Great journalism takes time and money.
Two years ago, Justin Trudeau recognized that the National Energy Board could not be trusted.
The man who would become prime minister said the Board had torqued reviews making it easy to recommend approval. At the time, he promised that the regulator's review of Kinder Morgan's Trans Mountain expansion proposal would be redone.
Yet despite Trudeau’s promise, Kinder Morgan expected business as usual. Commenting on the impact Trudeau’s government would have on Trans Mountain in October 2015, Kinder Morgan Canada president Ian Anderson quipped: “I’m wearing my Liberal red tie.”
After audible laughter, Anderson continued. “…We’ll certainly be briefing the Liberal government in due course on the project…”
As the federal registry attests, Anderson and his staff are engaged and skilled lobbyists. Kinder Morgan’s briefing of the Liberal government must have gone well. Trudeau broke his promise to Canadians on redoing the federal review of the Kinder Morgan expansion project.
With Trans Mountain’s approval we witnessed first hand what it’s like when government determines policy on the basis of corporate power.
It relies on broken promises.
It relies on duplicity — giving the appearance of due diligence and respect for the public interest, while betraying it.
When the newly elected BC NDP government was sworn in, Anderson was dismissive. He said, “I think we’ll just wait and see what Premier (John) Horgan wants to do, and I look forward to his call.”
Such pomposity is appalling. This degree of arrogance can only be borne out of experience. What Kinder Morgan didn’t expect is a democratically elected government that intends to make good on its campaign promises.
BC NDP enters Trans Mountain battleground
The province will join the legal fight against the federal government’s approval of Trans Mountain’s expansion by seeking intervenor status in court proceedings — proceedings that would not be taking place if Trudeau's promise to overhaul the Kinder Morgan review had been kept.
The B.C. government will not allow construction on Crown land until adequate First Nations consultation occurs and is seeking legal advice on its options regarding a lawsuit in BC Supreme Court challenging provincial approval of the expansion.
Every Canadian should be encouraged by this.
British Columbia’s stand against abusing the interests of the people who live there is a stand against such abuse across the nation. The private financial gain that occurs when huge corporations override cultural, economic and environmental needs of society — aided by duplicitous elected officials who do their bidding — is not unique to B.C. and the Trans Mountain expansion project.
Approval not based on facts
As indicated by a number of scientists and prominent politicians, the approval of the pipeline expansion was not based on facts, evidence or the best interest of Canadians. It was approved to support the private financial interests of a Texas-based pipeline company along with a handful of overextended oilsands producers — and the banks who finance them — caught oversupplying a product long past its climate change 'best before' date.
Corporate powers, their lobby groups, Alberta or Ottawa cannot be allowed to circulate erroneous statements portending economic fallout while the B.C. government seeks to fulfill its duty. Such misrepresentations play on legitimate concerns that if the public interest is protected, it will come at grave cost. In this case, these concerns are not warranted and it is irresponsible to fuel them with falsehoods.
Following U.S. President Donald Trump's election in November 2016, Alberta Premier Rachel Notley claimed: "We must continue to work to diversity (sic) Canada’s energy markets, and build trading relationships with more than one buyer. For that reason, a Canadian pipeline to tidewater remains an important priority for Alberta.”
There is already a pipeline to tidewater in Canada. It’s the existing Trans Mountain pipeline that has had tidewater access since 1956. That access has barely been used.
In December 2013, Kinder Morgan’s application to the NEB said an average of five tankers a month load at the Westridge Marine Terminal in Burnaby, B.C. Prior to, and after 2010, there has never been an average of five tankers a month.
Kinder Morgan knew that there were fewer than four a month when it filed its application. The number has declined steadily since. Tanker loadings reached an average of 1.25 a month by 2016 — 15 tankers for the entire year. These few tankers were destined for U.S. markets — not Asian. Recent Kinder Morgan NEB filings suggest the same activity for 2017.
Kinder Morgan recently acknowledged it had provided inaccurate tanker figures to the NEB and the Canadian public, but failed to answer why. The NEB, for its part, had reason to believe Kinder Morgan’s tanker figures were exaggerated, but refused to test the company’s claim by asking them questions related to it.
Little demand for tidewater access
The anticipated increase in tankers at the Westridge dock, post expansion, is not seven-fold as Kinder Morgan wishes us to believe. Using the same mathematical approach of going from five to 34 tankers a month; going from slightly more than an average of one tanker a month to 34 is more like a 28-fold increase. Environmental assessments that consider the impact of tankers on the sensitive ecosystem of B.C.’s waterways, and likely frequency of marine-based oil spills, will underestimate risk if the tanker figures they rely on — pre-expansion — are inflated.
