Letter of Transmittal
Richard Albert Sylvester
Management Consultant
Lamplighters Corporation
Ottawa K I P 5B5
Phone: 613-563-1509
www.lamplightres.ca
The Right Honorable Justin P.J. Trudeau
Office of the Prime Minister
80 Wellington Street
Ottawa, ON K1A 0A2
RE: Project Suitability Report on the Proposed Trans Mountain Expansion Pipeline Project
Dear Right Honorable Prime Minister,
It is with great pleasure and honor that I submit this report on the suitability of the proposed Trans Mountain Expansion pipeline project.
The Trans Mountain Expansion pipeline project proposal by Kinder Morgan aims at increasing the current capacity of the existing Trans Mountain oil pipeline. Currently, the existing infrastructure has a capacity of 300,000 barrels per day, and the proposed expansion aims at increasing this capacity to approximately 890,000 barrels per day. This capacity growth is expected to result in substantial employment benefits for the communities living along the Trans Mountain oil pipeline corridor, besides providing tax revenues to both the provincial and federal governments.
However, the proposed pipeline expansion has generated a heated controversy due to the opposition coming from different sections of the Canadian public, including First Nation communities living along the Trans Mountain pipeline corridor, environmentalists, and political leaders of cities along the pipeline’s route. The basis of this opposition is the potential risks associated with the pipeline expansion, including the hazards associated with terrestrial and marine ecosystems. Moreover, the potential revenue benefits of the expansion compare minimally to the current ones collected by cities along the corridor.
On the basis of this deadlock and the potential risks and benefits of the proposed project, this report recommends that you turn down the proposal. However, if Kinder Morgan accepts to meet the conditions made clear in this report, the project can be approved.
Thank you for the opportunity that your administration has given me and my organization, and I believe the final decision of your government will be in the best interest of Canada.
Richard Albert Sylvester
Management Consultant
Lamplighters Corporation
Letter of Transmittal 2
Executive Summary 4
Introduction 5
Scope of the Present Report 5
Method of Research 5
Purpose of the Report 5
Rationale for the Trans Mountain Oil Pipeline 6
The Present Reality 6
Discussion and Findings 7
The Controversy Surrounding the Trans Mountain Expansion Pipeline Project 7
The Potential Benefits of the Trans Mountain Expansion Pipeline Project 9
Short-term employment benefits. 9
Long-term employment benefits. 10
Long-term tax benefits. 11
Fiscal benefits for provincial and federal governments. 12
Increased revenue benefits for crude oil producers. 12
Potential Risks Associated with the Trans Mountain Expansion Pipeline Project 13
Recommendations 14
References 15
Executive Summary
The west coast of Canada is a region of impeccable natural beauty, which is characterized by a high quality of life and a fervent spirit in terms of innovation. Today, the region is on a course of determining its economic destiny as evidenced by a number of high-profile projects, either commencing construction and development or still in the deliberation and analysis stage. In this context, the region cannot afford to ignore developments, such as the proposed Trans Mountain Expansion Pipeline Project, due to the economic and social significance that they have for the local people and businesses alike. Kinder Morgan’s pipeline project, if allowed to commence, will, undoubtedly, impact the lives, work, and businesses of communities living on the west coast. On this basis, it is very important to consider some of the implications of the project for the various entities; what the project will mean to them if Vancouver becomes a major oil shipping port, how the reputation of Vancouver as one of the greenest cities in the world will be affected, who exactly will benefit, and who will be at risk if the project commences, and what kinds of risks will be acceptable and which ones will be unacceptable in the opinion of the coastal communities residing on the west coast.
The Proposal: Texan-based firm, Kinder Morgan, has submitted a proposal for a $5.4 billion pipeline project, where it intends to build a new oil pipeline alongside its Trans Mountain pipeline system, which stretches for 1,150 kilometers from Edmonton, Alberta to Burnaby. Kinder Morgan’s goal is to increase its pipeline capacity from the current 300,000 barrels per day to approximately 890,000.
