Pipeline protester fights Kinder Morgan lawsuit

by Stefania Seccia, QMI Agency

VANCOUVER — A Burnaby, B.C. man argued in court on Tuesday that a multi-million-dollar lawsuit filed by Kinder Morgan’s Trans Mountain Pipeline is an attempt to stifle democratic activities.

Alan Dutton, a member of Burnaby Residents Opposing Kinder Morgan Expansion and a defendant in the $5.6-million lawsuit seeking damages against the protesters, is refusing to settle out of court.

In B.C. Supreme Court on Tuesday, Dutton said the case was an abuse of process and highlighted the need for anti-SLAPP (Strategic Lawsuit Against Public Participation) legislation.

Josh Paterson, the executive director of the B.C. Civil Liberties Association, said it’s up to the defendant and his counsel to prove that the lawsuit filed by Kinder Morgan was a strategic lawsuit against public participation.

“From our perspective, we’ve said that there needs to be legislation in this province that makes it easier and faster for so-called SLAPP lawsuits to be identified and disposed of,” he said.

Paterson said the province had legislation in place until 2001 that expedited the court’s determination as to whether a case was a SLAPP suit.

The BCCLA is calling on the province to reinstate such legislation.

While B.C. Minister of Justice Suzanne Anton was unavailable for an interview, a ministry spokesperson said the province “is in line with most Canadian jurisdictions which do not provide for what is sometimes described as ‘anti-SLAPP’ legislation.”

“The challenge with such legislation is determining the basis for dismissing a civil claim prior to a hearing on its merits,” the spokesperson wrote in a statement.

The decision on whether a case is legitimate or not is up to the court’s discretion, according to Section 18 of the Supreme Court Act, which outlines general criteria for what constitutes a frivolous claim.

Trans Mountain deferred comment about the court case until it is officially concluded.

The case will be back in court on Wednesday.

Kinder Morgan pipeline clears early hurdle

Author
Jeff Nagel
Kinder Morgan Canada has cleared one hurdle on the way to building a proposed second pipeline to carry Alberta oil sands crude through B.C. to Burrard Inlet.

The National Energy Board has approved the company’s commercial tolling application, the rate structure it intends to charge oil companies to use the expanded Trans Mountain pipeline.

It’s not an approval to begin construction.

A formal proposal to build the pipeline is expected to be filed by Kinder Morgan later this year, triggering public hearings similar to those still underway on Enbridge’s proposed Northern Gateway pipeline.

“The decision reinforces the market support for our expansion plans and it provides us the necessary economic certainty to proceed,” Kinder Morgan Canada president Ian Anderson said in a statement.

“As we continue the process, we look forward to working with the new B.C. government and will remain committed to listening to questions and concerns as we develop our application to file with the NEB later this year.”

The NEB decision ruled Kinder Morgan’s rates are just and reasonable, rejecting complaints of oil firms that argued the pipeline company would reap excessive profits.

A second decision is also expected soon from the NEB on an application by Chevron for priority access to oil from the pipeline to supply its Burnaby refinery.

The $5.4-billion Trans Mountain twinning project would boost the flow of petroleum products from 300,000 barrels per day now to 890,000, bringing about 400 tankers a year to the Burnaby terminal.

Burnaby NDP MP Kennedy Stewart, who opposes the pipeline project, said the NEB missed an opportunity with the tolling application to order a surcharge on each barrel of oil to help fund environmental protection and spill response initiatives in B.C.

He said the federal Conservative government has drastically clamped down on the public hearing process, and predicted Kinder Morgan hearings will be far less inclusive than the Enbridge hearings.

“There’s now a 10-page application form before anybody will be allowed to speak so the community is just about shut out of these processes,” Stewart said.

“It’s almost an industry love-in now – corporate lawyers talking to corporate lawyers. I guess that’s what you do when you want to ram oil pipelines through to the west coast.”

‘Pipeline Company Bullies’

Author
Andrew Nikiforuk
A farmer’s plea for protections against petro firms who ‘take our lands.’

On February 28th Dave Core gave an impassioned presentation about “pipeline company bullies” before the Standing Senate Committee on Energy, the Environment and Natural Resources.

The media were not there.

But the 58-year-old farmer and landowner, an expert on pipeline regulation, directly contradicted the testimony of National Energy Board (NEB) chairman Gaétan Caron as well as that of Mark Cory, Assistant Deputy Minister of Natural Resources Canada.

Both Caron and Cory reassured the Senate Committee that pipeline regulations were safe and orderly in Canada.

But that’s not what Core, who supports fair pipeline development, has witnessed over the last 20 years.

He told the Senate that the NEB, which is now overseeing the Northern Gateway hearings, is a captive regulator that does not work for Canadians but “protects the interests of pipeline companies.”

He documented oil-pipeline spills that had not been cleaned up in Ontario, Manitoba and the Northwest Territories.