There is no meaningful demand today for tidewater access despite repeated claims by industry proponents to the contrary. Fear mongering that tidewater access is urgently needed is without merit. Canadian-produced crude is not losing out. There is no benefit from putting our fresh and marine waterways at risk to simply give multinational oil companies more pipelines than they need.
Not only is there more than sufficient tidewater access for Alberta’s heavy oil, there is sufficient pipeline capacity. Notley’s energy watch dog knows this. The Alberta Energy Regulator estimated in March this year that “Alberta exports will begin to reach pipeline capacity limits by 2021... However, with the addition of one or both of the federally approved pipelines, (Enbridge's Line 3 Replacement or Trans Mountain’s expansion) there would be sufficient pipeline capacity for the remainder of the forecast period.”
Construction on the recently-approved Enbridge Line 3 pipeline has begun. The pipeline will be in service by mid-2019. Enbridge recently told its shareholders that other planned expansions mean no new pipelines, including Trans Mountain’s, are needed until at least 2028.
Kinder Morgan’s quiver is full of false narratives. We must remember, this company was forged from the corporate culture that brought us Enron, a scandal-plagued company that collapsed in 2001 over its questionable accounting methods. Kinder Morgan draws financial wealth from the Canadian economy and does not pay its fair share of taxes.
Kinder Morgan's duplicitous tax talk
While Kinder Morgan told the NEB that more than $100 million a year in taxes would flow to federal and provincial treasuries from the operation of the expansion project, Kinder Morgan told its investors that they hardly pay any taxes at all. From 2009 to 2013, Kinder Morgan paid an annual average of $1.5 million on $172 million in distributable cash flow (DCF) — Kinder Morgan’s metric for profits.
After I exposed this duplicity, Kinder Morgan no longer disclosed its Canadian cash tax situation during its Houston analysts’ conference, so I could not update the figures. Unable to raise financing for Trans Mountain’s expansion in U.S. capital markets, Kinder Morgan recently made 30 per cent of its Canadian operations public. Kinder Morgan still promotes the value of its project to shareholders by revealing how little in taxes they expect to pay.
Kinder Morgan Canada’s cash tax burden from 2014 to 2016 was an annual average of $733,000 on $246 million in DCF. With Kinder Morgan’s sophisticated corporate structure, its tax burden after the expansion of Trans Mountain likely will be negligible. Kinder Morgan’s marketing message about how it says its company would contribute to education, schools and other much needed social programs is insulting.
There are other Kinder Morgan falsehoods. The company says expansion is urgently needed and trots out extreme pipeline apportionment figures in support of its project. The company says almost 70 per cent apportionment existed from 2011 to 2014. This suggests that shippers failed to find transportation capacity for two out of every three barrels they had available.
Kinder Morgan knows this was not the case. Kinder Morgan knows imaginary barrels were included in its apportionment determination. The industry has a name for these phoney volumes — it calls them “air barrels.”
Blasting holes through barrel numbers
The NEB knows it, too. The industry-captured regulator finally addressed much of this sleight of hand in 2015 when it approved a new process for allocating capacity on the pipeline. The NEB also knows the new process continues to exaggerate apportionment figures — just not by as much.
"The Board found that the current nomination and capacity allocation procedures are likely contributing to the ongoing apportionment of the Pipeline," the NEB said in a January 2015 report on tolls and tariff for the Trans Mountain pipeline.
So for example, the new process suggests a 15 per cent apportionment on the existing Trans Mountain pipeline in 2016, when in fact, the pipeline did not run full.
Capacity on Trans Mountain’s existing system is 400,000 barrels a day — not the 300,000 barrels a day the company consistently claims. Throughput capacity is 300,000 barrels a day only if 20 per cent of the barrels shipped are heavy oil. As heavy oil is loaded into the existing 400,000 barrels a day system, capacity falls, because heavy oil is — well, heavier.
If heavy oil transported on the system is six per cent — which was the case in 2016 — then the system is capable of carrying about 355,000 barrels a day. In 2016 only 316,000 barrels a day of crude oil and petroleum products were shipped on the system. This is at least 10 per cent below the system’s potential throughput. In 2016, Trans Mountain was not running full.
The B.C. government fulfilling its duty to protect the public interest, the environment and First Nations’ rights does not come at economic cost to Canadians, whereas allowing Trans Mountain’s project to proceed, does.
British Columbia’s actions need to be celebrated across Canada. They represent a major step toward the protection of the integrity of our democracy and meaningful progress towards a viable, and sustainable economic future.