Despite strong resistance from the indigenous communities and the environmentalists, the Canadian Prime Minister has given a green light to a controversial $5 billion oil pipeline expansion project.
After convening an emergency meeting on April 10, Trudeau, who was praised for setting an ambitious global agenda to counter climate-change, has assured the energy infrastructure company, Kinder Morgan that the “construction will go ahead”. Two days after the company threatened to pull back from the Trans mountain pipeline project, Trudeau has now even offered Federal financial aid to the company.
The project was first proposed by the Texas-based energy infrastructure company in 2013 to the National Energy Board, since then Kinder Morgan has spent almost a billion dollars on this venture, which seeks to expand the existing 1,150-kilometre pipeline between Edmonton and Burnaby, to triple its oil-carrying capacity.
Though the Federal government in November 2016 has approved this project, supported by the government of Alberta on the grounds that it will bring the province an economic boost, relentless protests from Canada’s indigenous communities and environmentalists have consistently maintained pressure on the government of British Columbia to block the project, which is seen to have an enormous potential to damage the environment.
On the grounds that the company has not demonstrated that it has made adequate provisions to deal with the risks of oil-spill, the government of British Columbia has voiced a formal opposition to the project early in 2016, and has been supporting the mobilizations by environmental and indigenous activists, over 200 of whom have been arrested in protests since mid-march this year.
While the Canadian government claimed that the project was approved after a thorough consultation process, several First Nations along the pipeline route say they remain firmly against it.
"Clearly, the indigenous community, as well as the citizens of British Columbia, have not provided consent or social licence for this project to proceed," said Grand Chief Stewart Phillip, president of the Union of British Columbia Indian Chiefs.
"The answer is still 'no'. The Kinder Morgan Trans Mountain pipeline will never be built."
Oil-spills from Kinder Morgan pipelines has not been a rare occurrence. As reported in a previous article, a total of 121 incidents of oil-spillage from Kinder Morgan’s pipelines has occurred from 2006 to February this year, in U.S alone. A gross barrel spillage of 17,598 has caused a total property damage of $63,192,218 in the country.
In the city of Burnaby in British Columbia, whose government is vehemently opposing the pipeline expansion, the police, fire-department and engineering departments’ emergency group had to be mobilized on short notice and 225 residents had to be asked to evacuate the area in 2007, when a construction crew working on an inlet drive accidentally punctured a Kinder Morgan’s pipeline, which sent crude oil "shooting up.. at least 30 feet high, spraying onto the roads and property, the landscaping and the trees", as a local resident recalled to Burnaby now.
The crude oil, according to the Transportation Safety Board’s report, had seeped into the surrounding soil, sewer lines and storm drains, from which it flowed to the marine waters, affecting approximately 1,200 meters of shoreline and contaminating many shore birds which came into contact with the oil. The company was fined after it pleaded guilty of “introducing waste into the environment causing pollution under the Environment Management Act.”
The company’s unsafe practices have been documented in a 2013 report by financial research firm, Hedgeye, which alleged, “Kinder Morgan’s high-level business strategy is to starve its pipelines and related infrastructure of routine maintenance spending in order to maximize Distributable Cash Flow."
With the opposition to the project from activists unrelenting, in the course of which 200, including some M.Ps had been arrested, the company has said, in a press release on April 8:
“[W]e are committed to trying to find a way forward, working with stakeholders between now and the end of May on measures that may allow us to advance this critical project, but only if it does not subject KML shareholders to undue risk. If we cannot reach agreement by May 31st, it is difficult to conceive of any scenario in which we would proceed with the Project.”
This statement, seen by some as the company’s acknowledgement of defeat, seems to have sent P.M Trudeau - who has been under attack from the conservative sections for undermining investor confidence in the country by being unable to see the project through in face of opposition - into a panic mode. Only two days after the statement, on April 10, Trudeau called an “emergency cabinet meeting”, to search for “a way to convince Kinder Morgan to go forward with its Trans Mountain pipeline expansion.”
This cabinet meeting was followed by another meet with British Columbia’s Premiere John Horgan and the Alberta’s Premier Rachel Notley, after which Trudeau and Notley announced they were confident that the deadline handed down by the company will be met, and the project will be salvaged. Horgan, on the other hand, has made it clear that he does not share their confidence.
The relationship between the two Premiers has deteriorated over the last few months, as the Alberta government, which sees the pipeline as economically profitable to its province, has threatened to cut-off oil supplies to its neighbouring British Columbia, if the latter’s government does not stop blocking the pipeline, a major portion of which needs to be laid in its province.
Why subsidize a project that claims to have a sound economic case in its favour?
After his meet with the two premiers, Trudeau, offering ‘financial aid’ to the company, told reporters, “I have instructed the minister of finance to initiate formal financial discussions with Kinder Morgan, the result of which will be to remove the uncertainty overhanging the Trans Mountain pipeline expansion project.”
Now the federal government is engaged in a ‘private discussions’ with Kinder Morgan to work out a deal, which will include a financial subsidy to keep the project going. "This is a series of discussions that are happening in Calgary, in Toronto, in Houston and New York..They won't happen in public, but as soon as we have something to announce, I promise we will let you know," the Prime Minister has said.
Hinting at the government’s agenda two days prior to this meet, Natural Resource Minister Jim Carr had said, "What we must accomplish between now and May 31 is to help de-risk the project and give it some certainty that it doesn’t have now. All financial options would be on the table.” The central government’s focus, he explained, is to eliminate “all of the uncertainty that has clouded the capacity of investors to make a responsible decision.”
However, it is not clear in what way the provision of financial aid from the federal government - which critics have argued is a ‘bail-out’ - can address the problem of opposition to the pipeline by activists and British Columbia government, which, the company claims, is the cause of the uncertainty looming over its project.
This raises the suspicion that concealed under the complaints about the environmentalists’ opposition to this project, which is touted as vital to bring an economic boost, lies an unsound economic case itself.
"To reassure Kinder Morgan shareholders, Trudeau will buy into the project, and have Finance Minister Bill Morneau broker a deal behind closed doors. It's an affront to democracy. Canadians should know where their money is going and they shouldn't be bankrolling a giant Texas corporation by providing new subsidies to a major fossil fuel project.”Green Party Leader Elizabeth May has said.
“The reality is that Kinder Morgan's project is high risk because it lacks markets, and now Trudeau is prepared to bail them out.”
Kinder Morgan has made the case that there is a strong market, which serves to market this project as something that can generate a significant revenue for the economy. At an investor's meet in Toronto early last month, they presented a graph with Western Canada’s Crude oil supply plotted against pipeline takeaway capacity, to show that there was a shortfall of pipeline export capacity, which warrants such an expansion of the existing pipeline. However, if local refinery demand is factored in, it will be clear that expansion of the existing pipeline "is not needed for at least a decade", according to an article debunking the manipulative graph.