Trans Mountain - your friendly, government-owned, neighbourhood pipeline

Construction of the Trans Mountain pipeline expansion project will continue, but under federal ownership. The federal government is taking over Kinder Morgan's Trans Mountain pipeline and obligation to twin the pipeline, for $4.5 billion.

The federal government announced today (early this morning, in fact) that it will spend $4.5 billion to buy the Kinder Morgan Trans Mountain pipeline, and continue construction of the twinned pipeline between Edmonton and Burnaby.

This wasn't too surprising, given Kinder Morgan's deadline of May 31 for a final decision on whether to proceed with the project, given the protests, court challenges and intractable opposition of the B.C. government.

Black Press has done an excellent series on this project, giving extensive background to explain its many ramifications. The intent is to help readers get a more detailed understanding of the controversial Kinder Morgan pipeline twinning project. The project has prompted plenty of political finger-pointing and some pointed questions about the economy and the environment. The series will look in depth at the context in which this controversy has arisen.
Entitled A Pipeline Full of Controversy, it is appearing online and in Black Press print publications in the upcoming days and weeks. It will provide an overview of the project and the long history of the Trans Mountain pipeline, and how it relates to a B.C. historical and environmental perspective. It will look at the politics of the pipeline project and positions taken by various parties and individuals. It will examine the complex relationship the project has with First Nations and the wide variety of approaches taken by various First Nations towards it. It will look at environmental and other issues raised about the pipeline, from a scientific perspective.
This project has raised many alarm bells, for markedly different reasons, from both supporters and detractors. Members of the public need to have some clarity on how this has come about. That's what Black Press aims for in providing this series. Here's a link to one of the stories, on environmental ramifications. Here's a link to the story on the long history of the project. Here's a link to part three, on how First Nations are divided in their approach to the proposal.

I will post other links to stories in the series, as they become available.

I've done a story on the political turmoil surrounding the project, as part of the Black Press series. It has now appeared online on various Black Press websites. I did a revision when the purchase announcement came down at 6 a.m. (Pacific Time) Tuesday.
Here it is:

The Trans Mountain oil pipeline was almost non-political, when first proposed in the early 1950s. It was an economic issue.

Most Canadians saw building a pipeline to the west coast as a natural thing to do. A pipeline would better utilize oil which had been discovered in large quantities in Alberta in 1947. Trans Mountain was built to supply west coast refineries with crude oil. Three of those, the Standard Oil, Shell and Imperial Oil refineries on Burrard Inlet, had received their supply of crude oil by tanker until that time. Most of that oil came from California. Another refinery was built in 1957 as a result of the pipeline construction. Of those four, only the Standard Oil (now known as Chevron) refinery is still operational. The other three have been converted to storage facilities. All four still rely on the pipeline, and receive refined fuel products from Alberta refineries. Chevron gets crude oil as well.

A small amount of the Alberta oil was destined for export, both to Washington state refineries and further afield via oil tankers. The company was incorporated in 1951, and the pipeline was approved by the federal Board of Transport Commissioners in 1952. Construction started soon afterwards and the first oil was pumped through it on Oct. 17, 1953. Total cost was $93 million.

The proposal to twin the pipeline, now owned by Kinder Morgan Canada, was first made in 2013 to the National Energy Board. It was enmeshed in politics from the day it was announced. The political drama increased exponentially on Tuesday (May 29), when federal Finance Minister Bill Morneau announced that the federal government would buy the current pipeline and take over the expansion project, for $4.5 billion.

The political attention is due to concerns about ongoing use of fossil fuels, in light of climate change issues, and transport of bitumen by tanker across the Pacific Ocean. The federal government took  action because it wants the pipeline built.

                               Pipeline plan an issue in four election campaigns

In its first two years, the Trans Mountain proposal was overshadowed by the Northern Gateway pipeline proposal, proposed to run from near Edmonton to a terminal in Kitimat. That proposal attracted much debate, and was a major issue in the 2015 federal election. Liberal leader Justin Trudeau, who became prime minister as a result of the election, said he would not allow it to proceed, and after a court ruling, the government ordered the National Energy Board to dismiss the application. During the same campaign, Trudeau said he would support the Trans Mountain twinning proposal.

The Trans Mountain project was an important factor in the 2013 provincial election. The ruling BC Liberal Party used a statement by NDP leader Adrian Dix opposing the pipeline project, made in mid-campaign, as effective campaign fodder for the balance of the campaign. The BC Liberal Party’s campaign centred around job creation through projects such as the Site C dam and LNG plants, and the NDP opposition to Kinder Morgan was used to demonstrate that the party opposed resource projects which created jobs.

