Alarm bells are ringing after media reports this week that the federal government is leaning toward a new pipeline through southern British Columbia, possibly along the route of the existing Trans Mountain line, to carry an extra million barrels per day of oil sands bitumen to Canada\u2019s West Coast.<\/p>\n
Some officials in Ottawa believe a southern route \u201cwould face fewer environmental hurdles and less resistance from Indigenous groups than the northern route Alberta is proposing,\u201d the Globe and Mail reports<\/a>, citing two federal sources.<\/p>\n Alberta prefers a northern route because Prince Rupert, B.C. is North America\u2019s deepest port and is 36 hours\u2019 sailing time closer to Shanghai than Vancouver, the Globe says.<\/p>\n Carolyn Svonkin, communications director for Energy and Natural Resources Minister Tim Hodgson, said Ottawa\u2019s role in any future pipeline proposal will be to evaluate the project, not show a preference for one route over the other. But the Globe\u2019s sources \u201csaid a northern route<\/a> has several disadvantages, including the difficulty of getting Indigenous buy-in, the cost of building in rough terrain, the ecological impact, and need to lift the federal ban on oil tankers [above 12,500 tonnes of carbo] stopping, loading, or unloading on B.C.\u2019s north coast,\u201d the paper writes.<\/p>\n On Tuesday, B.C. Energy Minister Adrian Dix told media the northern route \u201cis not a realistic proposal,\u201d CBC reports<\/a>. \u201cIt\u2019s not realistic because the tanker ban\u2019s in place for a good reason, for communities and for the economy.\u201d<\/p>\n Subsidies Still a \u2018Non-Starter\u2019<\/p>\n The Toronto Star confirmed the government\u2019s interest in the southern route. One Liberal MP from B.C. said the majority of the party\u2019s B.C. caucus \u201cwould accept the southern route as long as Indigenous consultation was done properly,\u201d the paper writes<\/a>.<\/p>\n \u201cThe B.C. MP said putting public money into an expansion would be a non-starter with Liberal MPs from the province,\u201d the Star says. \u201cBut another Liberal MP said that in light of Canada\u2019s currently weakened relationship with the U.S., they can understand why it might be necessary.\u201d<\/p>\n The Star notes that last November\u2019s controversial Memorandum of Understanding<\/a> between the federal and Alberta governments, which calls for at least one new West Coast pipeline and 1.5 million barrels per day of new oil production, specified that private companies would build and finance any new project. So far, no investors have stepped up, and Prairie Economic Development Minister Eleanor Olszewski told the Star that caveat is still in place.<\/p>\n \u201cWe\u2019ve taken the position that we won\u2019t be spending money on the pipeline,\u201d she said. \u201cWe\u2019re not the proponent. Alberta\u2019s looking for a pipeline proponent.\u201d<\/p>\n But last January, former Alberta energy minister Sonya Savage warned<\/a> there was no way a fast-tracked western pipeline would attract private investment without a taxpayer \u201cbackstop\u201d. This week, Simon Fraser University political science professor said there\u2019s no reason for governments to buy in.<\/p>\n While a twinned southern pipeline would make more sense than the northern route, \u201cthe question I would raise is why would we put public funding into this,\u201d he told The Energy Mix in an email. The existing Trans Mountain expansion \u201cis likely to lose public money, reinforcing why the private sector did not want to invest in the first place.\u201d A new project would face opposition from First Nations and environmental groups, logistical and physical construction issues, and the even bigger risk of inflation and economic uncertainty, Hira added.<\/p>\n While the governments of Canada, Alberta, and B.C. stake out their choices between pipeline routes, independent analysts who followed<\/a> the tortured history<\/a> of the Trans Mountain<\/a> pipeline expansion<\/a> are warning that a southern route will face many of the same hurdles.<\/p>\n Last fall, with fossil companies and some public officials calling for renewed<\/a> government support<\/a> for a new pipeline, the Institute for Energy Economics and Financial Analysis (IEEFA) called Trans Mountain (TMX)\u2019s $35.6-billion price tag (up to that point) a \u201cred flag\u201d for any future projects.<\/p>\n \u201cThe chances for recouping public funds that have been sunken into the TMX are slim,\u201d wrote<\/a> IEEFA analysts Mark Kalegha and Suzanne Mattei. The pipeline\u2019s high cost \u201chas put enormous pressure on the pipeline toll-setting process, resulting in vociferous objections from the pipeline\u2019s shippers. Meanwhile, the oil market is increasingly beset by uncertainties that pose risks to TMX\u2019s long-term profit margin,\u201d including serious questions about long-term demand for oil exports to China.