Need for pipeline expansion questioned

GARY PARK

For Petroleum News

When Canada’s National Energy Board starts its final round of hearings Aug. 24 on Kinder Morgan’s application to expand its Trans Mountain pipeline, the economic outlook for Alberta’s oil sands may override the claims of First Nations, local communities and environmentalists.

The plan to triple capacity to 890,000 barrels per day on the shipping system from the Alberta oil sands to a tanker port in Vancouver and refineries in Washington state is now facing an argument based on hard dollars that could make the emotional case against the C$5.4 billion project irrelevant.

Mark Jaccard, an energy economist at Vancouver’s Simon Fraser University, said that failing another significant war in the Middle East, there is little chance that oil prices will rise significantly in the next 5 to 10 years to the point where the enlarged Trans Mountain will be economically viable.

“The fact that the price of oil has fallen right now shouldn’t affect the decision of either the company or the regulator,” he told the Vancouver Sun.

“However, if they believe that the price fall has a real long-term element (of a decade or more) to it, then it will affect the decision. If prices stay really low, I don’t think (the pipeline) would go ahead,” he said, noting that pipelines decisions are usually based on an operating life of 25 to 50 years.

Trans Mountain, which has shown no sign of shelving the application, said it still has long-term shipping commitments from 13 companies in the Canadian oil producing and marketing sectors.

A spokesman said that swings in North American and global commodity prices are “normal, expected and factored into considerations by our customers when signing-on for the project,” adding that the pipeline, like any other long-term investment, is “designed and financed to withstand the normal ups and downs of markets.”

Opponents of the Trans Mountain proposal show no signs of easing off in the face of these arguments, notably from British Columbia’s opposition New Democratic Party.

NDP leader John Horgan and environment spokesman Spencer Chandra Herbert submitted a letter to the NEB challenging the regulatory agency’s refusal to add climate change to its deliberations, its failure to require Kinder Morgan to provide an emergency response plan to handle leaks from the pipeline or tankers operating in British Columbia waters and its omission of First Nations from the hearing process.

The City of Burnaby, which incorporates Trans Mountain’s tanker terminal, said the NEB’s refusal to allow public attendance at the hearing is “going to be provocative.”

But the NEB said the initial hearing is only an opportunity for interveners to present their “oral summary arguments” and is not intended to be an open forum.

Sierra Club spokeswoman Larissa Stendie described the NEB’s handling of the process as “chaotic, deeply flawed and unfair.”