The NDP position hurt many of its candidates – incumbent MLA Harry Lali, who lost his Fraser-Nicola  seat by 600 votes, said that statement cost him the election.

“Kinder Morgan [Dix’s decision to oppose the concept, even before the company has applied] put the final nail in the coffin for rural B.C.,” Lali said. “Kinder Morgan did me in. I could see it on the doorstep. It came across as the NDP against the economy and jobs.”

A number of seats which the NDP had held in the B.C. Interior and in suburban areas of Greater Vancouver went to BC Liberal candidates, by close margins. Many swing voters cast ballots for the party they deemed was most likely to create jobs.
The Trans Mountain project also was the subject of opposition in the 2014 municipal election campaigns, most notably in Burnaby and Vancouver. Burnaby Mayor Derek Corrigan and his Burnaby Citizens Association (which controls all nine seats on Burnaby council) are strongly opposed to the proposal. So is Vancouver Mayor Gregor Robertson, whose Vision Vancouver was elected with a reduced majority of seats on Vancouver council.

The project was approved by the National Energy Board and the federal government in 2016.

Despite the approvals, the pipeline was again a key political topic during the 2017 provincial election, and particularly in negotiations afterwards that led to NDP leader John Horgan becoming premier. The BC Liberals won the most seats in the election, 43. The NDP won 41, and the Green Party, with three, has the balance of power.

                               NDP delivered on pledge to Greens

The NDP had campaigned against the pipeline, with Horgan vowing during the campaign that he would “use every tool in the toolbox” to stop it. The Green Party also opposed it. Both cited climate change, oil spill worries and a need to move towards more renewable energy sources. The BC Liberal government, after putting forward five conditions it wanted fulfilled, eventually agreed to support the project.

The Green Party was put in the position where it could effectively choose the government. Party leader Andrew Weaver negotiated with both Horgan and BC Liberal leader Christy Clark, and eventually signed a formal agreement to support the NDP.

The agreement states that an NDP government will: “Immediately employ every tool available to the new government to stop the expansion of the

Kinder Morgan pipeline, the seven-fold increase in tanker traffic on our coast, and the transportation of raw bitumen through our province.”

The NDP government delivered, with Environment Minister George Heyman proposing new regulations to subject all shipments of bitumen through B.C. to provincial laws. The B.C. government has taken those proposed regulations to the B.C. Court of Appeal in a reference case.

The Heyman proposal led to the bitter fight between Alberta and B.C. (both of which have NDP governments) and to a temporary ban on B.C. wine sales in Alberta. While the Alberta government has backed off on the wine boycott for now, it has promised more sanctions if the court ruling favours the B.C. position. At the same time, the federal government has vowed the pipeline will be built. Kinder Morgan, for its part, suspended non-essential spending on the project and gave May 31 as a deadline for assurance that the pipeline will not face further court delays and financial uncertainty.

That deadline prompted Ottawa to act. On May 29 (Tuesday), Morneau announced that the federal government would buy the existing project and take over the obligation to twin it. Its plan is to eventually sell it to private investors, or a combination of governments, indigenous groups and other investors. Morneau had said May 16 the government would cover any extra costs that Kinder Morgan Canada had to assume due to the B.C. government’s opposition to the pipeline. Negotiations continued after that announcement, with the full takeover the result.

                         Implications for governments, individual politicians and political parties

For B.C. NDP provincial government – It stands accused of needlessly delaying and potentially derailing a project the NDP government in Alberta wants to proceed. It has been told it is interfering in matters which are not within its jurisdiction. The federal government has control over interprovincial transportation. Support for the project in polling of B.C. residents has risen slowly but steadily since the Horgan government took a hard line and proposed new rules to delay the project. Its position fulfils its commitment to its Green partners, but could hurt it in the next provincial election, which (at this time) is scheduled for Oct. 16, 2021. Horgan’s position within the party remains strong for now. The federal move to buy the pipeline and now proceed as the owner of the project puts Horgan under more pressure, but thus far he is staying the course.

For Alberta NDP government – It faces the next election sometime between March and May of 2019. It is far behind in the polls to new United Conservative Party, a merger of the Progressive Conservative and Wildrose parties. It agreed to a carbon tax and limits on oilsands production, at least partially due to federal support for the pipeline twinning. It sees the project as a must to ensure that Alberta oil can be sold for an amount closer to world prices, rather than at the steep discount it encounters in U.S. market. Its hard line against the B.C. NDP has boosted its image among Albertans, but the poll numbers remain dismal. Premier Rachel Notley has a tough year ahead.

