Other than the fact that the Trans Mountain Expansion (TMX) and Coastal GasLink (CGL) pipelines may finally be completed in the next year, there is no good news associated with what are surely the two most expensive pipelines in history.
The latest cost estimate for the 992 km. TMX project from Edmonton to Burnaby is $30.9 billion. When originally announced by Kinder Morgan on December 16, 2013 the projected cost was $5.4 billion. The report warned the final cost could be higher.
Last month it was announced that the 700 km. CGL line from the Dawson Creek area to LNG Canada in Kitimat will now cost $14.5 billion. When first announced by TransCanada Corporation on June 5, 2012, the original estimate was $4 billion. The total cost for this project may also rise.
The most recent completion dates are Q1 2024 for TMX and late this year for CGL. That line will go into service when LNG Canada starts up in 2025.
That these pipelines will be completed is wonderful news for landlocked oil and gas producers and the Canadian economy. Restricted market access has cost Canada hundreds of billions of dollars.
One year of oil sands production at 3.4 million b/d at a C$15 per barrel discount equals $18.6 billion. Earlier this year the differential was closer to $40. It is currently $22.
Alberta produces about 10 bcf/d of natural gas. Having that gas fetch $1 per mcf below U.S. prices works out to $3.7 billion annually. Canadian gas prices have been in the dumpster for years.
The cost to the country of pipeline delays, cancellations and discounted commodity prices as measured by revenue, taxes, employment, economic disruptions, investment, competitiveness, and international credibility is enormous.
Because pipelines are no longer about creating wealth. For the past eleven years the focus has been politics. The collateral damage to the industry, country and economy is a secondary issue.
If one had to pick a start date or pivotal event, it would probably be the regrettable spillage of 20,000 barrels of “dilbit” into the Kalamazoo River in Michigan in 2010 from Enbridge line 6B. This was the same year as BP’s monster Macondo blowout in the Gulf of Mexico. The environmental impact of oil attracted global attention.
The now-infamous “Tar Sands Campaign” launched in the U.S. in 2008 was poised to exploit every opportunity to attack oil sands in every way possible.
Shortly after the pipeline spill, U.S. environmentalists created authentic looking but fictitious reports that dilbit was so corrosive that it wore holes in pipelines. This was accompanied by the assertion that viscous bitumen wouldn’t float. This made oil sands pipelines under or near waterways or ocean transport particularly dangerous.
In 2012 Canadian pipeline opposition and protests became front page news. Enbridge got its first taste of how much things had changed for previously routine regulatory hearings when the NEB process began for Northern Gateway in 2012.
Organized international opposition to Canadian pipelines became clear when 4,000 form letters from all over the world appeared demanding intervenor status. When Stephen Harper’s federal government changed the rules so only those directly affected could participate, that was criticized because climate change was a global problem.
A year later, headline-grabbing publicly stunts moved to Ontario during NEB hearings for the proposed reversal of line 9 back to its original purpose.
By 2015, pipelines had become a federal election issue. Justin Trudeau made campaign promises to stop Northern Gateway and retool the NEB, in part because it kept concluding that pipelines were in the national interest. Four years later bills C-48 and C-69 became law.
Today, no major pipeline operator will invest in a new project fraught with such uncertainty after losing hundreds of millions of dollars on Northern Gateway, Energy East, and Keystone XL. Enbridge and TC Energy instead focused their expansion efforts on the U.S.
When TMX and CGL updated rising construction costs, their owners politely avoided mentioning all the delays and cost increases caused by political posturing and interference.
TMX lists southern B.C.’s huge flood, the pandemic, supply chains, Burnaby Mountain tunnel challenges, construction in populated areas, difficult terrain, lower worker productivity, labor shortages, and encountering unexpected archeological and environmental obstacles.
According to its news release, CGL’s costs rose because of, “…the higher price of materials, a shortage of skilled labour and contractor underperformance and disputes, as well as other ‘unexpected events’ including drought conditions and challenges with erosion and sediment control.”
Lest we forget, following is a summary of the pipeline politics have that contributed significantly to costs and delays.
TMX was in court longer than it has been under construction.
After Kinder Morgan formally applied to the NEB in late 2013, the political games began. The City of Burnaby filed its first injunction in the B.C. Supreme Court in 2014 on environmental grounds. After this was overturned, Burnaby was back a year later requesting a review of constitutional conflicts between the NEB and Burnaby’s by-laws.
In May of 2016 the NEB approved the project for the first time, subject to 157 conditions. In November of that year Prime Minister Trudeau announced the project would proceed. At the same time, he officially killed Northern Gateway.
A month later Burnaby intervened again by delaying the issuance of the necessary permits for the expanded tank farm and loading terminal. Kinder Morgan appealed to the NEB which over-ruled Burnaby in October of 2017. In January of 2018 the NEB officially declared Burnaby’s interference “unreasonable”, a decision ratified by the federal court of appeal.
In January of 2017 BC issued its Environmental Assessment Certificate with 37 additional conditions to the NEB ruling. That was done by the Liberal government of Premier Christie Clark.
