Energy Inequality

The Northern Gateway project is a major petroleum pipeline project proposed by Enbridge Inc. to transport crude oil from Alberta's oil sands to a tanker port in Kitimat where it can be exported. Over the course of the Aboriginal and public consultations, considerable controversy has grown around the project's environmental, economic and social impacts. The rhetoric surrounding the project has become increasingly divisive and having an informed debate about the risks and benefits of the pipeline is becoming more challenging. Only through an inclusive, constructive debate can the impact of the Northern Gateway be properly assessed and the real benefits for British Columbians determined. Here we seek to provide an effective examination of the issues surrounding the Northern Gateway project and the approvals process it must undergo if it is to be built.

Technical Details of the Project

The project proposal encompasses two pipelines running from Kitimat B.C. to Bruderheim Alberta (about an hour north east of Edmonton). The two pipelines would have a capacity of 718,000 barrels of oil per day (BPD). To put this in perspective, the Tran Mountain Pipeline that runs from Alberta to Burnaby currently has a capacity of 300,000 BPD, though the operators of this pipeline are drafting plans to triple its capacity. The larger of the Northern Gateway pipelines (approximately 92 cm in diameter) would move 525,000 barrels of unrefined crude oil from the Alberta oil sands to a new export terminal to be built in Kitimat. The smaller (approximately 50 cm) pipeline would carry gas condensates the other way, from the coast to Bruderheim at a rate of 193,000 barrels daily. The route that was submitted to the National Energy Board and the Canadian Environmental Assessment Agency is 1,172km in length running almost straight east-west.

The terminal in Kitimat would include two tanker berths, three storage tanks for condensate and 11 tanks for oil storage. To help shepherd oil tankers up and down the narrow inlet they must traverse, radar and weather stations will be built in Kitimat. First response capabilities for accidents or spills would be kept on hand in the new terminal.

Enbridge is expecting construction of the Northern Gateway project to require 62,700 person-years of employment. A study by the CCPA disputed this claim, saying their economic analysis could account for only 14% of these person-years.

It is the single largest infrastructure project that has ever been undertaken between the provinces of Alberta and British Columbia. Enbridge is expecting construction of the Northern Gateway project to require 62,700 person-years of employment (i.e. 6,270 employees for 10 years). A study by the Canadian Centre for Policy Alternatives disputed this claim, saying their economic analysis could account for only 14% of these person-years, even if all the steel for the pipelines was manufactured in Canada. Enbridge believes another 1,150 new "long-term" jobs will be created across the country. Only 217 of these jobs will be created by direct employment (people working on the pipeline operations), while a large proportion of the remainder are indirect (lawyers, accountants, cooks, etc.). Over a third of Enbridge's projected long-term jobs are induced, meaning they are expected to be created from the money spent in local communities by these direct and indirect workers. Measuring induced jobs can be highly speculative though from an accounting point of view it is not disingenuous to include these numbers in their calculations.

Our fossil fuel infrastructure map tracks the route of the Northern Gateway pipeline along with other pipeline projects in the province.

Economic Rationale

The primary rationale for the pipeline is to diversify Canada's oil exports. Currently the vast majority of Canada's oil exports go to the United States, making Canada the U.S.'s largest single supplier. There are several trends worked into this strategic decision to diversify. Primarily is there is no guarantee of future American demand for the quantities of oil Canada is planning to start pumping in the near future. Enbridge, for instance, predicts that Canadian oil production from the oil sands will triple by 2035. As Canadian oil production has grown, so has the country's oil exports to the United States. They have risen steadily since 2001 by almost a third, around 2.3 million BPD. Oil companies working in Canada hope to push this number up considerably and sell most of it to the United States.

It does however appear that American oil consumption has hit a ceiling, following the oil price spikes of 2008 and American economic weakness following the global economic downturn that same year. American oil demand peaked in 2005 at 20.8 million BPD and has since declined to 18.7 million. At the same time American oil production has defied the declining trend since American oil production peaked in the 1970s. With the introduction of new technologies like fracking and horizontal drilling, and the opening up of more offshore fields, the Americans are boosting their own oil production, meaning they need to import less. These trends can be seen in the chart below.

Canadian Oil Exports

A continuation of current trends means that Canadian oil exports to the United States might hit a ceiling, leaving Canada with surplus capacity. This could happen even faster if the United States was able to continue to push up its own production. Another fear is that the United States could enact a rigorous climate action agenda, driving down their own oil consumption further with improvements in energy efficiency, an ambitious renewable energy program, and the widespread adoption of plug-in electric cars. If this was to occur before Canada built pipelines like Northern Gateway, it would leave few avenues to sell crude oil from the oil sands as fast as it was being produced.