And he provided evidence that the National Energy Board has left the industry off the hook for multibillion-dollar abandonment liabilities on 70,000 kilometers of federally-regulated pipelines. In other words, pipeline companies can abandon their corroded steel pipes in the ground (a hazard to groundwater and livestock) and walk away.

Core is the founder of the Canadian Association of Energy and Pipeline Landowner Associations (CAEPLA) which represents the legal interests of landowners across the country. It is a landowner’s version of Idle No More, the aboriginal movement now contesting the abuse of power by the Stephen Harper’s omnibus bills.

The Ontario-born farmer has been advocating for changes to Canada’s pipeline regulations since 1993. He knows more about the institutional history of the NEB than most of the nation’s reporters.

Here are a few excerpts from Core’s dramatic and timely presentation:

Kitchen table nightmare

“My goal this morning is to bring perspective to the issues of landowners when confronted by pipeline companies. That is, the issues when private property owners, like yourselves, come up against government supported and subsidized corporations that are allowed to come packing with government regulations to take our lands, our rights and leave us with annual risks, liabilities, a duty of care that we do not want, costs and the pipeline junk which includes the resulting safety and liability issues of historical contamination and pipeline collapse when the companies pack up and leave.

“Before I proceed I would like you to pretend you are sitting around a kitchen table with your family and a ‘land agent’ has just left you with a brown envelope with a Section 87 Notice, an NEB Regulatory Notice, stating that a pipeline company is going to put a pipeline in your backyard and the easement agreement and the compensation offer are included.

“The stress has only just begun. Next come teams of land agents, the men trained in profiling and in telling every tale they can to get the deal signed while they sit at your kitchen table drinking your coffee. He/she might even be your neighbour’s son or daughter. It is like you have stepped into a spaghetti western with cowboys coming to your door, not packing a gun, but a big smile, lots of lies and packing government regulations that allow them to threaten you if you question them.

“As can be seen in the transcripts of your previous guests’ presentations to date, pipeline companies have no real accountability to anyone and they haven’t since 1959….The self-admitted ‘industry partner’ Gaétan Caron, chair of the NEB, said nothing to you but that everything is wonderful, safe and sustainable. Well, it is not, and it is time everyone understands what is really going on.”

No spill liability

“Mr. Corey from Natural Resources Canada stated that pipeline companies are fully responsible for cleaning up spills. Then why are there spills and contaminated properties across Canada that have not been cleaned up? As I pointed out at the recent abandonment cost estimates hearing there is contamination in the Enbridge and TransNorthern pipeline corridor just east of Toronto, that has been there for 20 years. And more has recently been uncovered as Enbridge does integrity digs to repair the polyethylene coating disaster on line 9 in preparation for reversal. I also have a letter I read, at the hearing, from a Manitoba resident complaining of an Enbridge spill on her property that had never been cleaned up. I also know of other spills where landowners have signed confidentiality agreements and cannot talk about what was left behind. The NEB regulations and oversight protects companies from having to do due diligence to landowners.”

A revolving door of special interests

“The NEB and the industry have a revolving door when it comes to employees. Brenda Kenny, Canadian Energy Pipeline Association (CEPA) President was a long time employee at the NEB, as were a number of other CEPA people past and present. At the recent abandonment-cost-estimates hearing, two of the regulatory people representing Enbridge had just recently worked at the NEB as regulatory officers….

“Landowners are not just stakeholders. Like you, Honorable Senators, we are property owners. We bought our property as a place to live, a lifestyle choice, an investment, to ranch our cattle, to crop farm or run any other business zoning allowed. We did not request pipelines. We live, raise families and work on these properties, yet we have had pipelines enforced on our backyards, that do not respect our stewardship or legal obligations. Our name is on title and the NEB legislation leaves our future to the whim of pipeline companies and their regulatory partners.”

Expropriation of land without compensation

“In 1988, Section 112 of the NEB Act was created and the legislation was then reworked in 1990 since it was not properly done in 1988. A senator at that time stated that the legislation was questionable from a landowner rights perspective. It created new restrictions to the landowner’s right to farm over the pipelines and also restricted 200 more feet of our land along the pipeline. That is 100 feet on each side of the 60 foot easement. Our original easements gave us the right to farm over the pipelines and stated that the company was to compensate for any land taken for the operation of its pipelines. Those old 60-foot easements are now 260 feet, that is, four-times the width with no compensation.

“Section 112 was created to allow pipeline companies the right to leave pipelines in the ground that are too shallow, corroded, too thin and designed with ineffective protective coatings that compromise safety. These regulations protect the companies and their shareholders from the cost of upgrading its infrastructure and addressing those safety issues. It is easier to restrict the activity of farmers over the pipelines than repair them. Imagine restricting traffic forever rather than upgrading a deteriorating overpass.

“For 20 years we have been asking that regulations be changed to have pipelines buried 6 feet deep and provide thicker pipes in rural areas because we farm over the pipelines and are concerned with our safety and the safety of the pipeline. The CSA standards are only 24” of cover and thicker pipes in highly populated areas. We have pictures at our web site of pipelines with only 1 foot of cover. They should be dug up, replaced and buried deeper.”