But later in 2017, TMX became a provincial election issue with NDP Leader John Horgan pledging to use “every tool available” to stop the expansion. Horgan won the May election and kept his promise. TMX was back in court, this time to amend B.C.’s Environmental Management Act to declare heavy oil a hazardous substance. This was referred to B.C.’s court of appeal.
But Horgan’s own environment minister would later admit that the province didn’t have much of a case. A Bloomberg report April 13, 2018, was titled, “Advisors warned B.C. premier that blocking pipeline against the law.” The court agreed in May of 2019 ruling that this was outside of the province’s constitutional authority.
In March of 2018, B.C. issued an injunction against protestors so that work could proceed at the Burnaby terminal. To raise the political temperature even higher, on March 23 Green Party Leader and MP Elizabeth May and NDP MP Kennedy Stewart intentionally violated the order and proudly had themselves arrested before lots of media and cameras.
May said, “The commitment to build a pipeline in 2018 when we’re in a climate crisis is a crime against future generations and I will not be part of it.”
For federal MPs, intentionally breaking the law is not a crime in the court of public opinion if it appears noble to enough voters. May was punished by being re-elected in the 2019 election, and again in 2021. Kennedy Stewart went on to become mayor of Vancouver until he was replaced in October of 2022.
But the politics had gone too far for Kinder Morgan. In the spring of 2018, the company announced that if it wasn’t allowed to start construction immediately, the project would be cancelled.
With Northern Gateway, Energy East and Keystone XL all dead because of pipeline politics, the federal government bought the existing pipeline for $4.5 billion in May of 2018 and committed to completing the expansion.
Meanwhile, a coalition of First Nations challenged the NEB’s original approval in the federal court of appeal. In August of 2018 the court ruled the original decision was faulty due to failure to adequately consult First Nations and consider increased oil tanker traffic.
In February of 2019 the NEB issued a new report and in June the federal government approved TMX for the second time. Objections to all earlier decisions that kept TMX alive continued. These were finally resolved in 2020.
In December of 2019 TMX laid the first section of pipe outside of Edmonton, six years after the original NEB application.
The costs of years of political posturing, interference, court challenges, litigation, delays, and the federal government’s well-known major construction project management skills are included somewhere in the new $30.9 billion cost estimate.
Not tabulated are the indirect costs which include producer revenues, reduced government taxes at all levels, the exodus of tens of billions of dollar of investment capital, and the damage to Canada’s reputation as a safe and predictable destination by international investors.
The CGL pipeline has been highly politicized, but in much different ways. Because it was conceived to carry natural gas, not oil, it wasn’t an environmental hazard for the same reasons. But natural gas was still ostracized as a carbon-emitting fossil fuel.
What is noteworthy is that the two governments that actively obstructed oil pipelines – B.C. and Ottawa – provided significant financial support for LNG Canada and its essential supply link, CGL.
Therefore, pipeline opponents needed a new angle. So they focused on First Nations’ protection of land and traditional way of life.
This would prove to be equally effective and in some ways, much worse.
While approval for TC Energy to build CGL was granted in 2012 by Shell Canada, there were many fiscal issues to be resolved before the official announcement of construction on October 1, 2018. This included the waiver of provincial taxes such as carbon and PST, and relaxing federal restrictions regarding the importation of completed gas processing and liquification modules.
The main political tool exploited to create delays and possible cancellation of CGL, and therefore LNG Canada, was the internal workings of the Wet’suwet’en First Nation which occupied a large piece of territory near Smithers along the pipeline right-of-way.
CGL invested heavily in building economic and political bridges with 20 First Nations on the pipeline route in order to secure a “social license.” For the Wet’suwet’en First Nation, this included five of the six elected band councils representing a strong majority of its members.
But the Wet’suwet’en hereditary chiefs opposed the project. Their reasoning, based on traditional governance practice, was that band councils had no authority for land beyond reserve boundaries. Only they could do that.
So began what would eventually deteriorate into violence and vandalism on Wet’suwet’en territory when pipeline opponents arrived to show solidary with the hereditary chiefs. Demonstrations and road blockades began in 2019.
This was quickly followed by a B.C. Supreme Court injunction against anyone “obstructing, blocking, physically impeding or delaying access” in the area.
As opposition continued, arrests began. The formerly unknown Wet’suwet’sen hereditary chiefs became internationally famous as fearless land protectors opposing the destruction of their traditions and environment by big fossil fuel companies.
If you were opposed to pipelines and fossil fuels, this was a new way to support delays and possible cancellation.
By early 2020, the UN Committee on the Elimination of Racial Discrimination demanded Canada immediately halt CGL construction, plus TMX and the Site C dam. This would later be withdrawn once broad First Nations support was brought to their attention.
Then the national protests began. On January 7 in Hamilton, three railway junctions were sabotaged in solidary with the anti-pipeline chiefs. A few days later the B.C. Human Rights Commissioner called for construction to stop until all Indigenous groups supported the pipeline.
B.C. ferry service to Vancouver Island was disrupted. A week later B.C.’s Minister of Public Safety and Solicitor General declared a provincial state of emergency and authorized the RCMP to enforce the 2019 injunction. Talks between the B.C. government and the chiefs broke down.