This reliance on American oil demand means that Canadian oil is sold for less than it would be in a more competitive environment. A study by the School of Public Policy found that oil sold to Asia would fetch oil companies $10.30 more per barrel by 2016 than it would if sold to the United States.

In March 2012 a report was released by CIBC World Markets warning that Albertan energy producers may be losing $18 billion a year on crude oil sold due to the lack of infrastructure for shipping and refining. Currently the amount of oil that is being produced in Alberta is exceeding the amount that can be shipped and refined leading the producers to have to sell oil below market value if they have no storage capacity. This problem has also led companies to explore other options for shipping oil, one of which is using railroads. Cenovus energy, an oil producer in Alberta, ships approximately 31,600 barrels of oil a month by rail—a stop-gap resolution at best as this is only 0.002% of the capacity of Northern Gateway.

Keystone XL proesters
Proesters against the Keystone XL pipeline in front of the White House. American opposition to the pipeline largely stems from concerns about the oil sands' environmental impact.

American domestic politics pose another threat to Canadian oil exports: ethical opposition to the oil sands. The higher greenhouse gas emissions from the oil sands than from conventional oil production make it highly controversial. As an example of one opinion popular in the United States, James Hansen, head of NASA's Goddard Institute for Space Studies, wrote in a New York Times op-ed that "if Canada proceeds [with developing the oil sands] and we do nothing, it will be game over for the climate." Much of the public opposition in the United States to the Keystone XL pipeline which would ship oil sands crude to the United States is based on the idea that we should not be burning bitumen from the oil sands at all. If a future American administration was to act on these fears it would hurt Canadian oil exports and oil producers in Alberta. China, on the other hand, does not currently have such scruples, and a pipeline that would allow Canadian oil companies to export oil there could serve as a plan B.

On the other hand Americans often argue that it is better to import oil from Canada, which is democratic, stable and a staunch ally, than it is from Saudi Arabia and Venezuela. Currently American policy seems to be to slowly expand oil sands imports, without coming down strongly either way.

Keystone XL under construction
The U.S. has already started building the southern leg of the new Keystone XL pipeline. Here a truck is moving pipe segments in Kansas for the new pipeline.

Economic Benefits

Enbridge has said the pipeline will bring major economic benefit for British Columbia, Alberta and Canada as a whole. The pipeline will bring in $1.2 billion in tax revenues to B.C. over 30 years, and result in hundreds of millions in investment around the north coast, central B.C. and the northeast. Canada's GDP would grow by $270 billion over the next 30 years if the project were approved; of that the federal government would reap $81 billion in revenue and $48 billion of it would go to Canadian workers.

As the study by the Centre of Policy Alternatives points out, the share going to workers is only 18% of the total, the rest largely going to corporate profits. "This is extremely low by Canadian economic standards, which has traditionally seen a labour share of income in excess of 50% of GDP. This is due to the extremely capital-intensive nature of the oil and gas industry." A study by the University of Calgary brings the total revenues down by half, to $132 billion. The pipeline will certainly be profitable, although it may become less so if Canada subscribes to some sort of market mechanism for controlling climate change in the decades ahead—a carbon tax or cap-and-trade system.

Questions have also been raised about the idea of exporting unrefined oil sands crude. 'Why not refine the oil in Canada?' As of 2010 Canada only has the infrastructure to refine 4.2 million barrels of oil a day. The majority of Canada`s refineries are either located in eastern Canada or are used only to upgrade bitumen from Alberta to pipeline qualities. If more refining capacity was to be built in eastern Canada it could generate jobs there, further boosting the Canadian economy.

Pipeline Spill Risk

One of the main concerns about the pipeline is the threat of a spill. The proposed route for the pipeline crosses the headwaters of the Mackenzie, Fraser and Skeena rivers, and weaves through largely remote areas of northern B.C. Given the many diverse and pristine ecosystems the pipeline would be crossing, and the risk of quickly polluting mountainous watersheds, it would be desirable for a spill to be stopped quickly or avoided entirely.

The proposed route for the pipeline crosses the headwaters of the Mackenzie, Fraser and Skeena rivers, and weaves through largely remote areas of northern B.C.

