British Columbia Declines Oil Pipeline. Should Obama follow suit?
When President Obama blocked approval of the Keystone XL pipeline to transport oil from the Canadian oil sands to the Gulf Coast back in 2012, the Canadian government took notice. The Foreign Affairs Minister was quoted as saying: “this whole episode underlines the importance of diversifying our market….We can’t have only one customer.”
The lynch pin in the Canadian market diversification strategy is another iconic pipeline: the Northern Gateway. This pipeline would extend more than 700 miles from the Alberta oil sands to a port in Kitimat, British Columbia.
The Northern Gateway, which could carry more than 525,000 barrels of oil per day to the western port, would link the oil sands to Asian markets (and China in particular). By allowing Canadian producers to expand their customer base beyond the United States, the price of oil sold into the U.S. market would likely rise. From the Prime Minister’s perspective, this diversification plan seemed like a “no-brainer”. But British Columbia sees things differently.
British Columbia “slams the door” (but leaves the light on)
As a Canadian expatriate, I have been following these pipeline politics with great interest. And quizzing friends and family (thanks, Jonathan, Rick!) about what issues are of most concern to the informed-Canadian-on-the-street. Whereas the controversy south of the border over Keystone XL has focused on climate change and greenhouse gas emissions, the politics fueling the opposition to Northern Gateway in B.C. look quite different:
Environmental impacts: This pipeline and tankers would pass through very remote, ecologically sensitive, and difficult to access areas. A diluted bitumen spill could have profound and devastating effects.
Environmental politics: Environmentalists in Canada are outraged about the Harper government’s pushing through an omnibus bill that repealed several important environmental laws. The bill gave the Harper cabinet power to override National Energy Board decisions on big development projects like the Northern Gateway pipeline.
First Nations land claims: More than 50 percent of the proposed pipeline and tanker route lies in the traditional territories of Indigenous First Nations communities who are united in their opposition to the project.
Few economic benefits for BC: Opponents of the project have been quick to point out that the pipeline would generate very little in the way of jobs or revenue for the province. In the words of David Coles, President of Communications, Energy, and Paperworkers Union:
“Bitumen is just muck, neither tar nor oil. It needs to be upgraded to turn it into oil. It’s no different than raw log export. You ship it out of the country and you ship out thousands of jobs.”
Enbridge is forecasting the creation of only 217 long term jobs for British Columbia.
Provincial politics The Premier of British Columbia secured a surprise win in a recent Provincial election. Her victory has been attributed to her more moderate stance on pipelines and oil tankers and her ‘B.C. against Alberta and Ottawa’ rhetoric. Looking ahead, an important part of her strategy to bring jobs and revenues to the province involves ramping up LNG production. She’ll need the backing of environmentalists to pull this off. If she spends political capital on Enbridge, she’ll have none left to spend on LNG development.
On May 31, British Columbia formally rejected the Northern Gateway proposal. In its written statement, the government said it was not satisfied with responses to concerns about the risk of an oil spill resulting from this project. Factors such as the “incompletely understood” behavior of diluted bitumen in water, and the profound impact a potential spill would have on pristine river environments led the government to conclude that the project should not be approved.
With this decision, the government did not completely rule out a path to yes. British Columbia specified several conditions with respect to environmental stewardship, risk mitigation, and revenue sharing that would need to be met should the panel decide to approve the project.
British Columbia leads…should the Obama administration follow?
Opponents of Keystone XL see this B.C. decision as an important milestone and have urged U.S. lawmakers to follow suit. In an open letter to President Obama, Tom Steyer writes:
“With Friday’s announcement that the Canadian provincial government of British Columbia opposes the transportation of tar sands oil over their lands, the last of the arguments for the development of the Keystone Pipeline has collapsed.”
350.org founder Bill McKibben issued the following:
“For years the tar sands promoters have said: ‘If we don’t build Keystone XL the tar sands will get out some other way’. British Columbians just slammed the door on the most obvious other way, so now it’s up to President Obama.”
If Canadians continue to oppose pipeline access to the west coast, the fate of Keystone XL could impact the future extraction path of the oil sands. But it is by no means certain that blocking Keystone would reduce greenhouse gas emissions. To echo arguments made by Severin in an earlier post, high oil prices create strong incentives to find ways to get the oil out of the ground and into the market.
In sum, I think British Columbia has set an example worth following in two respects:
- The province is using a strong bargaining position to demand high levels of environmental stewardship, world-class spill response and adequate risk mitigation if the Enbridge pipeline is approved.
- They have not made anti-pipeline activism a centerpiece of their response to climate change. The province’s tough stance on pipelines is quite separate from the steps it is taking to reduce GHG emissions (e.g., a revenue neutral carbon tax of $30/ton of CO2 equivalent).
On Tuesday, President Obama will unveil his much anticipated national plan to reduce greenhouse gases. In gearing up to fight climate change, he needs to pick his battles wisely. A fight against Keystone XL would divert political capital and associated resources from other policy initiatives which are more likely to deliver greenhouse gas reductions in the near term.
Meredith Fowlie is an Assistant Professor of Agriculture and Resource Economics at the University of California, Berkeley. Prior to joining UC Berkeley, she was an Assistant Professor of Economics and Public Policy at the University of Michigan. She received a MSc in Environmental Economics from Cornell University in 2000 and PhD in Environmental and Resource Economics from UC Berkeley in ...
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