t have been able to when they were shareholders in a Texas-based oil company,” Horgan said.

“So the good news is that the government of Canada needs to be accountable for a protection plan, and if there are gaps in that plan I’ll be able to speak directly to the owners of the pipeline.”

Horgan also said that the B.C. government’s court reference case against the pipeline expansion will continue, reiterating an earlier pledge to do everything possible to avoid “the catastrophic consequences” of a diluted bitumen spill.

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For 18 months, the federal government has claimed that its support for the Trans Mountain pipeline expansion is science-based.

Despite pledges to increase transparency and elevate science in policy decisions — which earned kudos during the 2015 election — it’s hard to find the scientific basis for their science-based decision.

Some in the Trudeau government seem to be getting the message.

Less than three weeks ago, Environment Minister Catherine McKenna called for the creation of a new scientific advisory panel to reconsider concerns about the environmental risks of the Trans Mountain pipeline expansion project. Many scientists — including ourselves — are eager to contribute.

An advisory panel of independent experts could address the deficiencies of a National Energy Board process that is widely acknowledged to have been both industry-biased and insufficient.

However, this begs an important question: if concerns are sufficient to convene a new science panel to address the NEB’s failures regarding the risks of diluted bitumen in B.C.’s coastal waters, shouldn’t the decision to approve the pipeline have waited for just this kind of information?

Prior to the November 2016 pipeline approval, we shared with government a peer-reviewed study that evaluated scientific understanding of 15 types of environmental impact to the oceans caused by the production and transport of diluted bitumen.

This heavy petroleum product would be pumped through the Trans Mountain pipeline at three times the current volume and create a seven-fold increase in tanker transport through Vancouver’s Burrard Inlet.

Our research found large gaps in scientific understanding of the toxicity of diluted bitumen products to marine species and how the products will behave in the ocean. Filling both gaps is necessary before determining whether the Trans Mountain pipeline is in Canada’s best interests.

In fact, our study was one of at least five major scientific reviews, published by the Royal Society of Canada and the U.S. National Oceanic and Atmospheric Office of Response, among others, in the lead up to the approval of the Trans Mountain project.

All five identified major gaps in scientific understanding and preparedness for environmental impacts generated by the coastal transport of diluted bitumen.

The gaps in knowledge, combined with incomplete risk assessment and insufficient baseline data, make it impossible to address the full suite of threats to ocean species and their habitats, or to assess the effectiveness of emergency actions, including spill response.

Given the paucity of information on these key issues, the B.C. government’s call for additional scientific review and research, made last January, was well grounded, and has proven to be prescient.

McKenna’s proposal for a new look at the science followed on the heels of reports that a high-ranking government official had instructed public servants to find a “legally-sound basis to say ‘yes'” to the Trans Mountain project, while discouraging them from raising concerns identified by independent research, including our own.

A credible review, by a panel of independent scientists, at arm’s length from influence by industry or government, is long overdue.

In the absence of sound science, government has a duty to delay construction, and err on the side of coastal protection and climate progress.

Prime Minister Trudeau’s public commitment to transparency and evidence-based policy demands no less.

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On Wednesday, Finance Minister Bill Morneau broke the federal government’s long silence about its plans for financially backing Kinder Morgan’s Trans Mountain Pipeline.

Details were scarce. But Morneau confirmed the government is indeed ready to compensate any company — whether Kinder Morgan or any other company that takes on the project — for any financial losses resulting from delays.

It’s unclear how much money the government would commit, but in late 2017, the company stated that it loses about $75 million in gross earnings for every month of delay. That could — um — add up.

The decision by the government to financially back an oilsands project didn’t come from nowhere. In fact, there’s an incredibly lengthy history of public investments and supports in the sector — which continues to this day.

“The idea there would be public investment in the industry as a whole is nothing new and nothing surprising,” said Chris Turner, journalist and author of The Patch: The People, Pipelines, and Politics of the Oil Sands, in an interview with The Narwhal. “You’ve got this 100-year history of government investment and partnership to get it to commercial viability. It’s a bit strange in the current market environment but it’s not something wildly new to the industry.”

So in honour of Morneau’s big announcement, here are some of the “greatest hits” of such investments over the years.

Opening up the sands

Almost all of the early major players in the oilsands were government employees.

For instance, the first full mapping of the region’s potential for oil development was conducted in 1913 by an engineer from the federal Department of Mines.

Hot water separation, the process vital to the commercializing bitumen, was perfected by the now-legendary Karl Clark when he worked as a research scientist for the provincial government.

In 1950, an engineer hired by the Alberta government published a landmark report about economic viability, which Turner described in his book as bringing “an unprecedented sense of purpose to the oil sands project.”

Following that, the province hosted a sizeable conference in Edmonton that attracted oil companies from around the world to hear about the region’s prospects, after which Clark gave guided tours of the hot water processing facility in Bitumount. That technology, as Turner put it, “remains at the core of every oil sands mining enterprise.”

“I don’t think the oilsands would have the success that it has had today in terms of production and investment if there hadn’t been that initial government investment,” said Gillian Steward, journalist and author of the 2017 Parkland Institute report, Betting on Bitumen: Alberta’s Energy Policies from Lougheed to Klein.

Early companies

But it wasn’t just about the research: the public also played a significant direct investment role in launching the oilsands. In fact, Turner described the first two mines as “all but Crown corporations in their early days.”

First was the Great Canadian Oil Sands — which later became the mighty Suncor — and its sale of $150 million worth of equity to 100,000 Albertans to open its project in the late 1960s. Turner said the Alberta government, then led by premier Ernest Manning, “ushered it in every step of the way.” In 1981, the Government of Ontario bought a 25 per cent stake in Suncor, which it held until 1993.