Harper’s ‘criminal penalties for farmers’

“In the Omnibus Bill C38 (May of 2012) NEB regulations were changed to put monetary and criminal penalties on farmers if they do not ask permission to cross pipelines; on summary conviction, a fine of up to $100,000 and/or imprisonment up to one year; on conviction on indictment, a fine of up to $1,000,000 and/or imprisonment up to five years. Too bad the presidents of the pipeline companies do not suffer the same consequences for polluting miles of private property. Instead they get multimillion-dollar pensions.”

Canada’s pipeline abandonment scandal

“In 1985 there were five abandonment regulations that held the companies responsible for removal of pipelines upon abandonment. Mr. Vollman, Past Chair of the NEB, an engineer at the time, was responsible for creating a document called “Discussion Paper on Negative Salvage Value.” It discussed the issue of abandonment, pipeline removal and the collection of funds to finance the process. A year later, in 1986, the NEB gave notice to the industry that it would do nothing with the issue.

“In 2002, CAEPLA invited the NEB to come to Sombra, Ontario to view farming practices and we made a presentation on the abandonment and funding issue. The Chair of the Board, Mr. Vollman, an engineer at the time, and Mr. Gaétan Caron were both present, and Mr. Vollman stated that the issue had been looked at but could not be resolved. He never mentioned the 1985 document.

“CAEPLA accidently came across the document in 2007 and upon research found that the five abandonment regulations that called for the removal of pipelines at abandonment in 1985 had been changed a number of times, and now the regulations state that abandonment can now be approved in place.

“In the meantime, two abandonment hearings and hundreds of thousands of dollars of landowners money later, the NEB has ignored its judicial burden-of-proof at hearings and decided to collect money, 50 years late, for only 20 per cent removal of pipelines. It has ignored the legal evidence provided by landowners that clearly shows pipelines must be fully removed to protect landowners from liability. At one point the Board even changed its 2008 judicial decision that protected landowners (20 per cent removal and 80 per cent maintained into perpetuity) to a scheme of just 20 per cent removal at the behest again of CEPA without a hearing.”

Transferring wealth to pipeline companies

“With the coercive power of expropriation, of forced entry behind them, pipeline companies have landowners over a barrel. An oil barrel.

“But it is an oil barrel that does not truly reflect the real economic costs of bringing it to market. Part of that cost is borne by farmers and ranchers and other rural landowners who are coerced into non-market transactions. Non market transactions that are effectively a transfer of wealth from one group of owners to another. From the owners of farms and ranches to the owners of shares in pipeline companies. A transfer of wealth from rural to urban Canada. A transfer from middle class and often less affluent, to the affluent….

“Real property rights imply the right to choose. The right to say no if need be. The right to freely and voluntarily deal or not deal as you see fit…. Government should not be in the business of facilitating the transfer of wealth from farmers, ranchers, and taxpayers to the shareholders of pipeline companies.” [Tyee]

Read more: Energy, Environment

Tyee contributing editor Andrew Nikiforuk is both an Alberta landowner and a reporter. Find his previous Tyee articles here.

US regulator fines Kinder Morgan for breaking 27 safety rules

Author
ANDREW NIKIFORUK
The U.S. federal Department of Transportation has fined Kinder Morgan nearly a million dollars in civil fines for breaking 27 U.S. pipeline safety rules.

The Houston-based firm, the continent’s third largest energy company, currently wants to triple the capacity of its Trans Mountain pipeline in a controversial bid to bring more Alberta bitumen to the port of Vancouver for export to China.

According to the Pipeline and Hazardous Materials Safety Administration (PHMSA), the violations took place between 2007 and 2009 during the hectic construction of the Rockies Express pipeline.

The 42-inch diameter natural gas pipeline now pumps shale and tight gas from heavily drilled western landscapes to eastern consumers in the U.S.

Unlike PHMSA, the National Energy Board, Canada’s federal pipeline regulator, performs two conflicting roles: it approves new pipelines and regulates existing ones. PHMSA does not approve lines, it only monitors their technical safety and fines companies for breaking the law.

As one consequence of its dual mandate the NEB has no system for fining pipeline companies for violating Canadian laws. Since 1959, the agency has only shut down two pipelines.

Moreover the NEB, which has been operating since 1959, did not begin posting its safety and environmental actions until the fall of 2011.

Since 2008, the board says it has issued 24 safety orders against pipelines owned by Enbridge, TransCanada and Kinder Morgan for a variety of infractions. None of the companies were fined and most of the safety orders were not publicly available when issued.

In July 2011, for example, the NEB ordered Kinder Morgan to reduce pressure on the 60-year-old Trans Mountain pipeline after a leak appeared on a pipe that failed to operate properly after a pump station expansion in 2005.

The NEB later ordered Kinder Morgan to check “long seam weld cracking” on all pre-1970s pipe installed on the line by December 2013.

