This decision makes perfect sense so I’m a little surprised that Justin Trudeau’s government is behind it. Canada has announced it will purchase the Trans Mountain pipeline from developer Kinder Morgan to ensure it is completed. From the NY Times:
The Canadian government said on Tuesday that it would buy a pipeline that has been the focus of widespread protests by environmentalists and some Indigenous groups, putting the government squarely on the side of the country’s oil industry.
The purchase, for 4.5 billion Canadian dollars, ensures that the Trans Mountain pipeline, which carries oil from Alberta to a port in a suburb of Vancouver, British Columbia, will begin a planned expansion this summer.
The pipeline has become a flash point for a wider debate in Canada over the environmental impact of tapping Alberta’s oil sands, which critics view as a particularly polluting energy source. Similar objections drove efforts to block the Keystone XL pipeline from Alberta to the United States…
Elizabeth May, the leader of Canada’s Green Party, characterized the project as much more than a pipeline.
“The climate crisis is the existential threat to our society, to our country, to our children, to our civilization,” she told reporters outside a Vancouver courthouse on Monday, after pleading guilty to contempt charges stemming from a March protest against Trans Mountain.
The big environmental groups are already announcing that the new project is doomed. Here’s the over-the-top statement from Greenpeace:
Prime Minister Justin Trudeau’s government has just signed up to captain the Titanic of tar sands oil pipelines, putting it on a collision course with its commitments to Indigenous rights and the Paris climate agreement. Trudeau is gambling billions of Canadian taxpayer dollars on an oil project that will never be built — a project that Kinder Morgan itself has indicated is ‘untenable’ and that faces more than a dozen lawsuits, crumbling economics, and a growing resistance movement that is spreading around the world.
Here’s a map showing where the tar sands oil is located (published by a site called The Narwhal):
Canada only has two options for selling that oil. One is to sell it south to the U.S. Gulf Coast where it can be refined and sold on the world market. In order to expand deliveries from the tar sands area, there was an attempt to build the Keystone XL pipeline, but the Obama administration killed that by denying a permit for the pipeline to cross the border. Trump reversed that decision but the fate of Keystone XL remains uncertain.
But even if the Keystone XL pipeline is built, Canada is still selling 99% of its oil to refineries in the U.S. and that narrow market means they currently get far less per barrel than they would if they had access to an alternative market. From CBC earlier this year:
North American oil prices are marching toward $65 US a barrel this month, giving the industry a boost after the market collapsed three years ago. The oil sector hasn’t seen these prices since late 2014, but most companies in Alberta are receiving significantly less, just above $40 US a barrel.
Canada could actually expand its market and get a much higher price by delivering the tar sands oil to its west coast, where China is eager to buy it. However, at present, there is only one pipeline from the tar sands region to the port in Vancouver and that pipeline was built in 1953. For several years a company called Kinder Morgan has been trying to build a new Trans Mountain Pipeline that would follow the path of the existing pipeline and allow much higher volumes of oil to flow west. However, environmentalists groups like Greenpeace and 350.org who support a renewables-only approach (keep it in the ground) have so far been able to block it.
Now the Canadian government is stepping in to make sure the pipeline is completed over the objections of environmentalists, especially those in the Vancouver area who are worried about increased shipping traffic and the possibility of spills along the coast. If the government succeeds in getting the pipeline built, it plans to sell it back to the private sector. Again, all of this makes good financial sense for Canada but it’s a bit surprising that Justin Trudeau is willing to directly challenge the environmental left to make this happen.