Key Findings: Concerning routing, there is significant uncertainty over the exact route that the pipeline will take, which is a major concern due to the density of human population in some areas in the Fraser Valley. With respect to the issue of oil spills, a deep concern is rife about the integrity of Kinder Morgan’s facilities, and it is founded on the fact that the company has reported several leaks and spills in its facilities, including the Trans Mountain oil pipeline, which has experienced several such incidents since 2005. Regarding jobs and tax revenues, the Trans Mountain Expansion project would not significantly contribute to employment and tax revenue for the people of British Columbia and the provincial government, according to Kinder Morgan’s estimates. With regard to liability, Kinder Morgan has only committed to $1.3 billion in the case of a major oil spin, meaning that most of the liability lies with the taxpayers of British Columbia. Concerning disaster preparedness in case of an oil accident, Canada lacks the capability to respond to a major oil spill in its waters at the moment. Finally, with regard to the health aspect, spills may contaminate the waters with dilbit, a major compound present in diluted bitumen, which is highly poisonous for marine life and a health hazard to humans.
Recommendation: On the basis of our findings, this report highly recommends that the proposed Trans Mountain Expansion pipeline project be canceled forthwith.
Introduction
Historically, oil has remained among the most lucrative, yet controversial, global commodities. The lucrative side of the precious commodity is evidenced by the profit margins that global oil marketing firms, such as British Petroleum (BP) and Exxon-Mobil among others, report in their fiscal reports. Additionally, the wealth of countries producing oil, such as the Kingdom of Saudi Arabia, is a clear testament to the viewpoint that oil is equivalent to national prosperity. On the other side, the controversy surrounding the commodity is manifest in areas where it is extracted and refined. Communities in such areas cry foul about the health risks that oil production and refining pose to them. Additionally, environmentalists argue that oil spills and leaks endanger marine life as well as a host of other ecosystems. Consequently, companies involved in crude oil production and natural gas extraction, as well as those that deal in refining and transporting the commodity, continue to face intense scrutiny from governments and civil groups.
Scope of the Present Report
In Canada, the proposal by Texan-based Kinder Morgan to construct a twin pipeline to its existing pipeline system has been met with noteworthy rejections. Coastal communities on the west coast, as well as environmentalists, are up in arms over the potential risks and threats that the project will bring to the region. Additionally, political leaders in jurisdictions falling within the expected route of the pipeline are dissatisfied with the positive implications of the project for their populations. In this regard, the Trans Mountain Expansion pipeline project is under serious communal distrust due to the fact that members of the community (in this case those who oppose the project) do not see or have not been informed about the potential benefits of the project. However, there are those who support the project and are confident that it will positively impact the region. Based on the development, the report analyzes both the potential benefits, as well as the potential risks, of the Trans Mountain Expansion pipeline project.
Method of Research
The report undertakes an in-depth analysis of existing literature on Kinder Morgan, including its position as an oil company, the history of Trans Mountain oil pipeline, and the proposed Trans Mountain Expansion pipeline project on Canada’s west coast. The literature combines government reports, such as the analysis and evaluation of the National Energy Board, environmental assessment reports by civil society groups, including environmentalists, reports on the project’s implications for the Canadian energy market by energy experts, and economic analysis reports of the project by economic analysts among others.
Purpose of the Report
The main purpose of the report is to provide an in-depth analysis of the potential benefits of the Trans Mountain Expansion pipeline project to all the stakeholders, including the communities living along the pipeline’s route and the provincial administrations within the same corridor. Furthermore, it highlights the potential risks of the pipeline project to the communities and businesses along the main passage. In addition, it discusses the extent of likely environmental and health risks that the project will portend for the region and its population. On the basis of the findings on the two aspects, the report will give a recommendation on the suitability of the Trans Mountain Expansion pipeline project, including whether it should be approved or rejected.