Government support was even more pronounced with Syncrude. As the consortium was gearing up to build its project, Atlantic Richfield (ARCO) — which had a 30 per cent stake — pulled out. As Steward put it in her report, “other private corporations involved in the project used the withdrawal to force major concessions from the Alberta, Ontario, and federal governments.”

“It was in danger of the whole thing falling apart,” Steward told The Narwhal. “It was at that point that the federal government, Alberta government and Ontario government actually stepped in and bought a significant equity in it, which allowed it to keep going.”

The federal government bought 15 per cent, Alberta bought 10 per cent and Ontario bought five per cent. The Alberta Energy Company, founded in 1975 by the Lougheed government, also held a 10 per cent share for decades.

Ongoing research

The Alberta Energy Company (AEC) was a key creation by the province to take a more active role in energy, forestry and coal, with half of its shares owned by residents.

Another piece of the puzzle was the Alberta Oil Sands Technology and Research Authority, also known as AOSTRA, which Turner described as being “set up by the Lougheed government with the single task of making in-situ bitumen deposits commercially profitable.”

It’s no exaggeration: without the public research body that was set up in 1974, there’s a high probability that the groundbreaking in-situ method of steam-assisted gravity drainage (SAGD) wouldn’t have happened — or at least not for decades. The process now represents almost all future oilsands growth beyond 2025.

“I don’t think that would have happened without government money,” Steward said.

The 1995 task force

In mid-1995, the National Task Force on Oil Sands Strategies — created by industry lobby group, the Alberta Chamber of Resources — released a 62-page report calling for an aggressive overhaul of tax and royalty regimes for the oilsands.

The organization that created the task force was also headed by the CEO of Syncrude. In total, 45 of the 57 committee chairs and members were from industry, with the other dozen from the federal and provincial government.

Both levels of government almost immediately accepted the task force’s recommendations: Alberta established a generic royalty regime that only charged one per cent of revenues until projects had recouped capital costs, while the federal government brought in accelerated capital cost allowances — which let companies write off more costs, earlier.

Those highly generous regimes have stubbornly remained to this day, even through multiple royalty reviews.

“Once things got rolling after 1995 or 1996, it was almost exclusively private investment from then on,” Turner said. “But it was all built on old public investment.”

To three million barrels and beyond

But Laurie Adkin, political science professor at the University of Alberta, isn’t convinced that it’s been all private investments since.

In fact, she said in an interview with The Narwhal that a vast majority of the tech innovation sector of the province has been oriented towards supporting fossil fuel development.

“The infrastructure of research innovation has always been oriented towards massive subsidies for fossil fuel related technologies,” she said. “You can see that in every kind of area.”

Lougheed’s AOSTRA, which developed steam-assisted gravity drainage, never died: it transformed into the Alberta Energy Research Institute and later Alberta Innovates.

That’s been accompanied by sizeable government grants and collaborations with universities. There are countless public agencies providing research and development for industry: CanmetENERGY, the University of Alberta’s Institute for Oil Sands Innovation, Emissions Reductions Alberta (the latter of which is funded by carbon levy revenue which Adkin argued should be directed towards actual low-carbon energy sources).

The Alberta government has also announced a wide range of oilsands investments in recent months: $440 million in December 2017 to help producers cut emissions, $1 billion for partial oil upgrading facilities in February 2018, $70 million for emissions-reducing techs earlier this month.

As a result, Adkin isn’t at all shocked at the federal government’s willingness to compensate for losses in Trans Mountain — and thinks it might only the beginning, setting up the possibility of province eventually taking increasing equity shares in the sector.

“In the future, I won’t be surprised if it goes to the province buying equity in CNRL and Cenovus and other companies to say the province is invested in these,” she said. “And it’s now even more in the interest of Albertans that they don’t fail.”

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In the weeks since Kinder Morgan’s announcement that it was suspending all “non-essential spending” on the proposed Trans Mountain pipeline, we’ve seen yet another round of concerns about a spike in the shipping of oil by rail.

The argument goes that failing to build Trans Mountain means that excess oil from Alberta will just be shipped to markets by rail — a more costly option with the potential for fiery spills and explosions in the middle of communities, like what happened in Lac-Mégantic back in 2013.

But there are two major issues with such analysis: 1) there’s not enough rail capacity to substitute for pipelines; and 2) transporting oil by rail wouldn’t be nearly as unsafe as it currently is if government updates its rules and enforcement.

Ignoring such realities may allow for convenient pro-pipeline mythmaking, but not for reasonable fact-based debate.

“Governments and industry uses it to fearmonger a little bit to justify pipeline capacity expansions,” said Patrick DeRochie, climate and energy program manager at Environmental Defence. “But if they were actually concerned about mitigating the risks of oil by rail, there are some pretty clear and simple steps they can take.”

Here’s a breakdown of what’s actually going on.

IEA predicts rail exports could nearly triple by 2019

In February 2018, the most recent month that we have data for, Canada shipped a daily average of 134,100 barrels of oil to the United States on trains. While not an insignificant amount, it was nowhere close to the historical high of December 2014 — when oil-by-rail exports hit 175,600 barrels per day (bpd) due to pipeline constraints.

Such figures don’t include oil that’s shipped by rail across Canada. A recent Globe & Mail article reported that more than 150,000 barrels of oil are moved daily on British Columbia’s railways. Much of that ends up being exported to the United States.

To put such numbers in perspective, Alberta produced an average of 3.4 million barrels of oil per day in February. So rail shipments represented only five per cent of the province’s output.

The concern is that those numbers will rapidly rise in the near future, well beyond the December 2014 threshold.

“It’s real and people have been predicting it,” said Bruce Campbell, former executive director of the Canadian Centre for Policy Alternatives and author of an upcoming book about the Lac-Mégantic tragedy. “As production keeps increasing, there’s uncertainty about the pipelines, so there is that looming possibility.”

