Ottawa – November 2016 just may be the turning point for the great pipeline debates affecting Canada for the better part of the past decade. On Nov. 29, Prime Minister Justin Trudeau announced that Kinder Morgan’s Trans Mountain Expansion and Enbridge’s Line 3 Replacement both got the go-ahead from the federal cabinet, but Enbridge’s Northern Gateway is dead. On Nov. 8, Donald Trump was elected president of the United States. He emphatically promised to approve TransCanada’s Keystone XL pipeline (which was kyboshed by President Barack Obama a year ago) puts a third major export pipeline in play. After years of consternation, pipeline companies are planning to scratch dirt by next summer.
Trudeau said, “Canadians know that strong action on the environment is good for the economy. It makes us more competitive by fostering innovation and reducing pollution.”
He prefaced his announce by referring to recent actions by the federal government to put a price on “pollution” (suggesting CO2 is pollution), an “oceans protection plan” and the intention to phase out coal-fired power in Canada by 2030.
He noted Canada is rich in energy of all kinds, conventional and renewable.
“I have said many times, there isn’t a country in the world that find billions of barrels of oil, and leave it in ground while there is a market for it,” Trudeau said. “But it isn’t enough to just exploit that resource for our short term interest. Our challenge is to use today’s wealth to create tomorrow’s opportunity. Ultimately, this is about leaving a better country for our kids than the one we inherited from our parents.”
Trudeau said major pipelines could only get built if we had a price on carbon and there was strong environmental protection in place. Indigenous peoples must be respected and part of the process. He strongly credited Alberta Premier Rachel Notley’s climate change initiatives as being key to these approvals.
With that, he announced the Government of Canada approved the Kinder Morgan Trans Mountain Pipeline Expansion, a $6.8 billion project to twin the existing pipeline running from Edmonton to Burnaby, B.C., tripling the capacity of the system. Similarly, the $7.5 billion Enbridge Line 3 replacement, from Hardisty, Alta., to Superior, Wi., is also a go.
In rejecting the Northern Gateway project, Trudeau reiterated a statement from his election campaign, saying, “The Great Bear Rainforest is no place for a pipeline and the Douglas Channel is no place for oil tanker traffic.”
“This is a defining moment for our Project and Canada’s energy industry,” said Ian Anderson, President, Kinder Morgan Canada. “This decision follows many years of engagement and the presentation of the very best scientific, technical and economic information. We are excited to move forward and get this Project built, for the benefit of our customers, communities and all Canadians.”
The $6.8 billion 1,150-km Trans Mountain Expansion Project will expand the existing Trans Mountain Pipeline system – between Edmonton and Burnaby, B.C. Its capacity would increase from 300,000 barrels per day, to 890,000 barrels per day.
Kinder Morgan noted this final federal approval triggers a number of next steps. Trans Mountain will continue to seek all necessary permits, and is planning to begin construction in September 2017, with an in-service date for the twinned pipeline expected in late 2019. Other next steps will include a final cost estimate review with shippers committed to the Project and a final investment decision by the Kinder Morgan board of directors.
In a statement on its website, Enbridge said, “We’re pleased by the federal government’s decision to approve the Line 3 Replacement Program, an essential maintenance project that will ensure the safe and reliable delivery of Canada’s energy resources to market.
“The Line 3 Replacement Program is the largest project in Enbridge’s history at approximately $7.5 billion, and will enhance the safety of the line and restore its original capacity of 760,000 barrels a day.”
The current Line 3 is operating at reduced pressure, thus lowering its throughput to 390,000 barrels per day.
The anticipated in-service date for this project is 2019, pending U.S. regulatory approvals.
Regarding the rejection of $6.5 billion Northern Gateway, which would have transported 525,000 barrels of oil per day 1,177 kilometres from Bruderheim, Alta. to Kitimat, B.C., the company said, “Enbridge is disappointed the federal government has directed the NEB to dismiss the Northern Gateway application. This was an important project to ensure Canada gets its resources to international markets, where Canadian producers can receive the best returns, benefiting our provincial and national economies.
“Northern Gateway also represented an unprecedented partnership with Indigenous people. The 31 Indigenous communities who had a one-third ownership in Northern Gateway stood to realize $2 billion in benefits to their communities and would have played an important stewardship role in the project.
“In advancing Northern Gateway, we relied on a process that saw the federal government approve the project. The Federal Court of Appeal then found that the Federal Government failed to properly consult Indigenous communities, but affirmed our engagement on the project.