Rationale for the Trans Mountain Oil Pipeline
For the first time, the 1947 discovery of crude oil deposits at Leduc, Alberta instigated a wave of oil pipeline construction for long-distance delivery in Canada (Kheraj, n.d.). Three years later in 1950, Enbridge (then Interprovincial Pipe Line) initiated the first efforts in this wave by completing an oil pipeline between Edmonton, Alberta, and Superior, Wisconsin (Kheraj, n.d.). Shortly thereafter, another oil pipeline was constructed in the opposite direction, from Edmonton, Alberta to Burnaby, BC as well as to Puget Sound area in Washington. This was done by Trans Mountain Oil Pipeline Company in response to the late 1940s and early 1950s rush toward the development of oil infrastructure to take advantage of the newly found resources in the west coast of Canada (Kheraj, n.d.).
Trans Mountain’s foray into Canada’s west coast was significantly marked by the construction of several pipelines, including an 1155-kilometer oil pipeline of about 6 centimeters wide from Edmonton to Burnaby between February 1952 and October 1953; an 8.9-kilometer spur extension between Ferndale, Washington and Sumas, which was later extended to Anacortes; and an additional four kilometers of a delivery line to a loading dock at Westridge on the Burrard Inlet (Kheraj, n.d.). Consequently, the Trans Mountain oil pipeline crossed the Rocky Mountains at Yellowhead Pass, passing through Mount Robinson Provincial Park, as well as Jasper National Park. Since this period, however, the Trans Mountain oil pipeline has undergone major modifications, most of which have been informed by market conditions (Kheraj, n.d.).
The Present Reality
The Trans Mountain oil pipeline has been delivering crude oil and other petroleum products for over 60 years since it was first constructed (Kheraj, n.d.). The pipeline has been moving these products from oil-rich Alberta to oil refineries located in British Columbia, Washington, and beyond. However, during this period, the company has considerably altered the pipeline routing in response to emerging trends in the wider oil industry. This explains why the rationale for the construction of the pipeline in the 1950s had to be modified to fit the unfolding realities (Kheraj, n.d.).
Unfortunately, between 1973 and 1991, Trans Mountain oil pipeline was largely underutilized due to the low levels of crude oil production (Kheraj, n.d.). Additionally, the United States had introduced several restrictions on oil exportation coupled with a number of measures, such as fuel efficiency standards for automobiles, and energy conservation policies. Most importantly, the general economic recession experienced during this period was a major contributing factor to the reduction in Trans Mountain pipeline crude oil levels. Indeed, this caused the company to associate the low crude oil levels transported through the pipeline with a decrease of crude oil consumption in the United States in 1981.
However, from 1992 to 2010, the pipeline restored its former daily crude oil delivery levels of over 200,000 barrels per day since the 1970s (Kheraj, n.d.). The firm ascribed much of this growth to increasing shipments of heavy crude oil delivery after the development of bitumen oil resources in Alberta, which continues up to the present moment.
However, due to the favorable global oil market and the firm increase in demand for oil products, especially in North America, Kinder Morgan, the current owner of the Trans Mountain oil pipeline wishes to expand the capacity of the existing pipeline system. This need is the basis of the company’s proposal to the Canadian National Energy Board (NEB) to be allowed to commence the expansion of the existing pipeline. Kinder Morgan intends to expand the existing pipeline system between Edmonton, Alberta and Burnaby, British Columbia, which will entail constructing a new pipeline as well as making modifications to the existing one through the additional of pump stations and farm tanks, as well as the reactivation of approximately 190 kilometers of the existing pipeline (Kheraj, n.d.). Consequently, the company intends to expand the Westridge Marine Terminal and at the same time add new segments between Edmonton and Hinton in Alberta as well as Hargreaves, Darfield, Black pines, and Burnaby in British Columbia. Additionally, Kinder Morgan intends to reactivate some existing segments that had been deactivated when the pipeline was underutilized between 1973 and 1991 (Kheraj, n.d.). These segments include sections between Hinton in Alberta as well as Hargreaves, Darfield, and Black Pines in British Columbia.