In 2012 PHMSA fined Enbridge, a Calgary-based firm, a record $3.7 million for a total of 24 violations of pipeline regulations related to largest onshore oil spill in U.S. history in Kalamazoo, Michigan. The spill of diluted bitumen cost nearly $1 billion to clean up and the river remains contaminated.

Given the number of ongoing problems on the Rockies Express line, Kinder Morgan must develop a plan to “address the potential for remaining girth weld defects resulting from inadequate radiography or delayed cracking that was not identified during girth weld remediation activities.”

Improper welding practices and inspections for pipelines were the subject of two part-Tyee series last year based on documents and complaints registered with Canadian and U.S. regulators by Evan Vokes, a Calgary-based mechanical engineer. The NEB confirmed the allegations against TransCanada, Vokes’ former employer, and ordered “remediation measures.”

Kinder Morgan wants to boost the capacity of the Trans Mountain pipeline from 300,000 to 890,000 barrels a day with a $5-billion expansion. The upgrade would increase the number of international oil tankers in the port of Vancouver.

Local communities, First Nations and environmental organizations have criticized the expansion plans, saying a larger bitumen highway will multiply risks to the environment, community health as well as violate of indigenous rights and sovereignty.

After Kinder Morgan experienced a major pipeline leak and an oil tanker spill near Burnaby in 2007 and 2009, citizens have raised questions about the adequacy of company’s monitoring and accident response programs.

In recent years Kinder Morgan has profited from the “energy sprawl” generated by increased production of lower quality unconventional hydrocarbons such as bitumen and shale gas. As such Kinder Morgan has become a major shipper of condensate, a gasoline-like hydrocarbon, much in demand in Canada’s bitumen industry.

Bitumen, a junk crude, is so thick and heavy that it will not move through a pipeline without being diluted by higher quality fuels such as condensate.

The Eagle Ford Shale, an unconventional gas resource that requires heavy hydraulic fracturing, now yields large volumes of highly valued condensate which Kinder Morgan hopes to ship to Canada via two proposed pipeline networks by 2014.

But the NEB recently raised serious concerns about the fitness and integrity of one of the proposals, the Cochin Pipeline. It also questioned the adequacy of crack detection methods employed by Kinder Morgan.

The more bitumen that Canada exports, the more dependent the country becomes on imported condensate and higher quality hydrocarbons from the U.S. or the Middle East.

Currently, a lot of condensate needed to move bitumen comes from shale gas fields where hydraulic fracturing blasts open deep rock with millions of gallons of water, sand and toxic chemicals. The process can contaminate groundwater, cause earthquakes and leak vast amounts of methane.

Canada now imports about 300,000 barrels of condensate a day in order to export its bitumen. Expected demand could grow as high as 670,000 barrels a day in the absence of any public policy to upgrade and refine raw bitumen within Canadian borders.

PHMSA posted its ruling on Kinder Morgan on its website last November where it went largely unreported in the Canadian press.

Andrew Nikiforuk has been writing about the energy industry for two decades and is a contributing editor to The Tyee.

Kinder Morgan goes full-speed on Trans Mountain pipeline expansion

Through pristine Jasper Park, Kinder Morgan goes full-speed on Trans Mountain pipeline expansion

Through pristine Jasper Park, Kinder Morgan goes full-speed on Trans Mountain pipeline expansion

Thanks for the article Karl

– National Post reports 4 years to completion of the KM line (2017)!

– the polls show most Burnaby residents are already opposed. What is their main reason; health and safety, real estate values, environment, climate change or a combination? We should know.

– My reason to oppose KM’s expansion is health and safety and climate change and I bet its the main reason for many not directly in the pipeline corridor. But is that true and what does that mean for our approach to organizing, messaging and branding?

– If Burnaby residents are already opposed, maybe we should be branching out and creating more alliances as we are in our pipelines and school safety campaign?

– We should know more about the facts so we can design better campaigns and events.

– What is the point of making new members and contacts if there are no mechanisms to engage, inform and inspire them to action? Are we just making members and contacts for the sake of making new members and contacts? What’s the point unless we put people to work and what is that work?

Alan

Suncor leads attack over Kinder Morgan pipeline prices

Author
NATHAN VANDERKLIPPE
A corporate spat has erupted in the race to carry oil to the British Columbia coast, as energy producers accuse a U.S. pipeline company of trying to charge exorbitant prices to ship crude.

The attack is being led by Suncor Energy Inc., the country’s largest oil company, and is aimed at the Canadian unit of Houston-based Kinder Morgan Inc., which is seeking approval for a $5.4-billion expansion of its Trans Mountain pipeline. The Kinder project would allow for the shipment of another 890,000 barrels a day between Edmonton and Burnaby, B.C., where it connects to a dock that stands to be an important outlet for Canadian oil to find new buyers in California and Asia.

