Economist Robyn Allan has a penchant for details. The former president and CEO of the Insurance Corporation of British Columbia also sees the benefits of informed decision-making, which is why Allan recently wrote a myth-busting letter to federal minister of natural resources, Jim Carr, on the issue of oil pipelines.

The minister, Allan said, had been “dangerously misled” by senior ministerial staff about the economic benefits of the Kinder Morgan Trans Mountain pipeline project. An internal document provided to Minister Carr, and subsequently released through Freedom of Information legislation, was “riddled with factual and analytical mistakes and displays a lack of attention to detail” Allan wrote in her letter.

Among her findings, Allan stated the minister had been misinformed about the need for increased oil pipeline capacity in Canada especially when considering Canada’s pipelines — despite claims to the contrary — are not operating at full capacity and market conditions have substantially altered the oil production landscape in recent years (see Allan's evidence in the full letter below).

With the federal decision on Kinder Morgan expected to come down by December and the recent (rather spectacular) collapse of public trust in the National Energy Board, pipeline politics are heating up in Canada.

DeSmog Canada asked Allan five questions about her take on Canada’s pipeline debate and the quandary of the Kinder Morgan pipeline.

.@RobynAllan: Natural Resources Minister @jimcarr_wpg ‘dangerously misled’ on $ benefits of #KinderMorgan https://t.co/KVhiWWFrXZ #bcpoli

— DeSmog Canada (@DeSmogCanada) October 7, 2016

Q:  What are the greatest misconceptions Canadians have about the need for new pipelines in the country?

A: The first major misconception is that there is an urgent need for new pipeline capacity to deliver Western Canadian crude oil supply to market. There is sufficient transportation infrastructure to meet market demand not only now, but up until at least 2025. 

The second major misconception is that markets in Asia exist and we need West Coast tidewater access to serve these markets.

There is no market for Alberta’s heavy oil in Asia. Oil industry groups, such as the Canadian Association of Petroleum Producers, make statements that suggest there is a market in Asia but these representations are not consistent with the facts.

Oil producers have been actively trying to create a market in Asia for more than half a decade. The National Energy Board granted them guaranteed access to Trans Mountain’s Westridge dock to help them do so, but their attempts have been unsuccessful. If markets in Asia ever develop it will take many years and Asian purchasers are not going to pay a higher price for Alberta’s crude than it commands in North America. 

The third major misconception is that new pipelines are needed to generate economic prosperity.

Pipeline proponents like Kinder Morgan claim that when new pipelines are built, access to markets will allow oil producers to capture higher prices on every barrel produced and these increased revenues will trickle down as increased gross domestic product, fiscal revenues and jobs.

This was the argument used to promote Northern Gateway, Keystone XL and now Trans Mountain but there is no basis in fact to support this idea. New transportation capacity will not enhance the price received for Western Canadian oil. What enhances the price of a raw resource is value added —upgrading and refining. Producers in Canada want to ship that value down the pipeline along with meaningful jobs so the benefits are realized in foreign economies. 

Q: Canadians are constantly being told we desperately need new pipelines. Is that true? Or, how do we best understand that claim?

A: When crude oil prices were rising the industry believed these prices would be sustained, and in fact, continue to rise. For a time prices were over $100US a barrel. The industry based its production projections on these high prices.

These prices made numerous projects appear economic and it was easier for oil producers to strategize to export the crude than invest in value added in Canada. Up until about 2008 a number of upgraders and new refineries were planned in Alberta. Then the plan changed to a raw resource export strategy. When bitumen is exported rather than turned into synthetic crude oil (SCO) twice as much pipeline capacity is needed per barrel of bitumen. (There is a need for pipelines to import condensate to dilute bitumen so it will flow through a pipeline and then because its still heavier than SCO it takes longer to move it back out as diluted bitumen.)

These two factors — an aggressive production outlook based on higher prices and a new strategy to export bitumen raw rather than process it in Canada — meant a huge increase in the expected need for future pipeline capacity space. These factors brought forward new pipeline projects — the first was Keystone XL. As questions began to be asked about the desirability of diluted bitumen exports the industry became concerned and turned up the heat on the need and benefits from new pipelines. 

There is no desperate need for new pipelines, but the industry — concerned that its social licence window is closing — is trying to get one approved.

