For years, the Canadian public has been besieged with the same message: Alberta’s pipeline network is completely maxed out, meaning the oilsands are landlocked and new pipelines must be constructed to allow producers to ship their product to new markets and eliminate the discount imposed on exports.

It’s a notion that’s been repeated by politicians of all stripes, including Alberta Premier Rachel Notley and Prime Minister Justin Trudeau.

But there’s no merit to that argument, according to a new report from the Washington, D.C.-based nonprofit Oil Change International.

In the briefing, titled “Canada Not Running Out of Pipeline Capacity,” authors Adam Scott and Greg Muttitt point out that there’s around 400,000 barrels/day of unused capacity in the network, easily accommodating exports for projects currently operating and under construction.

This calculation was derived from the organization’s Integrated North American Pipeline model, which then concluded the network was 89 per cent full.

As a result, the only reason that new pipelines like Kinder Morgan’s Trans Mountain and TransCanada’s Energy East would be required is if there’s a massive expansion of the oilsands, a move that would arguably undermine the Paris Agreement and other international climate commitments (an argument also made by David Hughes in his thorough June 2016 report for the Canadian Centre for Policy Alternatives).

“When you look at the reality of the situation building new pipelines would not increase the amount of money that producers receive because there isn’t a shortage,” Scott told DeSmog Canada. “And there’s no discount anymore that could be relieved by building a new pipeline.”

“It’s really that missing piece of the puzzle that Canadians are not getting good information on.”

Only Reason for Kinder Morgan and Energy East Would Be For Huge Oilsands Expansion

Scott isn’t discounting the historical existence of an artificial price differential. Rather, he’s arguing that it no longer applies.

There was a serious pipeline constraint in 2012 and 2013 that resulted in a transport-related price gap between Western Texas Intermediate (WTI) and Brent Crude with Western Canadian Select (WCS). In other words, the lack of pipeline access rendered bitumen production and transport less economically viable.

But that changed with the construction of new pipelines between Illinois, Oklahoma and refineries on the Gulf Coast in 2013 and 2014, as well as the removal of a 40-year ban in the U.S. on exporting domestically produced oil in December 2015 (which the report suggests “reduced market distortions between shale oil and oil sands crude oil at U.S. Gulf Coast refineries”).

Now, oilsands producers are facing three major issues that ultimately have nothing to do with pipelines: lower quality crude, distance from major markets (almost exclusively in the U.S. given access to heavy oil refineries) and extremely low global prices.

“In reality, that differential is basically gone now,” Scott says.

He suggests that the pipeline network may come close to full in 2018, resulting in a “very brief” spike in prices.

But there are more expansions planned for the network that will likely come online to loosen that bottleneck: Enbridge is currently planning to add 800,000 barrel/day worth of pipeline capacity to its mainline system by 2020, which wouldn’t require new permits as it would be an expansion rather than a new pipeline. Kinder Morgan and Energy East wouldn’t be constructed until 2020 or so.

“It has nothing to do with the decision about current pipelines,” he says.

Taking the Enbridge expansion into consideration, the Oil Change International report concludes that “only significant additional plans to increase production beyond projects already operating, in-construction or sanctioned would change this situation.”

One Million Additional Barrels/Day Allowed Under Oilsands Cap

Here’s a bit of rough math to provide some additional context.

The oilsands currently produce about 2.4 million barrels/day and 70 megatonnes (Mt) of carbon emissions per year. Alberta’s new emissions cap on the oilsands allows for only 100 Mt per year.

Assuming that per-barrel emissions stay constant (which is unlikely given that most new production will occur via the more energy intensive process of in-situ), the cap allows for another one million barrels/day or so of production, up to around 3.4 million barrels/day.

David Hughes has also calculated the 45 per cent increase in production could be accommodated via existing pipeline and rail networks, which includes a 15 per cent surplus for maintenance and pipeline problems.

Specifically, the potential addition of 800,000 barrels/day from Enbridge added to the 400,000 barrels/day in current spare capacity allows for 1.2 million barrels/day in new production.

If Kinder Morgan Trans Mountain or TransCanada’s Energy East are approved by the federal government, it will serve as a clear signal that nobody’s taking that cap seriously.