On May 19, 2016, the Canadian National Energy Board released its analysis report and recommended that the Governor in Council (GIC) approve the Trans Mountain Expansion pipeline project (National Energy Board, 2016). Once the GIC approves the project, the energy board will issue a Certificate of Public Convenience and Necessity, giving Kinder Morgan the right to commence the mega pipeline project. However, the board attached a list of conditions, which Kinder Morgan must meet and satisfy in the course of the pipeline construction.
Discussion and Findings
The Controversy Surrounding the Trans Mountain Expansion Pipeline Project
Kinder Morgan’s proposed Trans Mountain Expansion pipeline project has continued to gather controversy at every turn since it was made public. This controversy involves two main groups, including those who support it and those who oppose it. Each of the factions has their reasons, which are founded on facts that cannot be ignored by either side. It is on this basis of both sides having strongly supported arguments that the issue has become the most controversial national discourse in Canada in recent times. Notably, the controversy of this project emanates from several factors, such as the facts that the pipeline is proposed to pass through densely populated neighborhoods, communities, and residential areas; it is in proximity to environmentally sensitive locations; it will result in increased tanker traffic that may interrupt marine life significantly; and environmental concerns about Kinder Morgan’s plan to use the new pipeline for transporting diluted bitumen, which portends serious threats to marine life and other ecosystems (Gilchrist, 2014).
The route that Kinder Morgan proposes for the new oil pipeline includes sensitive ecological areas as well as densely populated neighborhoods. Consequently, the route could seriously interrupt and jeopardize the lives of hundreds if not thousands of human communities, including businesses and other ecosystems (Environmental Justice Atlas, 2016). By insisting on building the project under the terms of the pre-established right-of-way access undertaken during the construction of the existing pipeline, Kinder Morgan has created a visible sense of uneasiness with the concerned communities (Voss, 2015). This is because the areas surrounding the existing pipeline have undergone tremendous changes since the first pipeline was constructed. Furthermore, the planned route would mean that the pipeline would pass beneath several learning institutions as well as be in close proximity to several others (Voss, 2015). Additionally, it will have to run through shopping centers and residential neighborhoods. Most importantly, the pipeline will run below aquifers, which are the main sources of drinking water for residents in areas, such as Abbotsford and Chilliwack (Voss, 2015).
Consequently, the frequency of modifications to the Trans Mountain oil pipeline is a major issue of concern fuelling the controversy surrounding the currently proposed pipeline expansion project. Kinder Morgan has initiated several modifications to the existing pipeline without notifying the public. This has raised two main concerns relating the company’s willingness to seek stakeholder collaboration and build consensus in its projects on the west coast of Canada, and the certainty of the proposed route. For example, a most recent modification of the pipeline routing will see Kinder Morgan drill a tunnel through the Burnaby Mountain. Most importantly, since the regulatory review by the Canadian National Energy Board of the project began, the stakeholders, especially those opposed to the project, have experienced difficulties in finding correct information regarding various aspects of the project. This has bred a sense of mistrust and resentment, which has continued to fuel the controversy surrounding the Trans Mountain Expansion pipeline project (Voss, 2015).
Indeed, the actions of Kinder Morgan over the years with regard to the operations of the Trans Mountain oil pipeline have left communities along its course wondering over the social responsibility of the company. This concern is evident in the current controversy over the Trans Mountain Expansion pipeline project. For example, the Save the Fraser Declaration is a document agitating for the cancellation of the project. In addition, through the efforts of the Yinka Dene Alliance, more than 130 First Nation communities have appended their signatures for the same (Hume, 2014). The declaration unites and declares the opposition of the First Nation communities to the pipeline and the subsequent increase in tanker traffic entering the Burrard Inlet. Consequently, in October 2013, representatives of the Tsleil-Waututh, Musqueam, and Squamish Nations showed their opposition to the project by protesting by way of riding traditional canoes along the Burrard Inlet all the way to the Westridge Marine Terminal (Hume, 2014). Considering that the greater Vancouver is a densely populated region, the proposed pipeline could have devastating effects on the populations and hence may present significant impediments to its progress. Moreover, cities along the pipeline route, which include the District of Abbotsford, the City of Vancouver, and the City of Burnaby, could be affected by the pipeline expansion, which has made their residents come out strongly against the proposed Trans Mountain Expansion pipeline project.