Q: You complied some really interesting data on stalled or cancelled oilsands projects. Do you think we underestimate how quickly market forces can change production projections?

A: The market forces now are more normal than the high prices that stimulated the aggressive production projections. There has been a rapid expansion of crude oil production as industry tries to get it out of the ground and to market — any market — before their assets become stranded.

That behaviour has contributed to the price decline, but as we see, countries like Saudi Arabia, don’t want to lose market share. They don’t want to restrict production because the fossil fuel industry is an industry in decline. There is a structural shift occurring.

Governments all over the world acknowledge a need to limit greenhouse gasses. Canada will not meet its targets by building infrastructure to ship more heavy oil. We need to move away from fossil fuels, not subsidize their extraction by approving transportation systems to deliver more to market — to markets that don’t yet exist. We need meaningful decisions to support achievement of Canada's climate change obligations under the Paris Agreement.

Q: Did the National Energy Board err in its recommendation the federal government approve the Kinder Morgan Trans Mountain pipeline?

A: The National Energy Board did not do its job. It did not hold a quasi-judicial hearing based on the rules of fairness and natural justice. It limited the scope of issues, refused to allow cross-examination, did not test the evidence, and failed to protect the public interest.

The National Energy Board report is not credible — the Board does not know if its recommendation is correct because it did not undertake any reasonable amount of due diligence to be able to arrive at a considered recommendation.

Prime Minister Trudeau knows this. He promised that the Trans Mountain review would be redone and he has betrayed Canadians by breaking that promise.

Certainly I believe that the Trans Mountain expansion is not needed and its economic impact will be negative not to mention the environmental harm it will do even without the inevitable fresh and marine water spills. However, because due process has not been followed, the NEB recommendation cannot be trusted. Until due process is followed, permission for Trans Mountain’s expansion should never be given.

Q:  Some Canadians feel like pipelines are being rammed down their throats for the benefit of the energy industry. Other Canadians feel like ignorant environmentalists just don't understand how critical new pipelines are for Canadian prosperity. The Prime Minister seems caught between the desire to please both camps. How do you make sense of this very messy national conversation?

A: Environmentalists are not ignorant and the Trans Mountain pipeline expansion — first and foremost — is for the benefit of Kinder Morgan — a U.S.-based multinational that does not contribute its fair share of tax revenues.

Kinder Morgan plans to siphon $1 billion a year from the Canadian economy if this project is approved. Is this in the public interest? We don’t know: the Board refused to consider it.

The Board pretended to listen, but it refused to hear. Mr. Trudeau pretended to hear and now he’s not listening. 

The situation would not be getting messy if the elected officials who promised due process delivered on their promise. That is all that is being asked by concerned Canadians — that the due process that is our right be given. 

Robyn Allan Letter to Minister Carr re: 'Economic Benefits of Oil Pipelines' memo | September 14, 2016 by DeSmog Canada on Scribd

Image: Prime Minister Justin Trudeau and Natural Resources Minister Jim Carr. Photo: Government of Canada

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The federal government announced on Wednesday the upstream greenhouse gas (GHG) emissions associated with pipeline projects will be taken into consideration when federal cabinet makes its decisions on pipeline projects.

“We are considering direct and upstream greenhouse gas emissions,” Catherine McKenna, Minister of Environment and Climate Change, said. McKenna along with Minister of Natural Resources Jim Carr made the announcement.

“Today’s announcement is a great step forward and shows the federal government is listening to Canadians,” Kai Nagata, Dogwood Initiative’s energy and democracy director, told DeSmog Canada. “The dark days of the National Energy Board are coming to an end.”

The new measures will apply to pipeline projects currently under regulatory review, such as Kinder Morgan’s Trans Mountain and TransCanada’s Energy East pipeline projects, according to Carr. Five principles that proposed pipelines will be measured against were unveiled. One of those includes "meaningful consultation" for Indigenous peoples.

“This is a real test of this government’s commitments to uphold the rights of Indigenous Peoples," said Clayton Thomas-Muller, 350.org’s Stop it at the Source Campaigner. "At the heart of the United Nations Declaration on the Rights of Indigenous Peoples is the right to free, prior and informed consent. That means Indigenous Peoples have the right to say ‘No’ when it comes to projects like pipelines and its responsibility of the government to listen.”