In March, the International Energy Agency forecasted that Canada’s oil-by-rail exports could increase to 250,000 bpd in 2018 and 390,000 bpd in 2019. Kevin Birn of IHS Markit told Reuters that exports could go higher than 400,000 bpd if pipelines face more delays.

To put all those numbers in perspective, the rosiest forecast would mean an increase of 266,000 barrels per day via rail. Meanwhile, Kinder Morgan’s Trans Mountain pipeline expansion proposes to add more than double that with 590,000 barrels per day of capacity.

CP and CN already facing major backlog of grain shipments

According to the Canadian Association of Petroleum Producers, there’s already a total of 754,000 bpd in rail loading capacity in Western Canada, including 210,000 bpd at Kinder Morgan’s very own co-owned terminal in Edmonton.

So why on earth aren’t oil producers using that spare rail capacity? Well, for the very same reason that some are doubtful oil-by-rail is going to see any kind of major increase: there simply aren’t enough trains to go around.

DeRochie is skeptical about projections by the International Energy Agency.

“There might be a small incremental increase in the oil being shipped by rail, but we’re looking at the tens of thousands of barrels, which is nowhere near the capacity that pipelines would introduce to the system,” DeRochie said.

Canada’s two freight rail companies, Canadian Pacific (CP) and Canadian National (CN), are facing ongoing criticism from grain producers on the Prairies for critical delays that have left massive quantities of wheat and canola unable to get to markets. Grain shipments are ultimately the “bread and butter” of freight rail in Canada — and the companies are failing to adequately service even them.

Rail companies look for long-term shippers

Both companies have rebuffed calls from the oil industry to enter into short-term contracts to ship more crude.

In a January conference call with investors, CP Rail CEO Keith Creel said: “We understand crude is only going to be here for a limited period of time. We are looking for strategic partners with long-term objectives that allows us to have a more stable book of business.”

Meanwhile, CN Rail requires a minimum of a year-long commitment from shippers.

Most oil companies aren’t prepared to enter into long-term contracts and are ultimately banking on new pipeline capacity opening up in the near future. After all, oil-by-rail tends to be more expensive — Birn of IHS Markit recently told CBC News that rail adds about $3 to $4 per barrel in costs — so even the ability to ship backlogged crude to market isn’t necessarily worth it given current oil prices. But rail companies won’t spend on new trains and tracks without commitment.

This week, Bloomberg reported that Cenovus had signed an oil-by-rail contract to start in the second half of the year, seeming to confirm earlier statements by CN.

But workers at CP Rail are on the verge of striking, which could shut down shipping for weeks or months. CN Rail’s CEO has already stated that his company won’t be able to “pick up the slack” if it proceeds. While likely not a long-term issue, the potential strike action represents yet another source of unpredictability for oil producers.

B.C.’s proposed regulations could curtail shipments

Add to those issues the fact that B.C.’s proposed regulations on the transport of diluted bitumen would apply to rail.

In its reference case submitted to the B.C. Court of Appeal this week, the B.C. government outlined regulations that would apply to pipelines transporting any quantity of liquid petroleum products, as well as rail or truck operations transporting more than 10,000 litres of liquid petroleum products.

The proposed regulations would require shippers to meet several spill response criteria to obtain a “hazardous substance permit” from the government.

‘Industry still seems to be running the show’

For the sake of argument, let’s assume that companies evade all these obstacles and oil-by-rail exports triple to more than 400,000 barrels per day by 2019.

There’s simply no reason that shipping oil on trains needs to be as dangerous as it currently is. As we’ve previously reported, there are a wide range of changes that could be introduced by the federal government to greatly reduce risk — amend the Railway Safety Act to restrict certain volumes of dangerous goods, accelerate the phase-out of existing railcars, increase the number of on-site inspections and improve public transparency.

But with the exception of minor changes, the federal government hasn’t moved to make rail transport of oil safe

“The industry is powerful,” Campbell said. “I’ve talked a lot about regulatory capture. Transport Canada, as far as I can tell, is still as dysfunctional as ever. Industry still seems to be running the show, and resources seem to be as wanting, to say the least. You’ve got a weak regulator with insufficient resources.”

The report of the Railway Safety Act Review is expected to be released soon, but Campbell is “almost positive” that it won’t lead to a fundamental rethinking of the system.

Shipping raw bitumen by rail eliminates costly diluent, reduces risk of explosions

There are actually many upsides to transporting oil by rail instead of pipeline.

It physically moves faster in unit trains than pipeline, and doesn’t mix with other grades of petroleum as it does with pipeline “batching.” Rail terminals are also quite low in cost — the Canadian Association of Petroleum Producers reported in 2014 that a typical unit train terminal ranges between $30 million to $50 million and can be paid off in five years or less.

There’s also the potential to ship raw bitumen by rail in a form known as “neatbit.”

As the name suggests, diluted bitumen that’s transported by pipeline requires diluent, a costly natural gas condensate that takes up about 30 per cent of volume in a shipment. Diluent also serves as the volatile component of the mixture, which can explode in a crash. Shipping bitumen by rail without diluent would save companies money and prevent the risk of explosions.

But it requires upfront costs to purchase heated tanker cars and special loading terminals. It’s effectively the same thing preventing the electrification of freight rail, which would greatly reduce greenhouse gas emissions and fuel costs: it just costs too much cash to get started, even though the payoffs would be enormous. Until the government regulates such activities, it likely won’t happen — and the safety of communities will continue to be at risk.

“The reality is that the stuff is going to keep rumbling through Canadians towns and cities across the country,” Campbell said. “While it’s doing that for the next five years or more, make it safer. There are things that can be done.”

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Amongst all the hooting and hollering over the Kinder Morgan Trans Mountain pipeline, it’s easy to lose track of how on earth we ended up in this place of dysfunction.

But Canadians didn’t become deeply divided about oil pipelines overnight. Indeed, much of the current tension can be traced back to the federal review of Trans Mountain, which the National Energy Board (NEB) began in early 2014.

