With the current assumption that a crude export pipeline from Alberta to the US Gulf Coast is unlikely to ever be built, never has there been a better opportunity for Canada’s provinces to join hands and hasten efforts to open up oil export outlets along the country’s Pacific and Atlantic coasts.
Be it the recent rejection by the US government of the Keystone XL Pipeline — described by Alberta Premier Rachel Notley as a “kick in the teeth” — or the low-level east-west rivalry between the provinces to get a trans-Canadian oil export pipeline built, consensus building and not antagonism is a discerning aspect of the confederation.
A new issue is, however, brewing between Alberta and British Columbia that, instead of pulling the provinces together to optimize the value of the nation’s crude oil resources, is putting them at loggerheads.
In early March, Alberta’s energy minister Margaret McCuaig-Boyd said that the province would not buy additional electricity from neighbor British Columbia unless the latter lends its support for an oil export pipeline through that province.
The next day Notley said: “We’ve just got to get our product to other markets. We’re not necessarily going to have that much demand for electricity if we can’t find someone to sell our products to.”
Neighbors wanting to talk about new power lines crossing provincial borders need to understand that the issue is tied to inter-jurisdictional product distribution infrastructure, like pipelines to carry bitumen to tidewater.
These were not separate issues, Notley said.
British Columbia has opposed Enbridge’s 525,000 b/d Northern Gateway and the Kinder Morgan-backed 890,000 b/d Trans Mountain pipeline expansions, primarily for environmental reasons.
Now British Columbia has a project at risk: the fate of its recent final investment decision to build the 1,100 MW Site-C hydroelectric power project near Fort St John on the Peace River at a whopping cost of C$8.8 billion ($6.7 billion) and the laying of a new transmission line to supply power to northeast Alberta, which is home to oil sands producers.
HITTING WHERE IT HURTS MOST
For British Columbia, the signing of power purchase agreements with its neighbor is just as significant, as is Alberta’s efforts to receive higher royalties from its oil sands producers by opening up an export outlet and substantially wiping off the province’s ballooning budget deficit of over C$10 billion.
Right now Alberta’s crude is heavily discounted as it has few outlets and must go through the US in order to be exported overseas. With low-cost pipeline space limited, Canadian crude also needs use higher priced rail lines to get to the market, which requires oil prices to be lower.
The genesis of Alberta’s opposition to building the power project planned by BC Hydro goes back to the 1980s. This was when the then premier Peter Lougheed expressed concerns that building a dam in the Peace River valley would inundate about 5,500 hectares of land in the Western Canadian Sedimentary Basin and impinge on the constitutional rights of the Treaty 8 and West Moberly First Nations bands to their lands.
Four decades later, the slowdown of oil sands activity in Alberta, particularly Shell’s decision to cancel its 80,000 b/d Carmon Creek project in Peace River, will result in less power demand and come in the way of BC Hydro’s PPAs.
The British Columbia government is willing to work through Alberta’s demand and find a way to work together, said its energy minister Bill Bennett. But if recent statements by the federal natural resources minister James Carr are any indication, getting oil pipelines built in Canada will not get any easier.
“Of course, the process [of building pipelines] is a political one,” Carr said at an industry event in Calgary last month. “Some people have a cynical interpretation of political in the context of pipeline. But I see political as a word that is at the very heart of our democracy. We’re elected on a platform and are held accountable for achieving those goals.”
Governments are elected to make tough choices and that could likely create a greater consensus and reduce the hurdles in building pipelines, Carr said.
The federal government is expected to play an intermediary role between Alberta and British Columbia, with Prime Minister Justin Trudeau stating unequivocally that his main responsibility is to get a pipeline built. If Canada sticks to its policy of getting a consensus when making decisions, it will be a win-win situation in the end for both provinces.