For federal Liberal government – It too faces an election in 2019, on Oct. 21. The party won a record number of seats in B.C. in 2015, including a large number in Metro Vancouver. Some of those seats (Burnaby, Vancouver, North Vancouver) could be at stake as a result of the party championing the Kinder Morgan project. The outright takeover of the project may make it even harder for the Liberals to hold some B.C. seats, but may help the party in others. Liberals have already lost much support in Alberta, where they hold just four seats. Most are likely to be lost. The party also stands to lose some support in Quebec by taking over the pipeline. Quebec opposition was a major reason that Trans Canada Pipelines cancelled the Energy East project, which would have shipped Alberta oil to Montreal and Saint John refineries.

One of the reasons for the takeover is a federal determination to get the project built. If it isn’t built, the government will face charges that it is unable to get a major resource-based project underway. It does not want to damage the image of Canada as an investment destination. Failure will also hurt support for federal climate change plans, which largely centre around carbon taxes in each province. Saskatchewan is already suing the federal government, saying it does not have jurisdiction to impose such taxes. United Conservative Party leader Jason Kenney has said Alberta will join the suit if his party forms government in Alberta next year.

The uncertainty over the Trans Mountain project has placed the Trudeau government in a very awkward political position. The takeover will ensure the political drama continues.

For federal NDP – New leader Jagmeet Singh made no visible effort to get the two warring NDP premiers to agree on anything. These provinces are only place in Canada where the NDP holds power. Federal and provincial arms of the NDP are more closely allied than is the case with other federal parties. If this controversy within the party continues, it will hurt the NDP’s federal prospects in 2019.
Singh finally took a firm stance on the twinning last week (May 23), saying the federal NDP was opposed to the project going ahead. In the short term, Burnaby South NDP MP Kennedy Stewart, who has already been arrested during protests at the Kinder Morgan site, and was fined $500 for criminal contempt of court, announced May 10 that he will be resigning his seat and running for mayor of Vancouver. The vacant seat could compound Singh’s woes – or provide a seat for him to run in in a byelection. He was an Ontario MPP and does not have a seat in the House of Commons. The byelection will most certainly serve as a referendum on the pipeline expansion project.

For Green party (federal and provincial) – The anti-pipeline campaign and NDP-Green alliance has benefited the Greens. Their support in B.C. will hold or even build a bit in the next provincial election, which the Greens are moving heaven and earth to ensure will be fought on a proportional representation basis. Nationally, their support may increase in some areas, but more federal seats are unlikely after the votes are counted in 2019. Party leader Elizabeth May, who is Saanich-Gulf Islands MP, is the party’s lone MP. She was fined $1,500 for criminal contempt of court on May 28, for her actions on a picket line in Burnaby, opposing the pipeline expansion project.
Weaver will come out of this issue smelling like a rose. He can oppose the pipeline forever, but not pick up any political baggage for doing so.

Here's a couple of other random comments.
In Canada, federal governments have often played a key financial role in major infrastructure projects, going back to the construction of the Canadian Pacific Railway.That project initially led to the defeat of the John A. Macdonald Conservative government in 1874 over the Pacific Scandal, but when Macdonald returned to power in 1878, he found a group of investors who were ready to build the railway. Through many ups and downs and a lot of federal guarantees, it was completed in 1885.
That project and all the political hot air it generated led to the constant labelling of B.C. as "the spoiled child  of Confederation." Chances are, many other Canadians feel that way right now.

Another infrastructure project which the federal government took over (very reluctantly) was Canadian National Railways. The Liberal government of Sir Wilfrid Laurier has offered a lot of financial guarantees so that more railways could be built to compete with the very successful CPR. When the First World War came along, the two most significant components of the future CN system, Canadian Northern Railway and Grand Trunk Railway, couldn't pay their debts. That led to the Unionist government of Sir Robert Borden, during the most crucial months of the war, developing a plan to nationalize those two systems and combine them with existing government-owned railways. CN was fully in place by 1923, and remained a Crown corporation until 1995. It is now a very successful private company.
The current government probably won't own Kinder Morgan's Canadian assets for that long, but it is likely just as reluctant to take them over as the Borden government was in dealing when CN's predecessor companies.
The federal government has also been directly involved in the oil and gas industry as an owner and financier (as well as a regulator) in a variety of ways for the past 40 years, most notably by creating Petro-Canada. That was an initiative of the Liberal government headed by Justin Trudeau's father, Pierre Elliott Trudeau, who was prime minister from 1968-84, with a nine-month "time out" in 1979 when the Conservative government of Joe Clark was in place.