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Major oil companies are eager to ship to the coast to take advantage of higher prices on world markets than they can get by shipping to refineries in the U.S. Midwest and Southeast. But some of them are balking at the price – known in the industry as tolls – which they argue would allow Kinder Morgan to earn returns on the project that are far above its historical 7 to 12 per cent.

“The average projected [return on equity] would be approximately 28.3 per cent,” wrote Greg Matwichuk, an Alberta chartered accountant who provided evidence on behalf of Suncor to the National Energy Board. That, he added, “is significantly greater than returns earned by other pipelines in Canada.”

The dispute about tolls, which is set to burst into greater view when a public hearing begins Feb. 13, is a window into the high-stakes game under way for Canadian companies fighting to get oil to Pacific Coast as quickly as possible.

Building new outlets has taken on major new importance in recent months, with existing export pipelines effectively full and Canadian heavy oil selling at a discount as high as $42 (U.S.) a barrel to the North American benchmark, West Texas intermediate.

But oil companies’ pain stands to be a gain for pipeline companies. Once boring utilities, pipeline firms in Canada have in recent years moved farther away from a model that largely assured them returns, albeit modest ones, irrespective of operating costs or how much oil they pump. Today, they are seeking higher returns while at the same time accepting more risk, in the belief that the fast-rising oil sands will provide plenty of crude for years to come.

Kinder Morgan says that it is not looking for anything like a 28.3 per cent return on Trans Mountain – and that it is taking additional risk to build the pipeline.

Instead of passing along the cost of power or some construction overruns to customers, for example, Kinder Morgan is proposing to largely shoulder any rise in those costs – save several exceptions, including changes in the cost of steel or large first nations financial considerations.

The company also points out, in documents before the National Energy Board, that the intense public scrutiny of pipelines today could impose additional safety measures and development delays. “These risks and resulting costs are not immaterial,” the company says. In a statement, spokesman Andy Galarnyk added: “The return is not excessive. … The toll principles have been agreed to by 13 very large sophisticated parties (including BP PLC, Imperial Oil Ltd.) representing 708,000 b/d – which in itself is sufficient.”

In Canada, pipeline tolls are typically negotiated with oil companies then reviewed by the National Energy Board. Total SA joined Suncor in questioning the proposed tolls. Most other companies signed contracts that obligated then to support Kinder Morgan.

There is no doubt, however, that Kinder Morgan is looking for solid Trans Mountain profits. In the documents, it says it targets unlevered internal rates of return of 12 to 15 per cent. But those returns would rise substantially with the borrowing typical of pipeline projects. They are also well above the 9 to 11 per cent levered returns typical in the Canadian pipeline industry. U.S. profits have, however, historically been higher, and Houston-based Kinder Morgan warns it won’t build the expansion if it can’t meet targets.

Suncor, in response, say it is “critical” for the NEB to make sure there is a “just and reasonable” cost to shipping oil to the West Coast at a time when companies are desperate for new pipelines. The company says it is “disturbed” by how pipeline firms are “exerting market power that flows from the infrastructure shortage and need and necessity of take away capacity.”

Yet Suncor – through two subsidiaries – has already signed long-term contracts to ship oil through the expanded Trans Mountain system, whose tolls pale in comparison to the potential gains of accessing Pacific markets. Suncor has projected Trans Mountain tolls of between $4.15 and $5.48 (Canadian) a barrel. On Tuesday, the price difference between Canadian heavy oil and Maya, an international heavy blend, stood at just over $40 (U.S.).

The startling size of the price gap is weighing heavily on the province of Alberta, which through the National Energy Board posed Suncor a pointed question. It asked the company “to provide an estimate of the impact on Canadian oil producers if Trans Mountain decided not to proceed with the expansion.”

New Report: Financial Liability for Kinder Morgan

Author
Gwen Barlee
New Report: Financial Liability for Kinder Morgan

Today we’re excited to announce the release of a brand new report, co-authored by the Wilderness Committee with our allies at the Living Oceans Society, Georgia Strait Alliance and West Coast Environmental Law.

The report, Financial Liability for Kinder Morgan, takes a deeper look at the price tag for a potential oil tanker spill in the Salish Sea resulting from the proposed Kinder Morgan Trans Mountain pipeline and tanker route. This proposal represents a massive increase in the risk of a major oil spill—one that could have severe impacts on coastal industries and highly-populated communities including Vancouver, Victoria and the Southern Gulf Islands. But shockingly, the limited amount of insurance available to pay for the response and damages associated with such a spill would leave taxpayers on the hook for up to 90% of the cost.

Even though the BC government has been talking about asking polluters to pay for land-based oil spill cleanup, the province’s new spill response plan would not address marine-based spills from tankers like the ones being serviced at the Kinder Morgan terminal. And experience has shown us that spills in water are much more damaging, and more difficult and costly to clean up than spills on land.