“The reality is that there are huge gaping flaws in the Canadian environmental review process that have been known about for decades and have never been fixed,” David Boyd, an environmental lawyer and associate professor at UBC, told DeSmog Canada.

“The process that was carried out to review the Kinder Morgan pipeline was full of holes.”

Those holes, according to Boyd, include a “complete failure” to consider the cumulative effects of projects, Canada’s international climate change commitments and the constitutional rights of Indigenous people.

“Even countries like the United States have a stronger approach to environmental assessment than Canada,” Boyd said. “It’s just completely greenwash to say that Canada has a rigorous review process.”

And yet, that hasn’t stopped politicians and the oil industry from claiming Canada has one of the most rigorous reviews in the world.

Despite promising to reform the review process while running for office, when Prime Minister Justin Trudeau approved Trans Mountain, he said: “This is a decision based on rigorous debate on science and evidence.”

One of the major critiques of the NEB process that approved Trans Mountain was that the panel refused to consider the most recent peer-reviewed science on spills of diluted bitumen.

“How can you ignore the leading scientific evidence and then say you’ve conducted a rigorous review? It’s just a preposterous affront to reason,” Boyd said.

Pipeline debate taps into deeper challenges

“I think it’s fair to say that there’s a big transparency problem in Canadian environmental law,” Jocelyn Stacey, assistant professor at UBC’s Peter A. Allard School of Law, told DeSmog Canada.

“What we’re seeing with this project is that it taps into two really deep, deep challenges that Canada faces at the moment.”

Those questions are: how do we move to a low-carbon future in light of the fact we have tremendous oil and gas resources in this country? And: how do we reconcile with Indigenous peoples?

“Those problems are well recognized across the country,” Stacey said. “But when it comes to making really tough, potentially divisive decisions that will realize those promises, we’re not at a place where really big steps are being made.”

What is the ‘national interest’ anyway?

The big question is how to reconcile those two big questions with the “national interest.”

“Addressing aboriginal peoples’ concerns is in the national interest,” said Hans Matthews, who was a panellist for the National Energy Board’s review of the Enbridge Northern Gateway pipeline.

“The ‘national interest’ places a greater priority on the economics of a project, whereas I think a lot of communities and impacted people are more concerned with the environmental components of the project,” he said.

“Should the people who are most impacted at the local level carry the load for…the national interest?”

Matthews is the president of the Canadian Aboriginal Mineral Association, which is advocating for an Indigenous-driven environmental assessment process.

“It would have a significant amount of involvement of the community from the get-go and it would entail a greater input and analysis and interpretation of community knowledge,” Matthews said.

Indigenous-led assessment would reduce the burden on the courts and also be in keeping with the government’s commitment to implementing the United Nations Declaration on the Rights of Indigenous Peoples, Matthews said.

“[The government] can’t in one breath say ‘okay, we’re going to approve this resource project’ but in the other breath say ‘we’re going to adopt UNDRIP.’ ”

Matthews’ comments are in line with those made by the Assembly of First Nations’ B.C. Regional Chief Terry Teegee, who spoke last week before a House of Commons committee reviewing Bill C-69 — a bill tabled by the Liberals to improve Canada’s environmental assessment process.

“This bill falls short in terms of recognition of the core principles of the United Nations Declaration on the Rights of Indigenous Peoples,” Teegee said, noting that it fails to recognize Indigenous jurisdiction.

“We’re seeing that play out right now as it relates to Kinder Morgan, how First Nations who have made their decisions aren’t being recognized with regards to the final decisions of those major projects,” he said.

Lack of justification for decisions sows discontent

Stacey said a big part of what’s missing in the way Canada makes decisions on contentious projects is an evidence-based justification for those decisions.

In the case of the Trans Mountain pipeline, there was a federal order-in-council that constituted the reasons for the decision.

“But if you were to look at the order-in-council, you would find that there isn’t really an explanation of the decision itself,” Stacey said.

For instance, the order-in-council states that the project is not likely to have significant adverse effects.

“It’s not clear how they would reach that conclusion in light of the fact that the National Energy Board’s assessment found that there would be significant adverse effects on the endangered resident orca population,” Stacey said.

The decision also fails to reconcile further pipeline development with international climate obligations and doesn’t even reference protection of B.C.’s coast.

“That was a big part of the reason why B.C. wanted to intervene in the judicial review before the federal Court of Appeal — to make that point that the decision reasons mentions Alberta’s economy, but does not mention protection of B.C.’s coastline,” Stacey said.

Trudeau’s broken promise to re-do Trans Mountain review

Federal Green Party leader Elizabeth May says the Liberals made a huge mistake in not fulfilling their campaign promise to re-do the Trans Mountain pipeline review if elected.

“I think they don’t understand how bad the National Energy Board study was,” May said. “They seem to have forgotten.”

Instead of starting the process over, Trudeau appointed a “ministerial panel” to fill in the gaps that’d been missed by the National Energy Board process.

The 58-page report submitted in November 2016 to Minister of Natural Resources Jim Carr, concluded by posing six incisive questions to cabinet, including: “can construction of a new Trans Mountain Pipeline be reconciled with Canada’s climate change commitments?” and “how might Cabinet square approval of the Trans Mountain Pipeline with its commitment to reconciliation with First Nations and to the UNDRIP principles of ‘free, prior, and informed consent’?”

“That review panel asked some thoughtful questions that they thought should be answered before the project was approved,” Boyd said. “And of course those questions were never answered.”

In a prescient moment, the panel also acknowledged the controversy likely to be created by the pipeline: “The issues raised by the Trans Mountain pipeline proposal are among the most controversial in the country, perhaps in the world, today: the rights of Indigenous peoples, the future of fossil fuel development in the face of climate change, and the health of a marine environment already burdened by a century of cumulative effects.”

