Kinder Morgan’s Trans Mountain Pipeline: 9 Reasons We Shouldn’t Be Buying The Pipeline or The Spin

It was quite a shock when the Canadian Finance Minister announced that the Liberal Cabinet’s solution to Texas-based Kinder Morgan’s pipeline woes was that Canada would buy the Trans Mountain Pipeline outright for $4.5 billion.

Here are 9 reasons we shouldn’t be buying it:

Credit: Directly Affected, Pipeline Under Pressure film

1. Loss of Credibility on Climate Action

With this decision, the Liberals have lost enormous credibility on dealing  with climate change.

Following the announcement, BC Green Party leader Andrew Weaver was quick to comment about Trudeau’s decision. “He came into office claiming that he was there as an inspiration for the next generation, claiming he was going to deal with climate change, claiming he was going to be there for the future. He betrayed that today,” said Weaver.

In a recent Globe and Mail op-ed, “The great Canadian climate delusion,” Homer-Dixon and Strauch label Canada’s contradictory climate policies as lose-lose: “Continued investment in the oil sands generally, and in the Trans Mountain pipeline specifically, means Canada is doubling down on a no-win bet.”

They argue: “Canada has no plan to meet its 2030 Paris Agreement emission targets, because it’s virtually impossible to do so if the oil sands’ output rises to Alberta’s cap of 100 million tonnes of carbon dioxide emissions a year.”

2. Inconsistent with Canada’s Commitment to End Fossil Fuel Subsidies

In 2009, the G8 committed to ending fossil fuel subsidies. In The Great Canadian bailout, The Narwhal’s Sarah Cox writes:

“At a G7 gathering two years ago this month in Japan, Trudeau and leaders for the first time set a deadline for terminating most fossil fuel subsidies, saying government support for coal, oil and gas should be discontinued by 2025. Canada and other G7 nations encouraged other countries to join them in eliminating what they referred to as “inefficient fossil fuel subsidies.”

“Trudeau’s Kinder Morgan announcement is an “embarrassment” for the country in light of that commitment,” said Alex Doukas, a spokesperson for Oil Change International. “And that’s not acceptable. That’s not climate leadership.”

3. Undermines Canada’s Global Reputation as a vocal champion of the Paris Agreement and ambitious climate action

In an open letter to PM Trudeau, over 230 groups in 44 countries point out that “Canada has been a vocal champion of the Paris Agreement and ambitious climate action.” And yet, the letter adds, “your unwavering support for the Kinder Morgan Trans Mountain pipeline expansion runs counter to both of these commitments and undermines Canada’s role as a global leader.” And the use of public money to finance the pipeline “is particularly offensive in the face of the global climate crisis,” concludes the open letter.

Real climate leaders need to plan for a “managed phase-out and just transition away from all fossil fuel production.” But Canada is doing just the opposite. Canada has less than 0.5% of the world’s population but the planned Tar Sands expansion will use up 16% of the world’s carbon budget if the world hopes to keep warming below 1.5 degrees Celsius.

In his recent piece in The Guardian, Bill McKibben refers to Trudeau as: “the cutest, progressivest, boybandiest leader in the world going fully in the tank for the oil industry.”

4. Are Canadian Taxpayers Paying 4.5 Billion for 1.5 Billion in Assets?

In 2007, Kinder Morgan reported to the National Energy Board that the Trans Mountain pipeline system was valued at $550 million. Kinder Morgan says the work already done on twinning of the pipeline is estimated at 1 billion.

West Coast Environmental Law discusses the deal in detail (included terms where the deal would not be completed) and commented: “According to Kinder Morgan’s 8-K securities filings, its net of tax capital gain is $2.7 billion (i.e. the amount the company expects to make from selling its properties for more than it paid for them). A Royal Bank analysis estimates that Canada overpaid by about $1.2 billion. It is impossible to know exactly how much Canada overpaid because we don’t know the full price of construction, and any future revenues are speculative.”

5. The Real Cost to Canadian Taxpayers Will Likely Be $15 to 20 Billion

Writing in The Tyee, Andrew Nikiforuk exposes the real cost of the new ‘Liberal Pipeline’. “According to economist Robyn Allan, the bill for taxpayers won’t be $4.5 billion as announced but more realistically between $15-20 billion.”