Just this month, Kinder Morgan announced that they would be increasing the planned capacity of their proposed Trans Mountain pipeline from 750,000 barrels per day to 890,000 barrels per day; that means even more tar sands diluted bitumen flowing underneath our communities and into tankers on the Salish Sea. Instead of 300 tankers per year coming into the Vancouver harbour as originally planned, the proposal would now see more than 400 oil tankers travelling through these waters every year.

British Columbia’s coastal communities—and their local economies—rely on a clean, productive and beautiful ocean. An oil spill here would have long-lasting impacts and economic repercussions, especially for key industries like tourism, fishing and recreation.

I encourage you to read this report to learn more about the international agreements and funds in place to deal with marine-based oil spills, and about the potential economic losses that would be faced by the Salish Sea region in the event of a spill. Click here to visit our website and download the full report.

You can also help out by sharing this report with your friends, family and colleagues. Being informed about the risks and consequences is essential if we’re going to stop this pipeline and protect the coast from an oil spill!

Thanks,

Gwen Barlee | Policy Director
Wilderness Committee

http://wildernesscommittee.org/sites/all/files/publications/kindermorgan2012-english-2.pdf

Trans Mountain: The other Pacific pipeline

It is a sunny Sunday and Vancouver is doing what it does best: looking pretty and post-industrial. Morning lights up the downtown’s glass horizon. A half-dozen scooters rip down the road in a platoon. Cyclists swish past Zipcar lots, kayakers and stand-up paddle surfers ply the waters.

But just a few kilometres away, an oil tanker is preparing to raise anchor and slide into port. Soon, it will open its holds, with a total capacity of 650,000-barrels, to a flush of Alberta oil. After 30 hours of pumping, it will slip away to Long Beach, Calif. Oil tankers are, for now, relatively rare here. A tanker sails into the Vancouver harbour about once a week, docking at the Kinder Morgan-owned Westridge Terminal to accept Alberta crude flowing across the Rockies in the Trans Mountain pipeline.

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On this day, it is the 250-metre long Aqualegend that glides into place, smoothly manoeuvring alongside the Kinder Morgan dock. Its deck is spotless enough to eat off. The waters alongside the dock are clear and blue; a harbour patrol vessel has to ask crabbers to make way so the tanker can dock. Under blue skies and sunshine, exporting oil seems safe – even easy.

For Canada’s energy industry, however, the tanker route through the North Pacific is likely to be anything but.

The Aqualegend is a glimpse of what is to come: a future that could see a tanker sail past downtown Vancouver almost every day, to pick up oil from a newly expanded Trans Mountain. Kinder Morgan intends to twin the line, allowing 750,000 barrels a day – more than double the current 300,000 – to flow west. Most of the new barrels will be loaded on tankers. The project stands to change Alberta, making it an important global oil player. By placing crude on tankers that can deliver product anywhere a ship can sail, the oil industry can grab hold of global prices rather than selling its product on the cheap to its principal export market, the over-supplied U.S. Midwest. Expanding Trans Mountain stands to change Canada as well, enabling an expansion of the oil sands that will allow years of growth.

And Trans Mountain would change British Columbia’s Lower Mainland as well. Vancouver – home of the Prius taxi – could one day become Canada’s Rotterdam, a major oil tanker hub.

Yet the $4.1-billion project’s tremendous economic potential comes against a question mark nearly as big: is it even possible to build the expansion against rising anxiety that oil shipments will stain the shores of one of Canada’s biggest metropolitan areas?

Much rides on that question for Alberta’s energy industry. Take just one company: by 2020, Cenovus Energy Inc. intends to sell nearly 1 million barrels a day, most of them from projects not yet operating. It needs to find a home for those barrels, and the Kinder Morgan project is central to its plans. Already, the company is seeing a substantial lift in price for the barrels it is pumping through the existing Trans Mountain pipe and selling on the international market.

The Kinder Morgan project, in part because of its location, will likely send most of its crude to California, although some may also flow to Asia. For oil companies such as Cenovus, the destination doesn’t matter. Oil is often sold at the dock, and the price there is the international price, no matter where the crude ends up. To “unlock the value” of Canada’s crude oil, that product has to touch tidewater, says Paul Reimer, senior vice-president of marketing, transportation and power at Cenovus.

The stakes, then, are high for Kinder Morgan. In some ways, Canada’s global industrial position depends on this pipeline.

“More market connections increase our global competitiveness and position us to better receive full market value for our growing production,” says Patti Lewis, spokeswoman for Nexen Inc., which has been a supporter of the Kinder Morgan expansion. Ms. Lewis spoke before Nexen agreed to be bought out by China’s state-controlled CNOOC Ltd. for $15.1-billion, a deal that underscores the growing connections between Canadian crude reserves and Chinese energy ambitions.

First, though, Kinder Morgan must find a way to sail huge new volumes of oil beneath Vancouver’s Lions Gate Bridge and past Stanley Park, a jewel not just for B.C., but the entire country. And the anger that has met Enbridge Inc.’s plans to build the Northern Gateway export pipeline to Kitimat, on the B.C. north coast, is already beginning to simmer against Kinder Morgan. The company has yet to formally apply for the project – that should happen next year – and to publish a map of exactly where the new pipe would run.