Unfortunately, in remote regions it is more difficult to identify any leaks or damage in the pipeline. Along with increased complexity in the identification of malfunctions, maintenance becomes harder in remote areas. Furthremore Enbridge has had some very public pipeline bursts in recent years resulting in large oil spills. In 2010 20,000 barrels of oil were spilled from an Enbridge owned-pipeline along the Kalamazoo River in Michigan, even after a local official had raised concerns about the highly corroded state of the pipeline with Enbridge several months before. The Globe and Mail reported, "The Polaris Institute of Ottawa tallied about 600 Enbridge leaks in the decade to 2008, at an average of roughly 200 barrels. The last largest spill comparable to the one in Michigan happened at a hub near Edmonton in 2001, where most of the oil was eventually recovered."

Other large oil spills have occurred recently in Alberta, though not on pipelines owned by Enbridge. Also in 2010, a rupture along the Rainbow pipeline in Northern Alberta spilled over 28,000 barrels of oil. The Rainbow pipeline rupture was the largest spill in Alberta in almost 40 years.

These events, among others, show the very real possibility of accidents, and the possibility of a ruptured pipeline has been a key facet in the environmental concerns surrounding the Northern Gateway pipeline. It is also an economic concern as over 5,000 British Columbians that live along the pipeline route have jobs, in fishing and tourism for instance, that would be badly affected by a major oil leak, more jobs than created by the pipeline itself.

The threat of a spill has been enhanced by the perceived increased corrosiveness of bitumen. These fears have proved to be false. In a statement, Oliver Moghissi, the President of NACE International (a research organization whose focus is the study of erosion), was quoted as saying, "Corrosivity of diluted bitumen is largely similar to crude oil, which is considered to be low."

Anatomy of an Oil SpillANATOMY OF AN OIL SPILL: Oil spills are an inevitable part of the oil economy. Ongoing efforts to expand B.C.'s oil infrastructure have made the threat of oil spills loom large in the public debate as well. This article will discuss the likelihood of oil spills, explain how they can happen, and assess their impact upon human health and the local environmental.

Oil Tankers

MV Queen of the North
The MV Queen of the North sinking in 2006. This occurred near the entrance to the Douglas Channel, the waters where tankers will be oil supertankers travelling if Northern Gateway is built.

Along with the environmental concerns relating to the location and construction of the pipeline itself, there are also concerns about the proposed shipping route for the tankers to reach the Kitimat terminal. Ships would have to navigate 185 kilometers of inner coastal waters which suffer from heavy weather in the winter months. This is the same region where the MV Queen of the North sank in 2006, veering off course in the night and running aground on Gil Island. The accident was blamed on human error. While the likelihood of a major accident is extremely low, this terminal is expected to be in operation at least until the 2040s, and with time thousands of tanker trips will be made through the Douglas Channel, making the likelihood of a spill statistically higher.

In order to address these concerns Enbridge has stated in the project proposal that:


It should be noted that both the Exxon Valdez and the Prestige (which sank causing a major oil spill off the coast of Spain in 2002) were single-hulled tankers. Independent reviews later found that a double-hull would have limited the quantity of oil spilled, but would not have prevented either spill entirely.

A Washington State senate report investigating Canada's ability to respond to oil spills in B.C. waters found that. "It seems that Canada's oil spill response plan in the Pacific Northwest is to call the Americans."

Spill Response

In the event of an oil spill it is unclear whether Canada would be ready to respond. Heavy crude oil spills are harder to control as the substance does not readily evaporate, and can break up contaminating larger areas. Therefore a rapid response would be paramount. Unfortunately in 2010 the Canadian auditor-general reported that the Coast Guard and Transport Canada were unprepared to respond to a major oil spill. The Coast Guard had not conducted an assessment of its response capabilities since 2000 and there is confusion over jurisdictional authority when responding to a spill. Following the Exxon Valdez spill a review panel in the early 1990s suggested the federal government put in place a cross-ministry national regime for dealing with spills. But the auditor general found that "Such a regime is not yet in place and is not expected to be implemented before 2013. In the meantime, Canada lacks a formal framework for responding to chemical spills, including clear roles and responsibilities."

Washington State, concerned about the increasing tanker traffic that could be plying its coastal waters if the Kinder Morgan pipeline to Burnaby was expanded, asked a state senator to look into B.C.'s oil spill response capability. She reported back that "It seems that Canada's oil spill response plan in the Pacific Northwest is to call the Americans."

This image of poor preparedness was not helped when in 2012 the federal government removed a Vancouver-based five-person team tasked with giving scientific advice if an oil spill occurs. While the move caused some trepidation, the federal government has maintained that the functions performed by these workers can be carried out just as well from eastern Canada.

First Nations and Aboriginal Title

Pipeline Right of Way
A pipeline right of way in a park. A pipeline runs under this patch of land. The Northern Gateway pipeline will require a 25 metre right of way.