Rail blockades began in Ontario, Quebec and across western Canada. Rallies in support of the CGL opponents were held in Nelson, Calgary, Regina, Winnipeg, Sherbrooke and Halifax. Nearly four dozen people were arrested in Vancouver after they blocked access to ports.
In the middle of winter, Quebecers began to worry about shortages of propane delivered by rail which was essential for heating.
Due to growing public demands for law and order, by the end of February settlement negotiations were underway. A poll by IPSOS revealed 63% of Canadian supported immediate police intervention. Sixty per cent of Canadian opposed the blockades. Arrests continued but the demonstrations became more sporadic.
In early March a Memorandum of Understanding was signed between Ottawa and the hereditary chiefs. RCMP patrols on the CGL construction site and work resumed. Rail traffic returned to normal.
But as a result of the chaos, on March 6 legendary investor Warren Buffet and Berkshire Hathaway pulled its $4 billion financing for Energie Saguenay, a major Quebec LNG export project. Energie Saguenay announced on its website that an unnamed private investor had withdrawn support stating, in French, that “This decision was taken because of the political context that has prevailed for a month now in Canada.”
The Quebec government officially withdrew support for Energie Saguenay in July of 2021. Financial backers of the related gas pipeline announced earlier this month that they were suing the province for US$20 billion in damages.
On March 11, 2020, the World Health Organization declared a global COVID-19 pandemic and the world changed the channel. The inconvenience of the rail blockades was quickly eclipsed by an even greater societal and economic disruption.
For a while.
On February 17, 2022, there was a major act of vandalism at the CGL construction site on Wet’suwet’en land during which 20 masked individuals trashed trailers and construction equipment and threatened workers. This didn’t attract national attention because it occurred at the same time that the federal government was using the Emergencies Act to clear the noisy truckers out of Ottawa.
The job done, they left. Who did it remains unsolved a year later. Millions of dollars of damage was done according to CGL.
Now CGL opposition has switched to claims of sabotage. On February 28 The Epoch Times ran a story titled, “Anonymous Online Website Claims Credit for Sabotage of Coastal GasLink Pipeline.”
A blog posted February 24 reads, “A few holes in the pipeline here, some corroded welding seams there, damaged concrete here. Our goal was to contribute to small delays in a project that was well over budget.” It describes drilling holes to weaken the pipe then disguising the hole with fiberglass or epoxy so they would not be noticed. The protective coating was also damaged to accelerate rust and corrosion once the pipe was buried. The locations were identified within three-kilometer distance.
The threat is to have the pipeline leak and possibly explode once it reaches full operating pressure.
After listing 10 such acts of sabotage the website stated, “Or is that in fact what happened? Only some of these activities have actually taken place.” The purpose is to “use every means at our disposal to delay construction as best we can. So the only way to know where repairs are needed it to excavate and examine all the above-mentioned pipe.”
The title of the blog is “Treasure Hunt for Coastal GasLink.”
The article states that CGL and the RCMP are aware that efforts to delay and disrupt construction continue.
On March 14 Cedar LNG announced that Canada’s first Indigenous majority owned west coast LNG export project had received environmental approval. Last September 23 First Nations and Metis communities bought minority interests in seven pipelines from Enbridge at a cost of $1.12 billion.
Anyone suggesting that the drama associated with CGL has anything to do with protecting Indigenous lands or preserving the rights of the Wet’suwet’en hereditary chiefs should do a bit more homework.
According to an on-line review, “How to Blow Up a Pipeline” is the title of a book released in 2021 by “noted climate scholar (and saboteur of SUV tires and coal mines) Andreas Malm’’ of Sweden. Malm “makes an impassioned call for the climate movement to escalate tactics in the face of ecological collapse.”
What choice is there with the future of the planet at risk?
This is the same conclusion reached by MPs May and Kennedy when they broke the law at the TMX Burnaby site in a staged arrest.
And so it goes for B.C. Premier John Horgan promising during an election campaign to use “every tool available” to block TMX. And Prime Minister Justin Trudeau cancelling Northern Gateway and passing legislation to ensure no oil tanker could ever load crude on B.C.’s northern coast.
Or the vandalism and rail blockades associated with CGL, and public claims of intentional sabotage so the pipeline will leak and possibly explode because of structural weaknesses created by vandals.
When these people cloak themselves in their shrouds of climate moral probity, the cost to the economy, workers or taxpayers doesn’t matter.
When Canadian politicians break or challenge existing laws, what message does this send to everyone else?
When vandalism and sabotage become acceptable or even tolerated for any reason, where does it end?
As we’ve been told so many times, any costs incurred today like those above pale in comparison to the future cost of climate change.
Except the rest of the world doesn’t see it that way. Witness G7 countries coming to Canada and pleading for LNG.
Don’t they understand the enormous financial sacrifice Canada has made on their behalf to save them from impending climate catastrophe?
No, they don’t.
And neither do I.
David Yager is a Calgary oil service executive, oil and gas writer, energy policy analyst, and author of From Miracle to Menace – Alberta, A Carbon Story. More at www.miracletomenace.ca