That’s the assumption that allows the Canadian Association of Petroleum Producers to estimate that oilsands production will increase from 2.4 million barrels/day in 2015 to 3.7 million barrels/day in 2030, and the National Energy Board to calculate that oilsands exports could increase to 4.5 million barrels/day by 2040.

Oil Industry Is ‘Betting That In The Future the Government Will Ignore Its Own Climate Policy’

But such a spike can’t happen if Canada has any intention of meeting international climate commitments, especially its Paris Agreement target of reducing emissions by 30 per cent below 2005 levels by 2030.

A widely shared report published in September by Oil Change International titled “The Sky’s Limit” concluded that no new oil, gas, or coal extraction projects can be built if the world has any legitimate interest in staying below the mark of two degrees celsius above pre-industrial averages.

“Investment in new projects beyond what’s already under construction has stalled completely with the oil prices,” Scott says. “The oil industry knows these pipelines aren’t required and they’re betting that in the future the government will ignore its own climate policy and that somehow, miraculously, the price of oil will recover. Both of those things would be required for those pipelines to be needed.”

A recent analysis by economist Robyn Allan found that constrained oil production in the oilsands is exclusively the result of low oil prices, not restricted pipeline capacity. Allan found a total of 2.7 million barrels per day of oilsands production was cancelled between January 2014 and September 2016 due to the low price environment.

Per-Barrel Emissions Have Increased by One-Quarter in Last Decade

It also assumes that technological innovations will help decrease per-barrel emissions in order to meet those climate commitments.

Yet recent history shows little precedent for that: a Pembina Institute report from August 2016 noted that total emissions intensity has increased by 25 per cent between 2004 and 2014.

Technologies such as using solvents instead of gas to extract bitumen via in-situ isn’t very advanced, Scott says, and the increasingly popular technology features a far higher per-barrel emissions rate in both carbon dioxide and sulphur dioxide than open-pit mining.

“With the crash in oil prices, [research and development] budgets and the willingness of the oil industry to spend extra marginal dollars on extra technology that would increase the cost is gone,” he says.

“We don’t expect the oil industry will have a real ability to dramatically reduce emissions intensity.”

Yet politicians across Canada continue to push for pipelines, with the Kinder Morgan Trans-Mountain project expected to receive approval shortly before Christmas.

Scott suggests that such elected officials “are completely ignoring the reality of what the Paris Agreement means” and those who contend that new fossil fuel development can be allowed under such commitments “don’t understand climate science.”

“We’re not saying we need to shut down the fossil fuel industry tomorrow,” Scott says.

“But Canada can’t meet its own obligations to the Paris Agreement if it intends to allow for that expansion. In that way, the decision of whether or not to build these pipelines is a direct choice from politicians about whether or not they’re going to honour their obligations on climate change. It’s that simple.”

Image: Alberta Premier Rachel Notley, Prime Minister Justin Trudeau and Calgary Mayor Naheed Nenshi. Photo: Government of Canada

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Quebec Environment Minister David Heurtel announced Tuesday the province is filing a legal injunction against TransCanada’s proposed Energy East oil pipeline with Quebec’s Superior Court.

"Today's motion is very simple and very clear. It signifies that whoever seeks to build a project in Quebec must comply with all Quebec laws and regulations," Heurtel said at a press conference.

"This is not only a matter of respect, but equally a question of fairness towards all companies that wish to do business in Quebec."

The announcement left oil-patch politicians like Saskatchewan Premier Brad Wall once again bitter with Quebec for not fully supporting the west-to-east pipeline project. 

"I'm very disappointed," Wall said in response to the province's push for an injunction. "It seems of late that we seem to be forgetting what's best about Canada."   “The Minister himself was quite clear in pointing out it is not a position for or against the pipeline,” Karine Peloffy, executive director of Centre Québécois du Droit de l’Environnement (Quebec Environmental Law Center), said. “It is more an issue of insisting on the proper application of the law.”    Under Quebec’s Environment Quality Act, any pipeline longer than two kilometers must undergo a provincial environmental assessment and review prior to shovels going into the ground. If approved, 1,600 kilometres of the 4,600-kilometre Energy East pipeline will be built in Quebec and New Brunswick.   “We have laws quite specific to Quebec that take into account environmental risks and local health issues and concerns not necessarily considered at the federal level,” Peloffy told DeSmog Canada.