The panel did not, however, make any recommendations on what to do about all those thorny issues. That got punted back to the federal government, which — rather than acknowledging the inevitable controversy of a decision of this magnitude — has chosen to ignore all that complexity in favour a single talking point: “This pipeline will be built.”

On top of that, the federal government has now entered financial negotiations with Kinder Morgan.

“I don’t think we would have seen this coming out of Harper,” May said. “This is a manipulated crisis. We’re being played for country bumpkin fools by Texas.”

Fixing environmental assessment (aka avoiding this mess in the future)

So how do we avoid this situation in the future?

“What we really need to be looking at — and what the opposition in B.C. I think is really grounded in — are these more pressing and difficult issues of Indigenous jurisdiction and reconciliation and how Canada as a resource based economy can move to a low-carbon future,” Stacey said.  

The federal government promised to reform how we assess projects like these in the future and to that end has tabled bill C-69, currently before the House of Commons. But it fails on several fronts, according to experts.

“The government of Canada spent over $1 million on a high-powered panel of environmental law experts … they held public hearings in 21 cities across Canada … they had over 1,000 submissions. They reported on what needed to be done. And Bill C-69 bears no resemblance to those recommendations,” May said.

“It doesn’t create an environmental assessment process that is credible.”

The timelines in the new bill for conducting an environmental assessment for major projects are even tighter than the timeline Kinder Morgan was subject to.

“I think that that should be a major concern,” Stacey said. “We can see very clearly from the response in B.C. that when you have controversial projects, it doesn’t do anybody any good to rush these through an assessment process.”

The bill also leaves room for oilsands projects to be exempted from federal review.

But Stacey’s biggest concern is that the bill is still focused on project-based assessment, rather than taking a larger view and looking at cumulative impacts.

“What you see bubbling up is that the really fundamental concerns about the pipeline are much bigger than the pipeline itself,” Stacey said. “By crafting a regulatory and assessment process around projects, it’s ill-suited to dealing with these bigger issues that people really want to see addressed in a meaningful way.”

What’s needed are mandatory “strategic assessments,” Stacey said.

These would look at the impacts of certain government policies, which often have much more profound environmental effects than any individual project. For instance, the federal government has committed to doing a strategic assessment of the climate impacts of existing federal government policies.

May holds out hope that Bill C-69 can be fixed in committee.

“Something went wrong somewhere,” May said. “I think we can fix it. This is so unacceptably bad.”

Image: Justin Trudeau attends the Skandinaviska Enskilda Banken (SEB) Annual Corporate Client Conference in Ottawa. Photo via PMO Photo Gallery

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In December 2015, the world agreed to the Paris Accord; to slash greenhouse gas emissions to hold global average temperature increase to 1.5 degrees C (over what it was before the Industrial Revolution), and, if we miss that target, to as far below 2 degrees as possible.

The International Energy Agency (IEA) is not an environmental agency. It advises governments about demand and supply of energy. Since 2012, IEA has warned that to avoid going over 2 degrees C, two-thirds of all known reserves of fossil fuels must stay in the ground until 2050.

But that was to stay at 2 degrees. We have made a commitment to hold at 1.5 degrees. That half a degree is the difference between low-lying island states surviving, or Arctic ice remaining over the North Pole in summer, or increasing the risk of losing the Western Antarctic Ice Sheet or Greenland ice sheet (either one of which implies an eight-metre sea level rise.)

It is hard to get a fix on our carbon budget. One problem is that dangerous levels of climate change are exacerbated by positive feedback loops — changes that release more greenhouse gases from nature due to warming driven by humans. So forest fires, melting permafrost and loss of ice drive up the warming that itself speeds up the warming.

A group of European and Canadian scientists published their best estimates of our carbon budget in 2016 in Nature Climate Change. Their study set the carbon budget for global emissions from 2015 to forever at no more than 590 billion tons. That’s all we can emit.

In 2016, globally we emitted 49.3 billion tons, so now our global carbon budget is down to 540 billion tons. Do the math. At current emission rates, if we want to avoid disaster, we have approximately eleven years before we blow through the global carbon budget.

These are lines we cannot cross if we want to hold on to a functioning human civilization — not a collection of failed states, desperate environmental refugees and collapsing food systems.

So where is Canada in this? Canada’s climate target  — 30 per cent below 2005 levels by 2030 — is described as our Paris target in national media and by the Trudeau cabinet. The problem is it is not our Paris target. Canada has yet to adopt a target consistent with 1.5 degrees or even 2 degrees. Canada’s target remains the same one set by Harper in May 2015 — seven months before the negotiations in Paris. The Harper target equates to 2030 emissions of 517 million tons (or megatonnes).

Unfortunately, we are currently on track to miss the Harper target by 187 million tons.

“We can plan our way to a transition away from fossil fuels, and still help the Alberta economy.” #abpoli #bcpoli #cdnpoli #oilsands https://t.co/E8TYbbcCFf

— DeSmog Canada (@DeSmogCanada) April 25, 2018

So where is there room for a pipeline? Alberta Premier Rachel Notley has committed to capping oilsands emissions at 100 megatonnes/year. Current emissions are less than the cap — approximately 70 megatonnes/year. So Kinder Morgan’s emissions don’t even fit into a plan to meet Harper’s emissions targets.

As Jeffrey Sachs wrote in the Globe and Mail earlier this month: “The truth is that Alberta oilsands have absolutely no place in a climate-safe world. Investing in them is almost surely to be investing in a future bankruptcy.”

What about the constant claim that our economy depends on the oilsands?

Baloney.

Even at the height of oilsands growth when oil sold for more than $100/barrel, oilsands amounted to less than three per cent of national GDP. We can plan our way to a transition away from fossil fuels, and still help the Alberta economy.