“Given today’s decision, we’ll need to assess our alternatives which we’ll do in consultation with our partners, including our Aboriginal equity partners.”
Of the four pipeline proposals in play, Trans Mountain Expansion and Northern Gateway have little direct bearing on Saskatchewan production. However, Enbridge’s Line 3, as part of the Enbridge mainline system, has a direct impact for all of Saskatchewan. Nearly every drop of oil produced in Saskatchewan that does not travel by rail finds its way onto the Enbridge system. With additional pumping capacity, the new Line 3 could go beyond the restored capacity of 760,000 bpd to a new capacity of 915,000 bpd, effectively 525,000 bpd more than the current, old Line 3.
That number is very close to the maximum production Saskatchewan reached before the oil crash. Lloydminster oil can reach the system via the Husky mainline, from Lloydminster to Hardisty, the Kerrobert terminal, or at Cromer, Man., from the Enbridge Saskatchewan System (which is in the process of being acquired by Tundra Energy Marketing Limited).
Additionally, Lloydminster-area oil could also find its way on the Keystone XL pipeline, via Hardisty.
Saskatchewan Premier Brad Wall has been arguably the loudest proponent for pipelines among Canadian premiers. Wall said on his Facebook page, “The federal government's announcement today with respect to pipelines is a step in the right direction and we welcome the approval of Kinder Morgan's Trans Mountain and Enbridge's Line 3. As for the latter pipeline, it will involve significant investment and new jobs in Saskatchewan during construction, and it will create opportunities for Regina-based Evraz.
“Any pipeline taking Canadian oil to tide water will reduce the differential in price that has resulted in Canadians selling their oil at a discount versus the world price.
“Saskatchewan remains hopeful that the pipeline project of greatest importance and impact to our province, the Energy East pipeline, will also be approved by the appropriate review and decision making process.
“We thank the Prime Minister and the federal government for this announcement.”
Alberta Premier Rachel Notley said Trudeau has shown “extraordinary leadership.”
“Our province has been brutally slammed by the collapse in commodity prices. It has been a long, dark, night for the people of Alberta as a result. Today, we are finally seeing some morning light. We are getting a chance to break our landlock. We are getting a chance to sell to China and other new markets at better prices. And we’re getting a chance to reduce our dependency on one market, and therefore be more economically independent. And, we’re getting a chance to pick ourselves up and move forward again.”
She added this is part of a strong, new national environmental policy by getting rid of coal by 2030, capping oilsands greenhouse gas emissions, and phasing in a carbon tax.
Regarding the Trans Mountain Expansion approval, Canadian Association of Petroleum Producers president and CEO Tim McMillan said, “Through West-Coast access to the Pacific Rim, Canada can grow its international trade, create more jobs and prosperity at home and grow its international reputation as a place to invest.
“The government has made the right decision for Canadian prosperity; we will take responsible steps forward to make sure the project continues successfully.”
CAPP did not put out a statement regarding the other pipelines.
Wes Waschuk, owner of Red Deer-based Waschuk Pipe Line Construction Ltd. , said “I’m glad Kinder Morgan and Line 3 got approved. Northern Gateway was very important to Alberta. That’s pretty disappointing.”
Waschuk Pipe Line has been one of the prime pipeline contractors on the last two major pipelines to go through Saskatchewan, Alliance (1999-2000) and Enbridge Northern Clipper (2008-2009). They had bid on Keystone XL seven years ago. Wes Waschuk said it would be rebid. He anticipates bidding on Line 3 Replacement as well. “I hope to get some of that,” he told Pipeline News.
For his company, it would mean one “spread” or crew of about 650 people, working over a period of one-and-a-half years.
The fight is just starting
Greenpeace Canada spokesperson Mike Hudema said in an emailed statement, “Apparently Justin Trudeau’s sunny ways mean dark days ahead for climate action and Indigenous reconciliation in Canada. With this announcement Prime Minister Trudeau has broken his climate commitments, broken his commitments to Indigenous rights, and has declared war on B.C. If Prime Minister Trudeau wanted to bring Standing Rock-like protests to Canada, he succeeded.”
Hudema added, “We will stand with First Nations, municipalities, and communities across Canada to ensure these pipelines are never built. Whether it is through lawsuits, protests or peaceful direct action, we will live up to the promises our governments have made, even if they won’t. These pipelines will never make it into the ground.”