Peloffy points to the province’s adherence to legal concepts like protecting water as a collective resource and the fundamental right to live in a healthy environment as areas where Quebec’s environmental law differs from its federal equivalent.

Legacy Of Weakened Federal Environmental Protections 

Much of Canada's federal environmental legislation related to the protection of at risk species, fish and water protection was weakened or eliminated under the previous federal government, leaving some to wonder if provincial law is the last best defence for the environment.

The the Species At Risk Act, the Navigable Waters Protection Act and the Canadian Environmental Assessment Act were significantly altered through two omnibus bills in 2012. In the wake of the legislative changes, hundreds of environmental assessments of energy projects were cancelled outright, eroding public trust in the ability of the National Energy Board, Canada's pipeline regulator, to adequately assess the environmental risk of new major pipeline projects.

“In 2012, the Harper government set out to scale back federal environmental legislation to the minimum amount required to satisfy its jurisdiction,” Ecojustice staff lawyer Charles Hatt told DeSmog Canada.   “Provincial environmental assessment legislation can sometimes fill gaps left by this narrow view the previous federal government took of environmental assessment,” Hatt said.   Prime Minister Justin Trudeau's government promised to review the national pipeline assessment process but indicated pipeline review processes already underway — for both the Kinder Morgan Trans Mountain pipeline expanstion and Energy East — will continue on under the current regime. 

Quebec to Avoid Same Legal Ruling as British Columbia

Comments made by Quebec Premier Philippe Couillard earlier this week indicate the province is trying to avoid legal obstacles faced by British Columbia in the construction of the Enbridge Northern Gateway pipeline.

The B.C. Supreme Court found last January that the provincial government failed to fulfill its legal duty to consult with First Nations about Northern Gateway when it handed over its responsibility to conduct an environmental assessment of the project to the National Energy Board. 

“Essentially the courts ruled the B.C. government acted illegally by abdicating its responsibility to review Northern Gateway to the National Energy Board,” Peloffy said.

"I want to point out that this [injunction] should not be interpreted as us being for or against the project," Environment Minister Hurtel said Tuesday. "Rather, as in other provinces, it is an attempt to have our laws and regulations respected." 

TransCanada Refuses To Supply Quebec With An Environmental Impact Study of Energy East 

TransCanada may have also played a role in provoking the Quebec injunction.   “I clearly informed TransCanada Pipelines that it needed to table a project notice for Energy East," Environment Minister Heurtel stated in a media release. "In the face of its inaction, the government has taken action. This is not only a matter of respect, but equally a question of fairness towards all companies that wish to do business in Quebec."

Under normal circumstances in Quebec, when a company wishes to undertake a major project it must submit a notice with the ministry of environment. This in turn triggers a review by a provincial agency called the Bureau d’audiences publiques sur l’environnement or BAPE and leads to the issuance of a governmental authorization of and conditions for the project.   The province asked TransCanada in 2014 to provide an environmental impact study of the Quebec portion of Energy East for purposes of conducting a provincial review and the Calgary-based pipeline company has yet to respond.   Despite TransCanada not following proper Quebec procedure, the province decided to go ahead with a review of Energy East regardless. The review is scheduled to begin next week.   Quebec environmental organizations have concerns about the provincial review in its current form.   “A big issue with the current review is the minister has been able to carve out pieces of the mandate they didn’t want to be studied,” Peloffy said. “Normally in a provincial review all aspects of the environment are looked at, including economic aspects and Indigenous rights. The Minister decided both are outside the purview of the review.”   TransCanada’s non-compliance with Quebec law has given Heurtel the legal leeway to cater the review of Energy East to a more limited set of criteria than is standard in the province. The review’s findings will only serve to inform Quebec’s position during National Energy Board hearings and not result a provincial government decision on Energy East.   Quebec Environmental Law Centre, Equiterre, Nature Quebec and Fondation Coule pas chez nous are calling on the Quebec government to suspend its Energy East review until the province’s Superior Court delivers a ruling on whether TransCanada has breached Quebec law. All four organizations filed a joint motion with the Superior Court against the Energy East project on February 18th.   If built, the $15.7 billion dollar Energy East pipeline will transport 1.1 million barrels of western Canadian oil and oilsands crude 4,600 kilometres to New Brunswick every day. To date, TransCanada has submitted over 30,000-pages of documents as part of its Energy East application to the National Energy Board. The Board has not determined if the application is complete. 