The communities that stand to be affected by the proposed pipeline project together with the political leadership of cities along the proposed pipeline corridor have publicly aired their concerns through various mediums, including print and broadcast media. On his part, the Mayor of Burnaby Derek Corrigan has questioned the rationale through which the city and its residents should fund disaster response in case of an oil spill or leak caused by the Trans Mountain oil pipeline when Kinder Morgan has been laying off workers at its Burnaby tank farms hoping that the city will employ them (Lee, 2014). These remarks demonstrate the frustration that the residents of Burnaby have had over the years in the course of their relationship with the Texan company. The mayor’s remarks provide a window of understanding why a vast majority of communities are opposed to the proposed pipeline expansion; Kinder Morgan has not been that friendly to the community in terms of social responsibility. According to Chuck Punchmayr, the current head of the Lower Mainland Government Association, his outfit is pleading with both the Federation of Canadian Municipalities and the Union of British Columbia to call on the National Energy Board and the federal government to cancel Kinder Morgan’s Trans Mountain Expansion pipeline proposal (Lee, 2014). The main concern of the Association, which comprises three regional districts, as well as 33 municipalities, is the pipeline expansion’s effects on the territory between Pemberton and Yale (Lee, 2014).
In Vancouver, the Mayor, Gregor Robertson, questioned the Trans Mountain Expansion pipeline project’s review and approval process, which was being conducted by the National Energy Board, terming it as hostile to public opinion. In his observations, he noted that the Board had consistently ignored the participation of the public in the review process (Lee, 2014). Consequently, a number of councilors in the Vancouver region noted their disappointments over what they termed as Kinder Morgan’s poor planning for an oil spill, which they claimed was underpinned by a noticeable lack of information on the matter (Lee, 2014). Furthermore, they castigated the National Energy Board for its unwillingness to consider the long-term implications of the proposed pipeline project in terms of climate change and fossil fuel issues even though it was willing to consider the economic benefits of the project (Lee, 2014). The councilors termed this approach as a clear sign of the inadequacy of the review process being undertaken by the board and a testimony of Kinder Morgan’s Trans Mountain Expansion pipeline project’s arrogance toward the west coast communities.
The Potential Benefits of the Trans Mountain Expansion Pipeline Project
The benefits of Kinder Morgan’s proposed Trans Mountain Expansion pipeline project are mostly economic and are categorized as short-term and long-term.
Short-term employment benefits.
In its proposal, Kinder Morgan claims that the proposed new pipeline, as well as the expansion of the existing one, will create jobs for the residents of Canada’s west coast although in the short-term. According to the company, the jobs will run for a two- to three-year period of new pipeline construction and related activities. Kinder Morgan estimates that taking into consideration the wide range of spin-offs throughout the supply chain as well as economy, the construction of the proposed oil pipeline will create approximately 30,000 person-years of employment in the province of British Columbia (one person-year is equivalent to one full-time job for one person in a year) (Goodman & Rowan, 2015). This means that approving the Trans Mountain Expansion pipeline project would result in about 36,000 jobs for the residents of British Columbia over the estimated three years of construction and related activities. On average, the total employment positions for British Columbia residents in a year would be 12,000.
Currently, the total employment position of British Columbia exceeds 2 million jobs (Goodman & Rowan, 2015). Therefore, taking into account all the spin-offs as per Kinder Morgan’s estimation, the jobs that would be created by the pipeline expansion project would account for about 0.5 percent of the British Columbia total. Even though somewhat significant, these employment vacancies would be only short-term (Goodman & Rowan, 2015). The jobs estimated by Kinder Morgan for British Columbia include on-site, which deal with construction workforce, offsite, which include engineering, support, and design, and downstream, which involve those supported by workers’ s income spend from off-site and on-site categories.