The changes are too little, too late, according to Ecojustice lawyer Karen Campbell.

“These interim measures are a welcome band-aid, but they are not enough to inject science and evidence-based decision-making into the Kinder Morgan review process," Campbell said. "The outcome of the National Energy Board review must still be to reject this project, until the flaws in the application are remedied, and the full regional impacts of the project are fully considered.”

Both ministers were clear upstream and direct GHG emissions will be “a factor in the decision making process." How much weight a project’s GHG emissions will be given compared to its economic benefits is unclear.

“Climate plays into the economic viability of these projects,” Adam Scott, climate and energy program manager with Environmental Defence Canada, said. “How do these projects fit into a world of high carbon taxes and shifting away from oil?”

Like Nagata, Scott says he is “very encouraged” the federal government is listening to Canadians. However, he is concerned Carr, although acknowledging the problems with the current National Energy Board, is still allowing the review of Energy East to go ahead without reforming the board first. The National Energy Board is Canada’s federal pipeline regulator.

“There’s no legal reason for Energy East to go through the old broken process,” Scott told DeSmog Canada. “The review hasn’t even started yet and the board has not determined if TransCanada’s application is complete.”

Wednesday’s announcement has little effect on the workings of the National Energy Board itself. The Environment Ministry, not the Board, will conduct the assessments of a project’s greenhouse gas emissions. The five principles are transition measures to be kept in place until an overhaul of the NEB can take place.

McKenna said revamping the board could take “a number of years.”

The federal government will also extend the timeframes in which decisions on Energy East and Trans Mountain must be made. Legislative changes under the previous Conservative government mandated that proposed pipelines made it through the regulatory process within 15 months.

An extra six months will now be tacked on to the review of the Energy East pipeline. For the Trans Mountain pipeline, which is in its final round of hearings, no federal decision will be made until December of this year.

“The fact there’ll be no construction on Trans Mountain this summer is good news for people of B.C.’s Lower Mainland,” Nagata said.

The extra time is meant to give the federal government more time to assess emissions, consult with Indigenous peoples and the general public in what Carr describes as “setting up a process beyond the NEB’s mandate and timelines.”

Nagata welcomes this decision as well, but questions still remain.

“How do you put a timeline on meaningful consultations with First Nations?” Nagata asked.

Another unanswered question and an issue most Canadian politicians tend to dance around is how does an oil pipeline pass a climate test?

“A climate test on pipelines is only meaningful if it respects the commitment to 1.5ºC that Prime Minister Trudeau made in Paris, and that would mean taking pipelines and tar sands expansion off the table,” Cameron Fenton, 350.org’s tarsands organizer stated in a media release.

“There’s no such thing as a climate-friendly pipeline. The science is crystal clear: in order to prevent catastrophic climate change, fossil fuels, and especially tar sands, need to stay in the ground,” Fenton said.

Alberta-based energy think tank Pembina Institute estimates the annual greenhouse gas emissions from the Energy East pipeline (1.1 million barrels per day capacity) are the equivalent of putting an additional seven million cars on the road.

Twenty-seven climate experts in a 2014 open letter projected Trans Mountain “alone is expected to lead to 50 per cent more carbon dioxide (CO2) emissions each year than all of British Columbia currently produces.”

Wednesday’s announcement comes on the heels of a recent backlash by pro-pipeline politicians against Montreal Mayor Denis Coderre, who announced last week that 82 Montreal-area municipalities oppose the Energy East pipeline.

For the last month, First Nations, environmental organizations and politicians such as Burnaby Mayor Derek Corrigan have called on the federal government to suspend the current regulatory reviews of existing pipeline projects until after the promised overhaul of the National Energy Board.

Image Credit: Screenshot CBC News

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Natural Resources Minister Jim Carr told reporters Wednesday that ongoing oil pipeline reviews will continue on as usual, despite a promise by the Liberal government to make the environmental assessment process more robust.

“They have not stopped,” Carr said. “The process continues.”

Ongoing National Energy Board reviews will continue for projects like the Kinder Morgan Trans Mountain pipeline expansion even though the Liberal party platform promised an immediate review of the process, saying the renewed assessments will “restore robust oversight and thorough environmental assessments” and “restore lost protections” resulting from weakened environmental laws under the Stephen Harper government.