Image Credit: David Heurtel via Twitter

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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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Several prominent western Canadian politicians came out firing at Montreal Mayor Denis Coderre’s announcement yesterday that Montreal-area municipalities will oppose TransCanada’s Energy East oil pipeline project. The outraged western leaders were not exactly polite in their criticism either.

“He’s wrong on this one. There’s no better way to put it,” Calgary Naheed Nenshi told CTV’s Power Play. “The alternative is more oil by rail and people in Quebec know the dangers of oil by rail, tragically.”

“I trust Montreal area mayors will politely return their share of $10B in equalization supported by (the) west,” Saskatchewan Premier Brad Wall said on Twitter.

The 82 municipalities of the Communauté Municipale de Montréal (Montreal Metropolitan Community) voted yesterday to oppose the 1.1 million barrels a day proposed pipeline going through their jurisdictions. The environment risks outweighed the meager economic benefits of the project, according to the political body representing nearly four million Quebecers.

"We are against it because it still represents significant environmental threats and too few economic benefits for greater Montreal," Coderre told reporters in a press conference yesterday.

“Call a spade a spade: It’s a bad project,” Coderre said.

Alberta’s provincial politicians also took shots at Montreal’s concerns about Energy East. Alberta’s Wildrose Leader tweeted that the Montreal-area municipalities cannot “benefit from equalization and then reject our pipelines.” The Alberta government called the announcement “both ungenerous and short-sighted.”

Earlier this month, the British Columbia government came out against Kinder Morgan Trans-Mountain pipeline project and Burnaby Mayor Derek Corrigan requested the regulatory review of the project be suspended. Neither announcement was met with the same outrage from politicians in the oil patch.

Some of the criticism showed a clear lack of understanding of the Energy East project by pro-pipeline politicians.

Nenshi seems to have mixed up Energy East with Enbridge’s Line 9 pipeline when he tried to justify Energy East as “a pipeline that already goes to Montreal. This is a project to modernize it, to bring it up to even better standards.”

Some 3,000 kilometres of the 4,600 kilometre proposed Energy East pipeline do exist as a TransCanada natural gas line stretching from Alberta to the Ontario-Quebec provincial boundary. The remaining kilometers of pipe will be a newly constructed pipeline in Quebec and New Brunswick.

The new pipeline would be built in the northern municipalities of Montreal should the project receive regulatory approval.

Nenshi’s and other western Canadian pro-Energy East politicians’ praising the pipeline for its potential to supply eastern Canada with western Canadian oil overlooks eastern Canada’s inability to refine large amounts of oilsands (tarsands) bitumen. The three eastern refineries lack the equipment to process heavy bitumen.

As Andrea Harden-Donahue of the Council of Canadians points out in a recent article, by the time Energy East comes on line eastern Canadian refining needs will likely already be met by rail, tanker and the existing Line 9 pipeline with Atlantic Canada offshore oil, U.S. light crude as well as western Canadian crude.

“When it comes to U.S. imports, the fact is it is cheap light crude and a likely ongoing choice given refineries desire for the best bang for their buck,” Harden-Donahue writes. “This leads to the conclusion that 978,000 barrels of the 1.1 million BPD is destined for export.”

How bitumen is going to help eastern Canadian refineries has yet to be adequately explained by Energy East supporters.

Alberta and Saskatchewan politicians’ condemnation that Montreal is sucking oil and gas provinces dry through equalization payments smacks of typical ‘Quebec bashing’ seen before in Canada. It also skirts around the issue that only half of natural resources wealth is subject to the equalization system because natural resources are under provincial control.

“Despite having a higher than average ability to fund services, Saskatchewan and Newfoundland receive more in federal spending and transfer payments than they contribute,” the Mowat Centre states in a 2014 press release on Canada’s “broken system of federal redistribution.”

At the end of the day, the most diplomatic response to Coderre’s announcement from the pro-pipeline side came from Energy East’s proponent TransCanada:

“[We] will continue to listen to other elected leaders in Quebec and stakeholders across the province as we take their concerns and input seriously.”

Image Credit: City of Calgary via flickr

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