CALGARY – The National Energy Board has determined that the Trans Mountain pipeline expansion that would move heavy oil from Alberta to the West Coast is in the public interest. But the regulator also imposed 157 conditions, including, for the first time, that the project must detail plans to reduce and offset carbon emissions.
The federal energy regulator recommended Thursday that Ottawa approve Kinder Morgan’s $6.8-billion project to expand oil shipments day to 890,000 barrels of oil per day from 300,000 bpd on its Trans Mountain pipeline system, as long as the company meets a series conditions limiting the project’s effects on the environment and aboriginal communities.
For the first time, the NEB is requiring the company to provide a plan, to be filed four months after the project’s start up, for offsetting all of the greenhouse gasses generated from the construction of the pipeline.
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The federal regulator did not specify how Kinder Morgan should offset its emissions, but only that a plan be submitted with an “accounting of offsets confirming no net GHG emissions from project construction.”
David Austin, a Vancouver-based energy lawyer with Clark Wilson LP, said the GHG offsets were “the only difference between this and other types of major project review proceedings that have occurred in the last 25 years.”
“On the whole, taking into account all of the evidence in the hearing, considering all relevant factors, and given that there are considerable benefits nationally, regionally and locally, the board found that the benefits of the project outweigh the residual burdens,” the NEB’s chief environment officer Robert Steedman said Thursday.
Key dates in the history of the Trans Mountain pipeline
October 1953: The Trans Mountain pipeline begins shipping oil with an initial capacity of 150,000 barrels per day. The project features four pump stations along its 1,150-kilometre route and a marine dock that connects loading facilities on the east side of Edmonton with ocean tankers in Burnaby, B.C.
1957: Pipeline capacity is expanded via the construction of a 160-kilometre pipeline loop. The Westridge Marine Terminal is built and commissioned in Burnaby, B.C.
Jan. 14, 1985: Trans Mountain’s biggest spill occurs at a tank farm in the Edmonton area. Nearly 10,000 barrels of oil are released.
2006-08: The Anchor Loop project adds 160 kilometres of new pipeline through Jasper National Park and Mount Robson Provincial Park between Hinton, Alta., and Hargreaves, B.C. The extension includes 13 new pump stations and modifications to existing stations, increasing capacity from 260,000 bpd to 300,000 bpd.
Feb. 21, 2012: Kinder Morgan says it wants to expand the Trans Mountain pipeline after receiving support from oil shippers and will begin public consultations.
Dec. 16, 2013: An application is made to the NEB to expand the Trans Mountain pipeline, with construction proposed to begin in 2017 and service by December 2019.
November 2014: More than 100 people are arrested after they camp out in a conservation area on Burnaby Mountain, east of Vancouver, to block crews from conducting drilling and survey work related to the pipeline expansion. Most of the charges are later dropped.
June 29, 2015: Weeks before the election campaign, Liberal Leader Justin Trudeau promises increased consultation on pipeline projects as part of his party’s environmental platform.
August 2015: The NEB postpones public hearings after striking from the record economic evidence prepared by a Kinder Morgan consultant who was to begin working for the regulator.
Jan. 12, 2016: Alberta Premier Rachel Notley says in a written submission to the NEB that the Trans Mountain pipeline expansion is in the best interests of both Alberta and Canada.
Jan. 27, 2016: The federal Liberal government says pipeline projects such as the Trans Mountain expansion will now be assessed in part on the greenhouse gas emissions produced in the extraction and processing of the oil they carry. Proponents will also be required to improve consultations with aboriginals.
May 17, 2016: Ottawa appoints a three-member panel to conduct an environmental review of the Trans Mountain expansion project and report in November.
Kinder Morgan’s Canadian arm issued a statement that said it was “pleased” the board recommended the project’s approval “because it is in the public interest.”
The company said it was still reviewing the conditions the NEB imposed, which include additional consultation with communities along the route and communities affected by marine shipping and a detailed plan for hiring and training aboriginal workers along the route.
The company must also conduct and file details of an earthquake analysis before it begins construction of the project.
Tim McMillan, the president and CEO of the Canadian Association of Petroleum Producers, called the decision “a milestone for the future of Canada.”
“The NEB is sending a clear message to Canada: building the infrastructure to get our resources to market is in the best interest of our country.”
Steedman said 93 of the board’s 157 conditions for the expansion project had been implemented following hearings held in British Columbia and Alberta, where affected parties were able to explain their concerns with the project.
The hearings in Burnaby, B.C. – the terminal point of the pipeline – were attended almost daily by protestors opposed to the project, including environmental and aboriginal groups concerned about increased oil tanker traffic in the Salish Sea and concerns that a spill of diluted bitumen carried through the pipeline would cause irreparable damage to the ocean environment.
The NEB’s 533-page decision noted evidence from the City of Vancouver, the City of Burnaby and Tsleil-Waututh First Nation that a spill in the Burrard Inlet in the Vancouver area would have adverse environmental effects, but concluded that “a large spill in Burrard Inlet is not a likely event.”
Vancouver Mayor Gregor Robertson, however, called the NEB’s recommendation a “profound disappointment.” Environmental groups also rejected the decision, saying the project has no social licence and will not be built.
The board also concluded that the pipeline would increase tanker traffic in the Vancouver area since its construction would allow domestic oil companies to reach new customers in Asia with additional oil shipments.
Oil producing companies in Alberta have backed the pipeline project as a way to reduce their dependency on the U.S. market, where the vast majority of Canadian oil exports are shipped right now.
Energy companies attending the hearings argued the reliance on the U.S. for domestic oil creates a discount for Canadian crude relative to the U.S. benchmark price, called West Texas Intermediate, and the global benchmark called Brent.
Research from FirstEnergy Capital Corp. showed the discount between unrefined heavy Canadian crude oil and WTI was $14.75 per barrel at the end of the day Wednesday.
In the end, the NEB decided that the project would deliver several “important benefits” to Canada, including “increased access to diverse markets for Canadian oil” and “considerable government revenues from the project.”
Now that the federal regulator has made its recommendations, an additional process introduced by Prime Minister Justin Trudeau’s government will begin to consider the pipeline project’s contribution to greenhouse gasses upstream from the pipeline.
Environment and Climate Change Canada is preparing that report ahead of the government’s final decision on the project, which is expected in December.
The full decision can be read here.