<\/p>\n \u201cMarket conditions do not favour a long-term reliance on Asia for oil exports,\u2019 IEEFA warned. \u201cMajor new oil pipeline construction could lead to government-funded bailouts, as has been seen with the TMX\u2014resulting in substantial outlays of public money that may never be recovered.\u201d<\/p>\n \u2018Immense\u2019 Risk of Stranded Assets<\/p>\n Analysts echoed and expanded on those concerns in reaction to this week\u2019s news reports.<\/p>\n \u201cThere is immense stranded asset<\/a> risk in any new major fossil fuel expansion, particularly those from Canada\u2019s oil sands,\u201d Michael Sambasivam, senior analyst at Investors for Paris Compliance, told The Mix in an email. \u201cWhile industry is using high prices<\/a> as a selling point for new oil infrastructure, we\u2019re witnessing demand destruction<\/a> driven by this price shock. This is exacerbated by the degree to which the cost of renewable power generation has plummeted<\/a> over the last few years.\u201d<\/p>\n Sambasivam said proponents of a southern route may be prepared to trade off \u201cthe ire of oil sands producers who would rather see more exports out of a northern B.C. port\u201d against the possibility of a lighter regulatory burden for a fully or partially twinned southern pipeline.<\/p>\n But that plan \u201cwould likely require all the same consultations as any other standalone pipeline,\u201d he wrote. \u201cConsultations with affected First Nations are constitutionally required and not offset by the use of an existing route. The impacts of increased tanker traffic will very clearly dictate new consultations with coastal Nations, as well.\u201d<\/p>\n Meanwhile, \u201cwhile Bill C-5 aims to reduce the regulatory burden regarding environmental impact assessments, any bypassing of impact assessment will likely have an inverse effect on the success of consultations with First Nations.\u201d And since there\u2019s no past model for the fast-tracked approval process the federal government has been promising, \u201cthere will likely be new legal challenges as precedents get set. Forcing this through without transparent and thorough due diligence could create more delays than it solves.\u201d<\/p>\n University of British Columbia political science professor Kathryn Harrison said a new southern route could point to a terminus in either Burnaby or Delta, B.C. Burnaby is the site of the expanded storage tank farm that has already raised serious<\/a> red flags<\/a> for local residents. Either option would increase the risk to the endangered southern resident killer whale population<\/a> that was one of the focal points for opposition to the previous TMX expansion.<\/p>\n But beyond environmental risks lurk \u201ceven bigger political challenges,\u201d Harrison wrote in an email. \u201cWould a southern route be the same as the TMX route? If not, it\u2019s likely to provoke opposition from communities that have never had a pipeline before. In Burnaby, there\u2019s known resident opposition. They lost last time round, but it\u2019s not clear to me that the implication is that they\u2019d welcome more than doubling the capacity of the two current pipelines. A pipeline to Delta would cross new neighbourhoods, who I expect wouldn\u2019t be happy.\u201d<\/p>\n She added that four southern First Nations remain opposed to TMX, there\u2019s no sign they would support a pipeline expansion, and a route to Delta would engage a different set of Nations.<\/p>\n No New Pipeline Before 2035<\/p>\n While the fossil industry is touting new pipeline capacity as a response to the immediate energy price shock brought on by Donald Trump\u2019s war on Iran, Sambasivam said no developer would be able to bring a new pipeline online before 2035\u2014at the earliest. Even with the federal government pledging to compress regulation and speed up permitting for a new project, the 12-year time span for the Trans Mountain expansion included a five- to six-year period of active construction, and new infrastructure would face formidable obstacles: no corporate sponsor has stepped up to finance it, Calgary-based pipeliner Enbridge Inc. has declared it isn\u2019t interested in the development risk, and \u201cthe impact of nations aiming to shore up domestic energy security will likely be a factor which deters financiers from joining the project,\u201d a gap that would either delay a final investment decision and push the timeline even later.<\/p>\n As that timeline takes shape, investors will see it as less and less likely that a new pipeline would ever recover its costs. While demand projections vary, \u201cthere is a high likelihood of global oil demand plateauing over the next decade, which could be exacerbated by uptake in renewable power generation and EV usage,\u201d Sambasivam wrote. \u201cLooking out to 2055-2060, around when such a pipeline would approach the point of being fully paid off, there is a high likelihood that reductions in global demand will have made high-cost oil sands completely economically inviable.\u201d<\/p>\n