The cost of completing the pipeline twinning was estimated by Kinder Morgan in 2017 as $7.4 billion. Nikiforuk points out that as with all megaprojects, one can expect cost overruns — expect the final cost to escalate to at least $9 billion. Nikiforuk lists these additional unmentioned costs to the pipeline project:

• $2.1 billion for a financial assurance fund for land-based spills;
• An ongoing Pipeline Safety Act commitment of $1 billion;
• Another $1.1 billion imposed by the federal government as a condition of the expansion of the pipeline, and
• $1.5 billion for the Ocean Protection Plan every five years.

6. Dwindling Market for Tar/Oil Sands Oil Undercuts the Economic Case

Are Canadian taxpayers investing in a pipeline at a time when markets for Tar Sands oil will soon be in decline?

A recent Energy Mix article points to a grim future for fossil companies which stand to lose US$19 trillion in income by 2040 according to a recent analysis by Oxford-based Aurora Energy Research Ltd. The analysis highlights a green shift to an energy future of mass electrification and new technologies that will lead to “peak oil” demand by 2025.

The bottom line: the Kinder Morgan twinning is an economic pipe dream. “Alberta’s low-grade tar sands heavy oil is expensive to get out of the ground, expensive to upgrade to the quality of conventional sweet light crude and expensive to get to market. The major oil companies have done their homework and decided there are better bets elsewhere. When oil demand starts to decline, the most expensive sources of oil will be the first to go.

7. $15 Billion Benefit Per Year To Canada and the Tarsands to Tidewater Myth

The Trudeau government claims that the purchase of Kinder Morgan is in Canada’s national interest. “We are losing $15 billion a year because we are trapped to the American market”, says Trudeau. Others like Premier Rachel Notley of Alberta and Jim Carr (Minister of Natural Resources) are using the same talking point. It makes for a good sound bite but the number is misleading.

The $15 billion benefit is based on a 2018 Scotiabank report which is deeply flawed according to Allan. “The number is bogus, a mere distraction in the larger debate over Canada’s energy future and BC’s environmental worries. The real number is closer to $7 billion but likely much less.” The bottom line is that there is no waiting market for tarsands oil in Asia or Europe. The 300,000 barrels per day that currently leave Burnaby all go to the United States, because that’s where they can get the  best price.

It is a betrayal of the public trust that Trudeau, Carr and Notley so eagerly got behind a $15 billion a year loss from a fundamentally flawed Scotiabank report, without checking first to make sure it made any sense. Robyn Allan

8. 15,000 Construction Jobs is a Myth – the Real Number is 2,500 jobs for 2 years

The jobs argument has been thoroughly debunked. When Trudeau first announced the Trans Mountain approval, he said the project “will create 15,000 new, middle-class jobs – the majority of them in the trades.”  But the jobs created will be in the construction phase and the real number is 2,500 workers per year for two years. And permanent jobs will be a mere 40 in Alberta and 50 in BC. The real job numbers were part of the Kinder Morgan application submitted to the National Energy Board (NEB).

9. Free, Prior and Informed Consent with Indigenous Peoples

Credit: Council of Canadians

The Liberal  Government’s commitments to truth and reconciliation and indigenous free, prior and informed consent, simply don’t line up with buying and pursuing the Kinder Morgan pipeline.

There Is A Better Way Forward

“More than anything, this decision is about the future versus the past, and Bill Morneau has made a big bet on the past,” writes Kevin Taft in the National Observer. Taft laments what might have been:

“Instead of a Crown corporation investing billions of dollars in a pipeline, imagine a Crown corporation investing billions of dollars in renewable energy partnerships with provinces, First Nations, and communities across Canada, and billions in energy efficiency programs.”

“Instead of hundreds of jobs building a pipeline we’d create thousands of jobs installing solar panels and wind farms.”

“Instead of pitting Canadians against each other we’d bring communities together.”

“Instead of increasing emissions we’d drive them down.”

“Instead of clinging to a fading past we’d embrace the future.”

Conclusion: Prime Minister Trudeau Can Still Get It Right

It’s not too late for the Trudeau government to walk away from the Kinder Morgan deal.

In his The Speech He Never Gave article,Mitchell Beer of The Energy Mix imagines a scenario in which the Prime Minister rises in the House of Commons to announce “one of the most momentous decisions my government will face.” In this scenario, Justin Trudeau makes the right decision by abandoning the Kinder Morgan buy-out. Trudeau recommits to the vision of climate leadership embraced in Paris, the “leadership Canadians deserve and expect, and that the world expects of Canada.”