Concerning on-site positions (direct pipeline construction workforce), Kinder Morgan estimates that building the new pipeline and expanding the existing one will require about 1,900 workers every year over a two-year period. Of this amount, about one-third (averaging about 600 workers every year) will work in the Metro Vancouver region (Goodman & Rowan, 2015). Therefore, according to the estimates of Kinder Morgan, the entire pipeline construction workforce for the proposed pipeline in the province of British Columbia (1,900 workers per year for two years), would be less than 11 percent of the total with spin-offs, which comprise about 12,000 jobs per annum (Goodman & Rowan, 2015). As indicated by this comparison, approximately 90 percent of jobs estimated by Kinder Morgan for the proposed pipeline expansion will entail off-site, downstream, and upstream employment. Furthermore, according to Kinder Morgan’s estimates, about 30 percent of workers in the Metro Vancouver regions will be residents and only five to 10 percent would come from outside the region. According to the company, only about 16 percent of the total direct construction workforce from the province of British Columbia would come from within the regions of the proposed pipeline’s route (Goodman & Rowan, 2015). Consequently, this job category will entail about 300 local positions in a period not exceeding two years for the whole of British Columbia, including 200 from Metro Vancouver and about 100 from outside the region but within the greater British Columbia (Goodman & Rowan, 2015).
In addition, according to Kinder Morgan’s estimates, the pipeline expansion project is set to create about 3000 on-site construction positions for the local community for a period not exceeding two years in the province of British Columbia (Goodman & Rowan, 2015). Indeed, this amount is negligible in the context of the British Columbian economy, which currently exceeds two million jobs.
Long-term employment benefits.
Just like the short-term employment positions, the expected long-term jobs from the Trans Mountain Expansion pipeline project are minimally low for the Province of British Columbia as well as for Metro Vancouver. Taking into account a wide range of spin-offs in the economy as well as the supply chain, Kinder Morgan estimates that the proposed pipeline project will create jobs in the range of 1,500 to 2,000 every year for the residents of British Columbia in a period spanning 20 years (Goodman & Rowan, 2015). According to Kinder Morgan, the low-end of this range, which is estimated to provide about 1,500 jobs per year, assumes that the proposed pipeline expansion will only deal with the transportation of crude oil as specified in the existing contract between Kinder Morgan and the shipping firms. In this scenario, the pipeline owner estimates that it will generate in excess of $644 million annually (Goodman & Rowan, 2015). With regard to the high-end range of the long-term jobs that will be provided by the proposed oil pipeline expansion, which stands at about 2,000 jobs per year, the assumption is that the pipeline will be used in the transportation of non-firm products in addition to those transported on the basis of the existing contracts in a bid to optimize its massive capacity. In this scenario, Kinder Morgan estimates the proposed pipeline may generate revenues of approximately $800 million every year (Goodman & Rowan, 2015).
According to Kinder Morgan’s analysis of the potential employment of the proposed expansion project of the Trans Mountain oil pipeline, the two scenarios are only estimates and the actual figures are likely to fall therein between. However, considering the existing economic context of the Province of British Columbia, the expected long-term employment benefits of the proposed Trans Mountain Expansion pipeline project, as per Kinder Morgan’s estimates, are at best minimal. This is considering the fact that the current employment in the province exceeds two million jobs and, therefore, the expected jobs from the proposed pipeline, taking into consideration all the spin-offs, would be 2,000 jobs every year, representing an insignificant 0.1 percent of the current workforce in the province (Goodman & Rowan, 2015). With regard to the low-end range, the expected jobs will be 1,500 jobs every year, which is still significantly low in comparison with the current provincial employment trend.
Just like in the Province of British Columbia, the expected long-term jobs for Metro Vancouver as per Kinder Morgan’s estimates are also significantly few. At present, the economy of this region supports over one million jobs. According to Kinder Morgan, only a minimal percentage of jobs in the Province of British Columbia would be provided for residents of Metro Vancouver. Therefore, even after taking into account all the spin-offs as per the firm’s estimates, the total jobs expected from the proposed pipeline expansion for Metro Vancouver would be about 800 to 1,100 per year, representing an insignificant 0.1 percent of the region’s current employment level (Goodman & Rowan, 2015).
