Given PEST factors Trudeau made correct decision on Kinder-Morgan ~ Hugh Holland


Canada’s oil pipeline decision
By Hugh Holland

Many opinions have been expressed about the federal government’s decisions to support the Kinder-Morgan pipeline and the steps taken to ensure that it gets built. It’s a complicated situation and it’s important to take the time to understand the long list of PEST factors (Political, Economic, Social and Technical) surrounding the decision. But first, let’s look at the global background.

A reliable and affordable source of energy for transportation is vital to life for the world’s growing population. The world’s vehicle manufacturers are aggressively developing vehicles with electric motors to replace oil-burning internal combustion engines, but there are many constraints. It will take two generations to replace the world’s easiest applications and longer to replace the more difficult applications along with enough clean electricity to power them.

Canada is home to the world’s third largest proven reserves of oil. Based on current production rates, reserve-life is 125 years for Canada, 81 for the Middle East, 21 for Russia, 19 for the USA, 19 for China, and 1 year for the European Union. That works out to 55 years for the world.

According to the International Energy Agency, carbon emissions from producing Canada’s oil sands product are about 7 per cent higher than the average of other sources and 7 per cent lower than some sources. The IEA says, “The difference in emissions is too small to be a factor in the sourcing of oil.”

Canada has the right and also the obligation to share our vital resource with the 185 countries that will need oil for the foreseeable future, but have little or no oil of their own.

Consequently, Canada must find the best ways to minimize greenhouse gas emissions from oil production and other sources and to transport our oil to the countries and people who need it.

Pipelines have proven to be the safest and most economical way to transport oil. The pipeline options in the order they were proposed are:

  1. A new 1,177 km Northern Gate pipeline from Alberta to Kitimat BC
  2. A re-purposed 4,500 km Energy East Pipeline from Alberta to St John NB
  3. An expanded 1,150 km Kinder-Morgan pipeline to the port of Vancouver
  4. A new 1,000 km Eagle-Spirit energy corridor for Alberta oil and BC gas to Prince Rupert BC

In the following evaluation, a rating of 1 indicates the best option for each factor, 2 is second best, etc.

In all cases spill risk is not zero, but with latest proven mitigation measures, risk is statistically very small. It is important to keep things in perspective. A recent Kinder-Morgan spill near Kamloops was reported as 4,800 liters.  That sounds big but it is the equivalent of three times our home propane tank or 4 per cent of a rail tank car.

Kinder-Morgan can be built and provide economic and social benefits sooner because it is an expansion of an known and already serviced route.

Kinder-Morgan and Energy East are more politically difficult because they pass thru more densely populated areas.  Most environmental activists categorically oppose all pipeline options, but have no viable alternative to offer.

These are all viable projects, but each has its particular pros and cons. At the end of the day, Kinder-Morgan has advantages in the technical, economic and social considerations that are not and should not be overcome by purely political considerations.

Vancouver is Canada’s biggest ocean port. Traffic will increase from 0.4 to 1.2 oil tankers per day in the port of Vancouver compared to 22 in Rotterdam, 30 in Houston, and 61 per day in Singapore.  Those mid-sized (Aframax) tankers will be escorted by expert Canadian-trained pilots and two tugs, with one tug tethered at all times until they reach the open ocean.

Eagle Spirit is second in overall rank. If and when more capacity is needed, it would be a strong candidate.

While even temporary government ownership of a pipeline is unusual in Canada, 75 per cent of the world’s oil production is done by government-owned enterprises.  Once the pipeline is running, there is significant upside potential to sell it at a profit, if so decided.

Anyone who has visited China recently will tell you they were blown away by the dramatic progress being made by that generally benevolent one-party government.  Sometimes it is necessary to bring closure to the endless wrangling that tends to take place in democracies, whether the Left or the Right is in power. This is one of those times and I am glad it was done.

To further minimize the risk and consequences of both pipeline spills and tanker spills, Alberta bitumen could / should be refined in Alberta and / or Northeast BC. That would bring hundreds more good jobs.

To totally eliminate carbon emissions, Alberta could / should use electricity from clean, safe advanced nuclear reactors that are reliable 24/7 regardless of weather. Instead of wasting the clean and cost-free surplus heat from those reactors, it could / should be used to replace the natural gas heat currently used for oil extraction, upgrading and refining.

Hugh Holland is a retired engineering and manufacturing executive now living in Huntsville, Ontario.

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  1. Thanks for your thorough analysis, Hugh. I agree that Kinder Morgan is the best option from the looks of it.

  2. Hugh, you are obviously a highly intelligent man, and I always appreciate your disentangling of these Gordian knots. So I’m basically just trying to get my head around a few issues: What did the Energy East pipeline previously carry, and why would its re-purposing cost be equivalent to Eagle Spirit’s new pipeline? If the economic/social factors were evaluated separately, would it be possible that Eagle Spirit might be preferred socially; considering that it would occupy generally less populated areas? As well, this could be regarded as a superior environmental factor, because spill capture areas could be constructed adjacent to the pipeline.
    I realize that the Prince Rupert harbour is not the equivalent of the Vancouver harbour, but it is far better served by rail (and has received $3.7 B for extensive improvements). And shouldn’t the natives have a proportionate say in the decision? After all, it’s really all their land.

  3. Hugh Holland on

    Rob, Energy East and Eagle Spirit were both estimated to cost around $15. 2/3rds of Energy East is a re-purposed natural gas pipeline on a known existing route, and 1/3rd is new pipe on a new route. Eagle Spirit is an all new but much shorter route. You can google the route maps for all pipelines.

    Yes, Eagle Spirit could be considered as having a social advantage because it follows a shorter route through much less populated areas. I showed that as a political advantage because the leader of Eagle Spirit is a highly respected First Nations lawyer who claims to have support from 95% of Fist=rt Nations on that route. He says that First Nations want to become self-sufficient but environmentalists who support prohibiting tanker traffic on the north BC coast want to turn First Nations land into parks and keep them in perpetual poverty.

    The Prince Rupert harbour offers the most direct and unobstructed route to open ocean, whereas ships leaving Vancouver harbour must work their way past several channel islands before reaching open ocean. That is why they will be accompanied by 2 tugs with one tethered at all times until they reach open ocean to guard against the unlikely possibility that they might lose power or steering control. That is why they will have Canadian-trained expert pilots on board in case the skipper goes to sleep as happened with the Exxon Valdize in the 1970s. Since then there have been many important improvements to tanker regulations, including the requirement that all tankers must be double-hulled, that have resulted in a dramatic reduction in tanker spills. A tanker recently ran aground in the St Lawrence seaway near Morrisburg Ontario. But there was no spill due to the double hull.

    • Thanks so much, Hugh, for your insightful response. I have a Catch-22 between my love for the environment, and my empathy for the First Nations. As you say, the marine regulations have been improved; as well as tanker construction. I am surprised, therefore, that the PM took the unusual step of choosing Kinder-Morgan, and made it a public utility.
      He would certainly have scored more points with me by choosing the Eagle Spirit alternative.

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