Already, the mayors of Vancouver and Burnaby have spoken out against it, as have local first nations. The B.C. government has published a lengthy technical document demanding substantial upgrades to tanker safety along its coast.

Neither the ruling B.C. Liberals nor the opposition NDP, who appear headed to take over in Victoria next year, have declared a public position on the Trans Mountain expansion, but the tiff between the Alberta and B.C. premiers over Northern Gateway seems poised to envelop Trans Mountain as well.

In case of accident

Before the Aqualegend, now loaded with Canadian crude, can so much as untie from the Kinder Morgan dock, it must meet an extraordinary set of demands. Loaded tankers are treated unlike any other vessel in Vancouver, starting with the two specially trained marine pilots they must have aboard, double the normal requirement. They can sail only during daylight, at high slack water, a window that on some days allows just 25 minutes for them to move. They must travel through a clear channel, meaning other ships must wait. Each tanker is first vetted for admissibility by Transport Canada, pre-screened by Kinder Morgan – which denies entry to ships that don’t meet its standards, including one that they must be less than 20 years old – and then inspected after entry by Transport Canada. Where other large vessels must only be accompanied by an untethered tug, a loaded tanker must sail with three tugs connected to it by thick metal cables.

Some of the requirements are new, intended to build on a nearly unblemished record of oil moving through these waters.

“We have never had an accident with a tanker. Not in 60 years,” says Kevin Obermeyer, chief executive officer of Pacific Pilotage Authority Canada.

But spills do happen. Since 2001 – the only period for which it could provide records – Transport Canada has recorded some 13 incidents with oil and chemical tankers in waters near Vancouver. The worst, in 2002, saw 2,300 litres of canola oil spill. In total, over the past decade, 31 litres of petroleum has spilled in the area. But those are minor, and nothing like the Exxon Valdez spill whose memory, and ongoing environmental damage, haunts any new attempts to carry oil along the West Coast. Kinder Morgan is eager to make clear how much has changed since that 1989 disaster.

With the “Exxon Valdez, there were no escort tugs, a single-hull ship, no pilots on board,” Kinder Morgan Canada director of engineering Mike Davies says. Tankers today do not suffer those weaknesses, and the changes “make quite a difference,” Mr. Davies says.

When critics accuse Kinder Morgan of pursuing a risky expansion, the company details the long list of safeguards in place – enough, the company says, that a reasonable person should have little reason for worry.

Oil shipping, Mr. Davies says, is “a highly regulated industry, the people are well-trained and there’s lots of scrutiny of everything that goes on.”

That’s not to mention the cleanup capability on the West Coast if disaster strikes. Barely a kilometre from the Kinder Morgan dock is the headquarters for the industry-funded Western Canada Marine Response Corp., which has equipment scattered up and down the coast and a video library showing every single kilometre of B.C. shoreline, which can be used to focus a spill response. WCMRC must, by federal mandate, be prepared to clean up a 10,000-tonne, or 63,000-barrel, spill. It has 2.5 times the capacity it needs, with resources across B.C. that include 118 fishermen and barge operators trained to help.

Around Vancouver alone, it has more than five times the skimming capacity it needs for a 63,000 barrel spill.

“This coast is, I would say, in pretty good shape right now,” says Kevin Gardner, president of the response organization.

Living with the line

Derek Corrigan, mayor of the Vancouver suburb of Burnaby, does not like the oil industry. He doesn’t like how its big multinational players seem unusually capable of profit. He doesn’t like how its sweeping size and importance gives it influence with government. And he doesn’t like how it is looking to build a pipeline through his hometown, where he has served as mayor for a decade.

“Not for a moment do I trust this industry,” he says. “Early on, the promises are wonderful and the infrastructure is new.” But give it a few years and companies, he says, begin to “slack off.”

Mr. Corrigan has first-hand experience. He was mayor when a city contractor hit Kinder Morgan’s pipeline, resulting in a geyser that sprayed out nearly 1,500 barrels of oil, some of which made it into Burrard Inlet. A report by the Transportation Safety Board of Canada found that the pipe had not been properly located for the city and, while the blame did not fall entirely on Kinder Morgan, the company compounded the resulting rupture by shutting the wrong valve when it tried to halt the leaking.

In 2009, oil also spilled from a Kinder Morgan oil terminal in Burnaby; Environment Canada said the government does not know how much leaked.

For those who live along the pipeline, those accidents provide a glimpse into a possible future that terrifies them. Local groups have pointed to studies questioning Canada’s spill response – a Canadian cleanup fund has half the money contained in its U.S. counterpart, for example, and though the Canadian Coast Guard is supposed to be the lead federal agency in responding to spills, many of its vessels aren’t equipped with spill gear. While the tug requirements are strict in Vancouver harbour, they are less strict outside of the harbour than in U.S. waters just to the south. Recent government changes haven’t helped, either: a Vancouver-based Environment Canada emergency response office was closed and its responsibilities shifted to Montreal, fact that concerns spill responders.