Alberta’s greenhouse gas emissions from coal-fired electricity are roughly the same as from the oilsands. While Alberta has promised to end coal-fired electricity by 2030, and is building 5,000 megawatts of renewable energy capacity, it will also allow some of those coal units to convert to using inefficient fracked natural gas. Instead, we should invest in an enhanced east-west electricity grid and bring in renewables from neighbouring provinces, while Alberta takes advantage of its huge potential in solar and wind.

But that still leaves the oilsands, which can’t be allowed to expand emissions by 30 per cent. Here’s a solution: cap the oilsands at 70 megatonnnes/year and create jobs in Alberta by providing federal assistance to build upgraders and refineries.

Yes, those will inevitably include greenhouse gas emissions, but far fewer than shipping solid bitumen overseas to refining elsewhere. This path means we ensure we are producing bitumen on a declining basis, but upgrading and refining in Alberta and keeping those jobs here.

Canada has been losing refinery jobs for decades. That’s why the major oilsands unions, like Unifor, oppose Kinder Morgan’s Trans Mountain pipeline. In the 1970s, Canada had 40 refineries. Now we have 16 and buy our gas, diesel and propane from refineries in the U.S. at higher prices.

We import approximately 700,000 barrels of foreign crude per day to Eastern Canada. Kinder Morgan’s pipeline expansion will increase exports by 590,000 barrels per day. Why not stop imports, process bitumen in Alberta and sell it across Canada?

The answer comes readily. Big Oil has decreed that Canada provide raw resources for export, not value added.

But what if we took a page from Peter Lougheed’s book? His first rule for resource development was “think like an owner.” Instead of bailing out an American company, let’s put federal support behind building upgraders and refineries in Alberta — in exchange for which Alberta agrees to reduce greenhouse gas emissions from the oilsands to 35 megatonnes by 2050. We would end up with more jobs and a less volatile economy. There will also be lots of jobs in trying to clean up the tailings ponds and despoiled landscape of the Athabasca. Polluter pays.

That is the kind of bargain that makes sense. With this plan, you could say “the economy and the environment go hand in hand” without having to suspend disbelief.

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Ian Anderson, president of Kinder Morgan Canada Ltd., must be laughing all the way to check on his stock options since the Trudeau government offered to use public funds to bail out the company’s stalled Trans Mountain Pipeline Expansion project.

Anderson earned almost $2.9 million last year in salary, stock awards and other compensation, according to company documents — and that was only from June through December.

Kinder Morgan Canada’s vice-president, David Safari, collected $1.95 million in stock awards and other compensation during the same seven-month period.

But that’s latte money compared to the hundreds of millions of dollars in annual dividend earnings of Texas billionaire Richard Kinder, who was the CEO of parent company Kinder Morgan Inc. until 2015.

Wednesday night, in its quarterly financial report, Kinder Morgan Inc. announced results so strong it beat its own rosy forecast for the first segment of 2018.

With US$80 billion in assets, cash is flowing and North America’s largest energy infrastructure company — which owns 70 per cent of Kinder Morgan Canada — is back in growth mode.

“Kinder Morgan Inc. Starts 2018 Off with a Bang,” read Thursday’s Yahoo Finance headline.

Yet Canadian taxpayers will be the ones to feel the biggest whomp if Prime Minister Justin Trudeau and Alberta Premier Rachel Notley follow through on new promises to back the project financially, with Trudeau calling the Kinder Morgan pipeline a “vital strategic interest” for the country.

Notley even suggested earlier this week that her government might buy the pipeline outright if Kinder Morgan opts to abandon the $7.4 billion project once the corporation’s May 31 deadline for resolution of the fractious inter-provincial dispute has passed.

Oh happy days for Kinder Morgan’s millionaires.

Ian Anderson, president of Kinder Morgan Canada, earned almost $2.9 million between June and December alone. That’s latte money compared to the hundreds of millions in annual dividend earnings of Texas billionaire Richard Kinder. https://t.co/HaZQM4rVPF

— DeSmog Canada (@DeSmogCanada) April 20, 2018

Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said it is a “terrible” idea for Canadians to “bail out — apologies, ‘invest in’ ” — the profitable Houston-based corporation that owns 137,000 kilometres of pipelines and 152 terminals.

“This is not appropriate,” Wudrick told DeSmog Canada. “There is absolutely no reason public money should be going to these companies.”

Which companies? Well, Honda, for one. Last year, the Japanese conglomerate received $84 million in taxpayer funding.

And Bombardier, the world’s leading manufacturer of planes and trains, has been diving deeply into the public trough for years, even though the Bombardier family that controls the company is among Canada’s richest and the company’s top executives, already earning millions a year, were offered a hefty pay hike after a $1 billion infusion of public money last year.

“This is very offensive to most Canadians,” Wudrick said. “If people in the private sector are going to make a lot of money, it’s their own money and their own business and good for them. But taxpayers should not be funding the salaries of these executives.”

The high salaries of Kinder Morgan executives are “just one illustration” of why the company should not receive any public money, said Wudrick, who supports the pipeline while opposing a taxpayer bailout.

He believes that Trudeau and Notley have made a strategic mistake by saying how desperate they are to build a pipeline to carry product from Alberta’s oilsands to tankers on B.C.’s coast.

“Kinder Morgan now knows that, and I think frankly they’re going to drive a hard bargain. They essentially have the premier of Alberta and the prime minister of Canada by the throat and they can say ‘unless you pay us x dollars, we’re going to back out.’ ”

“That’s a very bad negotiating position for government.”

So far it looks like the big winner of the inter-provincial brawl is not B.C. or Alberta but Kinder Morgan, which appears to be emboldened by the discord.

Duff Conacher, a founder of the civic organization Democracy Watch, called Kinder Morgan’s new May 31 deadline for resolving the conflict “an attempt at extorting a step forward” that should be rejected.

