The fundamental logic of building transportation infrastructure to allow Canada’s resource exports to reach the centre of global economic growth is incontrovertible.
At current oil prices, oil exported to Asia through the proposed Northern Gateway pipeline would bring in annual revenues of some $15 billion to producers and governments. And it would add billions more by removing the captive market discount on oil exports to the United States.
With these economic underpinnings, it’s hard to see how any nation would give up such a key economic driver, provided that the risks are acceptable.
On environmental risk, the facts should be in Gateway’s favour. Already designed to be one of the world’s safest pipelines, Enbridge just pledged an additional half a billion dollars to beef up pipe thicknesses and add more automatic leak detection shutdowns.
The only alternative for accessing Asian oil markets is expansion of Kinder-Morgan’s Trans-Mountain pipeline system to Burnaby, B.C. For many years now, tankers have carried Alberta crude from the Burnaby terminal through frenetic Vancouver Harbour, under the Lion’s Gate Bridge, past the fleets of ships anchored in English Bay and into Haro Strait’s busy shipping lanes. This has been done without incident and, by comparison, the tanker risks of the Gateway project are clearly lower. Latest technology double-hulled ships, the safest on the ocean, would move down the considerably less busy channel from Kitimat accompanied by massive tugs.
That Gateway is the lowest risk alternative hasn’t been much help in the public discourse. Environmental groups have succeeded in planting fear and doubt in the minds of British Columbians. But why hasn’t Enbridge been able to counter their rhetoric with the facts?
My years in the resource business taught me how difficult it can be for “big business” to be heard over the doom-laden exaggerations of environmental zealots. And for the powerful international environmental groups, stopping Gateway (and TransCanada’s Keystone XL), is part of a larger strategy to stymie further oil sands development.
Given that gaining public confidence requires a credible track record, the spate of recent pipeline leaks in Alberta and a damning regulatory report on spills from Enbridge’s aging pipeline in Michigan couldn’t have come at a worse time. Ironically, all that Enbridge would get from Gateway is a modest regulated return, while producers receive enormous upside if the pipeline is built and downside if it isn’t.
In contrast to the oil pipeline, there’s wide support among British Columbians for proposed pipelines carrying natural gas to Kitimat for shipment to Asia on LNG (liquefied natural gas) tankers. Two big reasons are that natural gas brings no risk of spills, and that field development investments and royalty revenue will flow to B.C. Premier Christy Clark has stated the other big reason, public perception that Gateway poses “a very large risk … and a very small … benefit to our province.” This was followed by a set of conditions for her government’s support that include a bigger share of fiscal and economic benefits.
To some, this condition raises fundamental questions about how a nation can succeed if one province has to compensate another for allowing products to cross borders. But it’s important not to turn B.C.’s stance into some gigantic existential crisis of Canadian federalism. Alberta Premier Allison Redford has interpreted the condition as a demand for a share of provincial royalties. But that isn’t what the condition states.
And what are oil sands producers doing to find a solution? An idea to build a world scale refinery in Kitimat, initiated by a constructive B.C. business leader has been shunned, and there’s been no other creative ways of rebalancing project benefits coming out of Calgary office towers. The reality is that the pipeline industry’s self-inflicted wounds, along with complete failure by the Alberta government and oil sands producers to understand the realpolitik of B.C., have made Premier Clark’s stance politically inevitable.
It’s been almost 150 years since redoubtable German politician Otto Von Bismarck stated “Politics is the art of the possible”, and the continuing travails of the Northern Gateway proposal demonstrate his veracity. Saving Gateway is still possible, if the Alberta government and the oil sands industry get a lot more constructive and creative at practicing that timeless political art.
Gwyn Morgan is a Canadian business leader and director of two global corporations.