And both Canadian and international laws place strict limits on financial liability for spills from tankers, whose owners – usually headquartered in distant countries – are held responsible. Those limits vary by product and vessel, but top out at just over $1.3-billion, far below the cost of cleaning up major accidents like the Exxon Valdez or the BP Macondo well – and even a smaller accident could prove immensely costly to clean alongside densely populated Vancouver.

That concern has driven an increasingly concerted effort by first nations to thwart the project. The final stretches of Trans Mountain cross particularly tricky territory, claimed by four first nations. Three have already publicly opposed the expansion, including, the Tsleil-Waututh Nation, whose land lies across Burrard Inlet from the Kinder Morgan dock and whose front yards look out on the water where tankers anchor. It is not a nation opposed to development: it has profited from hundreds of condominium units built on its one-mile-square reserve. But the last two Kinder Morgan spills have sent a pungent smell over Tsleil-Waututh land – and the nation, which stands to see no benefits from the expansion, is firmly against it.

If a spill happens, it could devastate “the coastline from Washington to the top of Vancouver Island,” says Ernie George, director of Treaty Lands and Resources. He points to dozens of projects undertaken by the nation to restore ecosystem function and marine life populations to the area.

“We’re trying to bring this inlet back to life,” he says. More oil “won’t help.”

Beyond the water, the pipeline itself is controversial. The Trans Mountain pipeline was built in the early 1950s, entering operation in 1954. A half-century has dramatically changed the land it crosses: Burnaby alone has quadrupled in size since then. To make the point, Kennedy Stewart, the NDP MP for the Burnaby region home to the pipeline, tank terminal and marine dock, directs a weaving route on roads that follow the yellow signs marking the pipeline’s underground path. It crosses beneath sidewalks, beside roads, past schools, through a golf course and beneath landscaped gardens. At an apartment co-op, Mr. Stewart gets out to walk, showing where it runs mere feet from backyard play sets.

Kinder Morgan has said it “will look at alternatives” in areas where buildings have cropped up close to the route. But Mr. Kennedy calls the pipeline right-of-way a “potential expropriation zone,” since people might be forced out of their homes if they stand in the way. It is, he acknowledges, an inflammatory description, but the rhetoric is intended to echo in Ottawa, as West Coast pipelines take on national importance.

That’s true for the environmental groups, too. Kinder Morgan has split its application into several parts, first working to establish tolls for the expansion. That application would normally concern only oil companies and refineries. But Vancouver’s Ecojustice, an environmental law firm, has drafted a letter it hopes municipalities, first nations and landowners will submit to the National Energy Board, in hopes they can argue for higher tolls to cover the cost of cleaning spills.

“It’s a bit novel and it’s not been tried before,” says Karen Campbell, a staff lawyer with the firm. “But we’re trying to figure out how to shine a brighter spotlight on this entire issue – and, frankly, how to slow it all down.”

Yet for all the concern, fighting this pipeline may prove difficult. Burnaby, for one, acknowledges there is little it can do, outside of helping stir up opposition. Kinder Morgan already has its dock, and substantial legal rights to the land where its pipe lies.

“It’s a 60-year pipeline on an existing right of way. They’ve had tankers there for years,” Ms. Campbell says. Compared to the battle over Northern Gateway, an entirely new pipe that would introduce tankers to waters that see very little oil movement today, fighting Kinder Morgan “is way harder.”

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THE ART AND SCIENCE OF PILOTAGE

They are a rare bunch: the 100 men tasked with guiding ships safely through the coastal waters of British Columbia. In many ways, the safety of the vessels that sail on Canada’s Pacific coast lies in their hands.

So it’s small wonder becoming a pilot isn’t easy. It involves writing what Kevin Obermeyer, who oversees the pilots as chief executive officer of Pacific Pilotage Authority Canada, calls “one of the hardest exams in the world.”

Don’t believe him? Take a look and see for yourself. Those winding black lines show coastal features and islands. But it is intentionally blank. The test: first determine which of the 27,000 kilometres of B.C. coast the blank map depicts. Then label it, with the names of islands and points and inlets, showing where navigational aids are located, marking hazards, noting minimum depths and pencilling in safe routes. That’s just one part. Another involves starting with a completely blank page. Would-be pilots have to draw from memory whichever stretch of coast the examiner asks for.

Just getting in to write the exam is tough: only those with more than 700 12-hour days as captains on the B.C. coast can start the process, which begins with a familiarization program, where candidates must ride along on at least 10, and sometimes 30, trips.

Even then, fully 83 per cent fail the written test, where they need a 70-per-cent grade to pass.

Mr. Obermeyer points to those entry requirements as part of the reason why last year, with 12,400 vessel movements that had pilots on board, “we had four minor fender benders.”

“I’m supremely confident in their knowledge and their ability,” he says.

Nathan VanderKlippe