“If the pipeline is such a great idea and it’s profitable, and if Kinder Morgan decides they are not going to build it, based on their completely artificial May 31 deadline, then presumably some other company will step up and build it,” Conacher pointed out in an interview.

“Why should the government jump into the market on behalf of one company?”

Those advocating for an infusion of public money into the Kinder Morgan pipeline claim the project is a guaranteed moneymaker, even though oil shipments from the existing pipeline to the lucrative Asian market have dwindled and most tankers leaving the Port of Vancouver now head south to California.

If twinning the pipeline does make sound financial sense, Wudrick also said another company will come forward to complete the project, which will triple the existing pipeline’s capacity and involve construction of 12 new pump stations, 19 new storage tanks and three new marine berths located at the Westridge Marine Terminal in the Burrard Inlet near Vancouver.

Federal officials said Thursday that the offer of financial assistance would extend to other companies if Kinder Morgan decides to walk away.

Conacher, a lawyer, academic and internationally recognized leader in the areas of democratic reform and government accountability, said it is up to the courts to decide what is in the national interest, based on the law and evidence.

“What is in the national interest is a question of law. And the government should not be taking steps to help a company do something that the government says is in the national interest until the Supreme Court of Canada has defined what that means.”

He said building the pipeline is unquestionably in the short-term interests of Alberta.

“But I don’t think the national interest is based on the short-term interest of one party in one province.”

The B.C. government announced this week that it will file its reference case on the ability of the province to regulate the transport of diluted bitumen in the Court of Appeal by April 30th, putting the much-debated constitutional question to the test.

The appropriate timeline for a final decision about whether or not to proceed with the Kinder Morgan pipeline should be the timing of a legal ruling, Conacher said, and not Kinder Morgan’s self-serving corporate deadline.

“If Kinder Morgan doesn’t like it then they can leave.”

Wudrick said other foreign corporations are watching the unfolding pipeline drama closely.

Canada needs to be a country that is welcoming to business, he said, adding that it is a very different matter and a “very expensive proposition” to subsidize businesses with public money.

“It will only attract the wrong kinds of business, the businesses that are interested in sucking money out of government rather than trying to make money in the marketplace. The fact that both the premier of Alberta and the prime minister have been so quick to offer of up taxpayers’ money sends a very dangerous signal.”

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For years, we’ve been told again and again (and again) that Kinder Morgan’s proposed expansion of the Trans Mountain pipeline is desperately needed for producers to export oil to Asian countries and get much higher returns.

The way it’s been framed makes it seem like it’s the only thing standing between Alberta and fields of gold.

Small problem: Canadian producers already have the ability to ship their heavy oil to Asia via the existing 300,000 barrel per day Trans Mountain pipeline — but they’re not using it.

“Virtually no exports go to any markets other than the U.S.,” economist Robyn Allan told DeSmog Canada. “The entire narrative perpetrated by Prime Minister Trudeau and Alberta Premier Notley is fabricated.”

In 2017, the Port of Vancouver only shipped 600 barrels of oil to China. That’s less than a tanker load. That same year, the port shipped almost 13 million barrels of oil, or about 24 Aframax tanker loads, to the U.S.

In other words: oil tankers are being loaded in Vancouver, but instead of heading to vaunted Asian markets, they’re heading south to California.

Shipments to Asia reached their peak seven years ago when the equivalent of nine fully loaded tankers of oil left Vancouver for China. Since then, oil exports to Asia have completely dropped off.

Some experts suggest exports to Asia are very unlikely to rebound in the short-term, with producers from many other countries continuing to dominate such markets. Others take a more long-term view, remaining optimistic that opportunities will arise over time — and only after the pipeline is actually built

“There’s no appetite in Asia for heavy oil,” said Eoin Finn, former partner at KPMG, in an interview with DeSmog Canada. “They don’t have the refineries to refine it. And the world is swimming in light sweet crude that’s cheaper and easier to refine, and altogether more plentiful.”

“There’s no appetite in Asia for heavy oil. They don’t have the refineries to refine it. And the world is swimming in light sweet crude that’s cheaper and easier to refine, and altogether more plentiful.” https://t.co/XCN92a02eS

— DeSmog Canada (@DeSmogCanada) April 19, 2018

No guaranteed access to Asian markets

One challenge is that the Port of Vancouver can’t even physically fit the size of tanker required to economically compete with other shippers of oil to Asia.

The largest class ship that is allowed in Burrard Inlet is what’s known as an “Aframax.” It can only be filled to 80 per cent capacity due to depth restrictions. That means a tanker from the Port of Vancouver can only ship 550,000 barrels at a time.

Meanwhile, Very Large Crude Carriers — yes, that’s actually their name — are now embarking from Louisiana via its brand new port, carrying two million barrels each. They’re also used by many Middle Eastern producers.

Practically, this means that Trans Mountain will have a harder time competing with producers in countries that can pay far less to ship their cheaper-to-refine oil in much larger ships. Trans Mountain supporters suggest this could become quickly irrelevant if situations change: say, a war breaks out in the Middle East and takes millions of barrels per day offline.

There’s also no guaranteed demand for Alberta’s lower quality crude on the other side of the Pacific. While 13 producers and shippers have signed long-term contracts with Trans Mountain — a fact that’s leaned on heavily by the company to make its business case, as they represent 80 per cent of expanded capacity — none have buyers in Asia yet.

“It’s a bit of a chicken and egg scenario. You need to build that pipeline before people are going to spend billions of dollars configuring their refineries to take your crude,” Jackie Forrest of ARC Energy Research told the CBC in a 2017 interview.

It’s expected that “sample shipments” of oil would be sent to various markets for testing once the pipeline was built.

