Highlights from the Joint Review Panel Technical Hearings on Economics
The technical hearings on economic issues raised by the Northern Gateway pipeline recently concluded in Edmonton. In these quasi-judicial hearings, Enbridge and intervenors (labour organizations, First Nations, environmental NGOs and the provinces of BC and Alberta) presented expert testimony and cross examined the experts of other parties. The Northwest Institute summarized the 15 days of hearings. Here are some highlights.
Cross examination of Enbridge Experts
Labour: refine the dilbit in Canada and create jobs
The Alberta Federation of Labour (AFL) questioned the export of raw dilbit (diluted bitumen, the tar sands’ crude oil) rather than refining it in Canada. Enbridge responded that markets aren’t looking for refined oil. They are looking for feedstock for their own refineries. No one could make money doing it, according to Enbridge, so there would be no benefit to Canada. Ninety percent of the claimed benefit to Canada is the “price uplift” that Enbridge claims will raise the selling price for all Canadian oil producers.
In later questioning, the AFL asked an expert for the Government of Alberta about the $8 per barrel “discount” for tar sands crude. The Alberta expert explained that tar sands crude fetches its highest price in the limited number of refineries capable of refining it for optimal value. When those refiners reach capacity, the price for tar sands crude drops $8. The $8 discount would be avoided by the Northern Gateway during its first year. Any pipeline (Northern Gateway, Keystone, Trans Mountain) would have the same “up lift” but, after the first few years, more heavy crude than refining capacity will trigger the discount and things will be back to where they are. Still, the Alberta expert concurred with Enbridge that, in his government’s view, building upgraders in Alberta would not be commercially viable.
BC: an underinsured pipeline
The Province of BC questioned Enbridge about its insurance coverage. Enbridge stated that it was looking at exposure of $60 million for the cleanup cost of a spill once every 250 years. BC noted that works out to $280 million for a 20,000 barrel spill. That’s the size of the spill in Kalamazoo which has already cost more than $767 million. BC also questioned whether the proposed separate corporate structure for the pipeline was intended to limit the liability of the corporate giant. Enbridge denied this. It stated that it would not consider a commitment to guarantee 100% of the clean up.
eNGO Coalition: National benefit from a pipeline that is half foreign owned?
A coalition of environmental NGOs (Forest Ethics Advocacy, Living Oceans ad Raincoast Conservation Foundation) established that Enbridge has ten potential funding participants who may each acquire a 4.9% interest and suggested that foreign ownership of the pipeline would impact the purported national benefit. Enbridge responded that the corporate structure would be modified for Enbridge to retain a controlling interest.
Later, the Coastal First Nations noted that, given 47% foreign ownership of Canada’s oil and gas industry, that same percentage of the asserted $17 billion of benefit to private interest presumably would leave the country.
Chris Peters: Externalized cost of greenhouse gas emissions
Chris Peters, a Prince George engineer, calculated that the “well to wheels” greenhouse gas emissions would be 37 million tons (2/3 of BC’s total emissions in 2010) and suggested this social cost should be entered into the equation. Enbridge responded that Canada is not responsible for emissions it exports to other countries, underscoring Peters’ point that the social costs of the emissions enabled by the proposed pipeline are not accounted for anywhere.
Haisla First Nation: An undersized study
The Haisla First Nation’s traditional territory will have more impacts than other First Nations because it is affected by all three aspects of the proposal: the pipeline, the terminal and the super tankers. The Haisla established that Enbridge gave different financial forecasts to different audiences – higher to the public, which inflates the claimed public benefit of a “price lift,” - and lower to investors.[xii] Enbridge responded that the different forecasts were insignificant to the project’s viability. The Haisla also raised concerns that the condensate costs and risks were not adequately addressed. Enbridge responded that this was the responsibility of the shippers. The Haisla noted that Mark Anielski’s “natural capital and ecological goods and services” study included no impacts beyond the right of way, no river or salmon impacts and less land than the pipeline would actually occupy.
Coastal First Nations: Enbridge admits that a spill is 93% likely
The CFN noted that neither the provincial nor federal governments have exclusive jurisdiction to decide whether the project will proceed given that the First Nations have never ceded their traditional territories. The CFN couldn’t evaluate impacts to salmon because they hadn’t been provided the necessary information. “Whose responsibility is that?” CFN council asked. Enbridge responded that they had tabled sufficient information for a determination by the JRP.
Enbridge agreed that there is a 93% chance of a tanker spill, terminal spill, or full bore pipeline rupture happening within 50 years. In a heated exchange, CFN pointed out that there was no accounting of the social costs of the conflict that the pipeline would cause if the project goes forward.
Economist Robyn Allen: risks from tanker traffic increases are exponential
Enbridge’s questions to the Alberta Federation of Labour panelist economist Robyn Allen allowed her to point out that if the pipeline were to increase from its stated capacity (525,000 barrels per day) to its potential capacity (850,000 barrels per day), this would increase tanker traffic by over 50 percent as well as activity in the marine terminal. “Risk is not additive,” she said. “It is exponential.”
JRP panelist Kenneth Bateman asked Allen about the value of Enbridge giving a “parental guarantee” that it would backstop all costs of a major oil spill. When Allen stated Enbridge won’t entertain that, Bateman implied that it could be required by the federal government.
The technical hearings will continue through December. Beginning October 9, the JRP will convene in Prince George to hear expert evidence regarding the construction and impacts of the pipeline. Beginning November 22, the JRP will travel to Prince Rupert to hear expert testimony on marine and First Nations issues. Community hearings in southern BC are scheduled to begin in January 2012. The final arguments on technical evidence will be in April, 2013. The 2012 Federal Budget and Bill C-38 require the JRP to submit its report by the end of 2013. The federal cabinet will make the final decision.