The Northern Gateway project, as it is currently being proposed, crosses the land of 65 First Nations groups. The planned use of this land has become a major point of contention in the project's proposal. At the Save the Fraser Gathering of Nations, 55 nations of these groups signed a declaration that they would not allow the Northern Gateway project to be built on their lands due to concerns about environmental safety. So far one of the 65 groups has endorsed the project. With the 55 nations all living in the watershed of the Fraser River, the waters that pass through are what provide drinking water, food and livelihood for the people. Chief Larry Nooski of the Nadleh Whut'en First Nation encapsulated the views of many First Nations' when he was reported in the Vancouver Sun as saying:

"The impacts on the aquatic life and salmon was just too great for our people to even consider something of this nature," said Nooski. "If there is an interruption in our fishing, a lot of people would be without food. I know it sounds strange today because you have the Safeways and what have you. Personally, I still rely on my catch. I still rely on the fish that is caught in the summer and fall," he said.

The first nations groups are lodging a legal challenge opposed to the pipeline on the concept of Aboriginal Title.

Aboriginal title is the idea that when no treaty was signed between the government, and no war was fought over the land, first nations groups in Canada are entitled to the land on which they have historically lived and still inhabit. The courts in Canada have thus far defined Aboriginal Title to be a right to the land itself, not just to hunt, fish and gather from the land9. In the 1982 constitution, aboriginal rights were affirmed, however no mention was made of aboriginal title which has led to its debate in the courts now. Although it was in 1973 that the Supreme Court first recognized Aboriginal Title, it was not until 1997 that a legal outline of Aboriginal Title was given by the Supreme Court.

This decision puts the responsibility of governments to consult native groups on crown projects that use land claimed by native groups, even without the establishment of aboriginal title. This was further strengthened in British Columbia by the cases of Haida First Nation v. British Columbia and Taku River Tlingit First Nation v. British Columbia which determined that the crown has the responsibility to consult and accommodate first nations.

The Review Process

The project is so large that it is subject to a joint review process by both the Canadian Environmental Assessment Agency and the National Energy Board (NEB).

Northern Gateway Review Panel
The Northern Gateway Review Panel. From left ro right, Sheila Leggett, Kenneth Bateman and Hans Matthews.

A joint review process is used when the project being proposed may either: cause significant adverse environmental effects, or if there is a high level of public concern for the project. It was under these parameters that a project may be referred to a joint review process. On January 20, 2010, then Environment Minister Jim Prentice and chair of the NEB Mr. Gaétan Caron referred the Northern Gateway project to a joint review panel for environmental and regulatory review.

The review panel consists of three members who were selected by both the government and the NEB. The panel consists of: Ms. Sheila Leggett, the vice chair of the NEB with experience in regulation and environmental issues and research; Mr. Kenneth Bateman, an energy lawyer with experience in both renewable energies and major land/offshore pipeline projects across Canada; and Mr. Hans Matthews, a professional geologist who's experience is in the mineral exploration industry where he has worked on Aboriginal community development and consultation.

The joint review panel has been holding hearings in the towns and cities along the proposed pipeline route since January 10, 2012 when the first hearing was held in Kitimat. Over 4,000 people have signed up to speak at the hearings. As of April 11, 2012 there have been 27 public hearings across northern B.C. and Alberta with another 38 scheduled between April 13, 2012 and July 31, 2012 with more possibly being added in Bella Coola, B.C. and Edmonton, Alberta. Following each of the meetings, the transcripts are posted on the joint review website where all Canadians can follow the proceedings of the panel. The website for the review is here, and includes more information on the process and information that has been submitted. The schedule of upcoming hearings can also be found on the review webpage under the tab of "Hearings".

Bibliography

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Krugel, Lauren. "Northern Gateway pipeline unnecessary: study." The Globe and Mail. December 20, 2011.

Lavoie, Judith. "Is Canada prepared for an oil disaster?" Times Colonist. May 6, 2012.

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O`Meara, Dina. "Alberta producers losing $18 billion a year to crude discount." Postmedia News. March 13, 2012.

O'Neil, Peter. "B.C.'s decision on Northern Gateway will be signal to world: Redford." Financial Post. December 16, 2011.

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Route Map." Northern Gateway Project Details. http://www.northerngateway.ca/project-details/route-map/. Accessed April 10, 2012.

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Tait, Carrie. "Blocking pipelines to B.C. would entail loss of billions: study." The Globe and Mail. December 15, 2011.

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References

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