But there’s very little proven interest in Alberta’s hard-to-refine oil. Instead, Asian countries are continuing to rely on imports of light sweet crude from Middle Eastern locales like Saudi Arabia, the United Arab Emirates, Iran, Qatar and Iraq. At this point, that appears unlikely to change in a significant enough way to make Alberta oil competitive.

Price discount results from lack of capacity, not location

The reality is that Alberta oil will always sell at a discount to lighter crude with greater market access.

In fact, back in 2014 a vice-president at the Canadian Association of Petroleum Producers told the Toronto Star that “there’s always a natural discount in the range of $15 to $25 [per barrel].”

In recent years, the “discount” has hovered around $10/barrel.

Nothing about a new pipeline will change the fact that Alberta’s heavy oil takes more effort to refine into usable products and is located farther from major markets than most other sources.

“It’s the lack of pipeline capacity that creates the price discount for Alberta. It’s not where that pipeline capacity goes. It’s not the difference between the U.S. Gulf and Asia,” Tom Gunton, professor and director of Simon Fraser University’s resource and environmental planning program, told DeSmog Canada.

“It’s got to do with that there’s not enough pipeline capacity.”

When Trans Mountain was pitched in 2013, there was a legitimate shortage of pipeline capacity, a reality made more concerning to industry by massive production forecasts for future decades. It seemed like an imminent and long-term backlog was about to emerge — which would actually lead to a price discount.

But then the 2014-15 price crash happened, new pipelines came online and dozens of proposed oilsands projects were either scrapped or put on hold.

When former U.S. president Barack Obama’s vetoed TransCanada’s Keystone XL pipeline in 2015 the backlog idea began gaining traction once again. But the veto has since been rescinded by President Donald Trump.

Gunton said that if you combine Keystone with Enbridge’s Line 3 and the proposed Mainline expansion, “there is more than enough pipeline capacity to meet all of Alberta’s needs without Trans Mountain” meaning that no serious price differential will emerge.

TransCanada spill in South Dakota responsible for current discount

The main reason that Alberta is currently experiencing a larger differential than usual (around $25/barrel) is because TransCanada’s Keystone pipeline spilled almost 10,000 barrels of oil into a South Dakota field in November — the third incident from the pipeline since 2010.

That resulted in a two-week shutdown, and the pipeline has been running at 20 per cent reduced pressure ever since.

As Allan pointed out in a letter to the Calgary Herald, this means that around 120,000 barrels per day have been backlogged, accounting for the widening differential. You can basically see the moment when the spill happened on differential estimations, increasing from $11/barrel in November to $25/barrel in February.

It is not a lack of market access to Asia that gutted returns for oil companies — it’s a pipeline spill. The phenomena of spills squeezing pipeline capacity is something Allan has previously documented.

Gunton said that even the two reports submitted by Kinder Morgan to the National Energy Board — the first of which was striked as evidence after its author, Steven Kelly, was controversially appointed to the regulator — didn’t identify an “Asian premium.” Instead, they argued that some of the shipments out of Alberta would have to go by rail due to inadequate pipeline capacity, reducing netbacks to producers. That’s no longer true.

“That’s another big lie that there’s this big demand in Asia,” said Green Party leader Elizabeth May. “There’s this series of assumptions that are repeated so often that nobody questions them.”

Most expanded capacity will end up in California, not Asia

But while politicians like Rachel Notley continue to repeat the fiction “that there is now and will always be a pretty substantial market for bitumen in the Asia-Pacific” many analysts have identified that most oil shipped from the expanded Trans Mountain line via Vancouver (with a significant chunk already diverted in Abbotsford to Washington refineries) will end up in California in the short term.

A 2013 report from the University of Calgary’s School of Public Policy argued: “Movement of crude supplies originating in Vancouver should satisfy U.S. West Coast demand before the first barrel crosses the Pacific to Asia.”

This is mostly because California is facing declining domestic production and imports from Alaska’s North Slope. Additionally, it already has refineries in place to process heavy oil, and Albertan bitumen could directly compete with Mexican Maya, a similar quality crude.

Based on 2017 data, only 3.4 per cent of California’s foreign crude imports came from Canada. That same year, half of the state’s imported oil came from Saudi Arabia, Ecuador and Colombia — which can all produce at far lower costs than Alberta. The state’s Low Carbon Fuel Standard also rewards crude oil with lower carbon intensity, further benefiting OPEC exporters over Alberta.

“There’s no premium to go to California,” Finn said. “There’s probably a discount because it’s farther and costs more to have ships go down there.”

U.S. Gulf Coast remains most lucrative location

So where is Alberta’s slowly-but-surely increasing oil production supposed to go? Well, where it’s always gone — to the U.S. Gulf Coast, aided by TransCanada’s Keystone XL and Enbridge’s Line 3 pipelines.

Compared to shipping via tankers from Vancouver, the Gulf offers comparatively cheaper transportation fees and existing heavy oil refining capacity.

In addition, both Venezuela and Mexico’s heavy oil production have also been in steady decline in recent years, providing even more potential for Alberta to fill existing refinery capacity in the Gulf.

“As we implement climate policies and as the world transitions away from fossil fuels, production in Alberta is not going to grow very much,” Gunton said.

“It’s the highest-cost producer in the world. Consequently, the demand for pipelines is down. And there is more than enough pipeline capacity to meet all of Alberta’s needs without Trans Mountain.”

Economic circumstances have shifted dramatically since 2013 when Kinder Morgan first proposed the pipeline, which raises the question: does the company want to back away from the project for reasons that stretch beyond the opposition its facing in British Columbia?

Even with both the Alberta and federal governments discuss bailing out the private project, in an investor call on Tuesday, Kinder Morgan indicated the investment may still be “untenable.”

If the company walks, a government could either purchase the $7.4 billion project as hinted at by Premier Notley. Or, Kinder Morgan may opt to sue the Government of Canada via NAFTA.

Whatever happens, one thing seems certain at this stage: it’s not going to be predictable.

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