British Columbia's steadfast opposition to Kinder Morgan Canada Ltd.'s Trans Mountain oil pipeline expansion is touching off an economic battle between the province and energy-rich Alberta and throwing more hurdles in front of Alberta oil producers seeking access to more markets.
The province, which has been vocal in its opposition to the C$7.4 billion project, proposed a law that would cap the amount of oil sands bitumen transported in the province. The province is proposing "restrictions on the increase of diluted bitumen ... transportation until the behavior of spilled bitumen can be better understood," a Jan. 30 posting on the environment department website said. The government said the restrictions would be the second phase of earlier regulations that included oil spill-response measures.
British Columbia did not provide details of the proposal to limit bitumen transportation in its announcement but said its main interest is the protection of jobs in the coastal region. It will begin a consultation process and establish an independent scientific advisory panel to make recommendations on the proposed rules. The results of the consultation are expected to be posted by the end of February.
In retaliation, Alberta Premier Rachel Notley said her government is pulling out of talks to buy as much as C$500 million annually in electricity from neighboring British Columbia amid the ongoing dispute over the project.
The scuttled power purchases do not include separate talks to buy electricity from the province-owned BC Hydro and Power Authority's under-construction and over-budget Site C hydro project, which is expected to add to a glut of electricity in Canada's westernmost province.
"We have formally suspended all talks to do with the purchase of electricity from B.C. through existing interties," Notley said at a Feb. 1 news conference. "These are purchases that, had these discussions been completed, would have contributed up to [C]$500 million per year to British Columbia and they do not include discussions related to Site C, which we will have more to say about later."
Alberta has a financial interest in seeing oil sands exports increase as it sells oil it receives from producers in royalties. "We are prepared to do what it takes to get this pipeline built — whatever it takes," Notley said.
The city of Burnaby in British Columbia has vowed to stop the C$7.4 billion expansion, as it is the location of Kinder Morgan's Westridge Terminal and terminus of Trans Mountain, which begins near the oil sands hub of Edmonton, Alberta.
Kinder Morgan Inc.'s Canadian unit and the city continue to spar, with ongoing hearings with a panel of the National Energy Board as their battleground. A Kinder Morgan Canada executive said the company relied on maps made available by Burnaby, while a lawyer for the city suggested that the company ignored documents marking off a conservation area.
The disputes, which have pushed back the in-service date of Trans Mountain by at least a year, are expected to exacerbate limited pipeline access in Alberta, Canada's biggest petroleum-producing province. This, along with high government-related costs put oil producers in the province at a significant disadvantage to their U.S. counterparts, a study by the Toronto-based C.D. Howe Institute found.
Alberta producers face costs caused by government policies of about C$770,000 on an average oil well, more than double what their U.S. counterparts pay, the study found. When the government burden is added to lost profitability because of pipeline constraints, the costs total about C$5 per barrel in lost revenue, the nonpartisan, economic think tank said.
Despite the obstacles, Prime Minister Justin Trudeau reiterated the Canadian government's support of the expansion project, stating that it is "going to get built," Reuters reported Feb. 1.
Trudeau made Canada's position clear on two separate radio interviews, stating that the project poses no threat to the country's west coast. "We know that getting our oil resources to new markets across the Pacific is absolutely essential," Trudeau said in an interview with CBC Radio in Edmonton. "We can't continue to be trapped with the price differential we have in the American market. We need this pipeline and we're going to move forward with it responsibly like I committed to."