Minister Carr indicated the National Energy Board review process will undergo a transition but until that time, project reviews will remain unchanged.

“There will be a transition as we amend the ways in which the National Energy Board goes about the process of evaluating these projects,” Minister Carr said, “and we will announce those changes as soon as we can, but the process continues.”

The announcement has some wondering what to make of Prime Minister Justin Trudeau’s assertion that a more robust process would apply to the to Kinder Morgan Trans Mountain pipeline.

In August, Dogwood Initiative’s Energy and Democracy Director Kai Nagata pressed Trudeau to confirm if an NEB overhaul would apply to the Kinder Morgan project.

“Yes. Yes,” Trudeau said. “It applies to existing projects, existing pipelines as well.”

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Trudeau on Kinder Morgan

Justin Trudeau says if he's Prime Minister, Kinder Morgan will have to go back to the drawing board, saying "the process needs to be redone." Find out where candidates in your riding stand: http://votebc.ca/

Posted by Dogwood Initiative on Friday, August 21, 2015

“Okay,” Nagata said. “So if they approve Kinder Morgan in January, you’re saying…”

“No, they’re not going to approve it in January. Because we’re going to change the government,” Trudeau responded. “And that process needs to be redone.”

After the Obama administration's recent refusal of the Keystone XL pipeline through the U.S. and a nearly dead Northern Gateway on B.C. northern coast, Kinder Morgan is upping its efforts to ensure the Kinder Morgan Trans Mountain expansion goes ahead.

On Friday Trudeau publicly released ministerial mandate letters, including one to Minister Carr that instructed him to “immediately review Canada’s environmental assessment processes to regain public trust and introduce new, fair processes” as well as “modernize the National Energy Board.”

“You can't slap some new paint on the Conservative review process and call it credible after campaigning against it,” Keith Stewart, energy and climate campaigner with Greenpeace Canada, said.

“I don’t see how the Trudeau government can continue with the review of a pipeline under rules that Trudeau has denounced for ignoring climate impacts, failing to respect Indigenous rights, and lacking a grounding in sound science.”

This week marks the passing of one year since hundreds of protesters gathered on Vancouver’s Burnaby Mountain to disrupt crews performing exploratory drilling for the Trans Mountain pipeline.

A massive loss of faith in the NEB process was on full display on Burnaby Mountain after nearly 500 citizens were prevented from participating as intervenors in the Trans Mountain hearings.

This included a group of 27 climate experts, including economists, scientists and academics.

The National Energy Board also quietly removed oral hearings from the process, which means oral cross-examination and testimony under oath are no longer part of the review.

These procedural deficits have made it easy for Kinder Morgan to refuse to answer questions from expert interveners, such as lawyers from Ecojustice.

Even the province of B.C. has been put in a position where it must fight Kinder Morgan for basic information about the expansion project. In early 2015, DeSmog Canada revealed that the company was refusing to release spill response plans to the B.C. government, even though the same spill response plans had been made available to the public in Washington State.

Beyond that, the review process has excluded local First Nations to such an extent the Tsleil-Waututh Nation, which is located directly across the Burrard Inlet from Kinder Morgan’s facilities, launched a legal action to challenge the credibility of the review process.

Last fall, energy executive Marc Eliesen publicly abandoned his role as an intervenor in the review process, calling it “fraudulent” and an act of “public deception.” Eliesen accused the board of engaging in a process that was rigged with a “pre-determined outcome.”

The current pipeline review process also considers upstream oilsands impacts to the environment and climate outside the scope of a relevant environmental assessment.

Terry Beech, Liberal MP in Burnaby North-Seymour, told the Burnaby NOW no decision on the Kinder Morgan pipeline would be made under the current system.

“We are going to redo the National Energy Board process,” Beech said. “We’re going to broaden the scope. We’re going to make sure it’s objective, fair and based on science.

“We’re going to make sure proponents of any major energy projects, including Kinder Morgan, have to work towards getting community support and support from partner First Nations,” he said.

“We’ve already said there will be no decision on Kinder Morgan in January. Kinder Morgan will have to go through a new, revised process.”

Image: Burnaby Mountain protest by Zack Embree

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