Taking into account the fact that both the economies of British Columbia and Metro Vancouver are growing positively, even if the proposed pipeline expansion fails to see the light of day, both regions would still have substantial populations, employment opportunities, labor force, and other economic projects in the near future. Therefore, the expected long-term employment benefits from the proposed pipeline project remain significantly low for the two regions in the context of this positive growth trend. In fact, according to estimates by economic analysts, the total provincial growth between the two regions would be concentrated in Metro Vancouver, with expectations of over 400,000 new jobs by the year 2040. On this basis, the Trans Mountain Expansion pipeline project is insignificant to this growth (Goodman & Rowan, 2015). Unfortunately, the same analysts note that as the economies of the two regions grow, the risks associated with the Trans Mountain oil pipeline would increase tremendously in the coming days. This is attributed to the fact that population growth will increase people’s proximity to the pipeline and accidents associated with oil spills, and leaks will most probably result in serious health risks.
Long-term tax benefits.
The proposed Trans Mountain Expansion pipeline project will result in increased tax revenues for both the Province of British Columbia and Metro Vancouver; however, this will be significantly minimal compared to the current revenues collected. According to Kinder Morgan’s estimates, the proposed pipeline expansion will result in additional property tax revenues collected by the Province of British Columbia of about $23 million (Goodman & Rowan, 2015). This includes about $7 million from the four communities in Vancouver, where Burnaby will commit about $ 6 million and Coquitlam, Survey, and Langley Township about $1 million. (Goodman & Rowan, 2015) However, considering the total revenues generated by the Trans Mountain oil pipeline at present, the expected revenue from property tax will represent a mere four to five percent of the total Trans Mountain pipeline revenues for Kinder Morgan (Goodman & Rowan, 2015). As per Kinder Morgan’s employment estimates for the proposed pipeline expansion project, the figures presented have already taken into consideration the benefits from the company’s expenditures toward employment in the course of the project operation. Therefore, the expected benefits from the proposed pipeline expansion in terms of revenues generated for the municipality from property taxes does not include benefits of employment.
Additionally, the proposed pipeline expansion will result in increased tax revenues for communities along the proposed pipeline’s corridor that could positively affect employment of the residents of the communities by municipal authorities due to increased revenues. However, in the context of the four communities in Metro Vancouver, which reside on the proposed pipeline’s corridor, the revenues for property tax will be minimally low. In 2013, the total municipal revenue generated from the four communities was approximately $2 billion, including about $500 million in Burnaby and a total of about $1.5 billion in Langley Township, Survey, and Coquitlam (Goodman & Rowan, 2015). On the basis of these municipal property revenue figures, the proposed Trans Mountain Expansion pipeline project will only be about 0.4 percent of the 2013 figure of the region’s total municipality property tax revenue (1.4 percent for Burnaby and about 0.1 percent for Coquitlam, Langley Township, and Surrey) (Goodman & Rowan, 2015).
Fiscal benefits for provincial and federal governments.
Besides the municipality property tax, the proposed Trans Mountain expansion pipeline project will have fiscal benefits for both provincial and federal governments. These benefits range from pipeline construction and expansion to pipeline operation and increased revenues from increased crude oil production in the west coast. As regards the construction and expansion of the proposed pipeline, Kinder Morgan estimates that tax revenues for the Province of British Columbia will increase by $300 million for the entire construction period of three years or about $100 million every year (Kinder Morgan, 2015). At present, the total provincial revenues stand at about $40 billion every year and, therefore, the expected increase from the proposed pipeline will only account for an insignificant 0.22 percent of the current total (Goodman & Rowan, 2015). Furthermore, Kinder Morgan estimates that the construction of the proposed pipeline will increase tax revenues for the federal administration even though the company has not put a figure to the estimation. However, it estimates that the Province of British Columbia will gain about $80 million in the form of fiscal benefits courtesy of federal spending toward the proposed pipeline expansion project.
Therefore, taking into consideration both increased tax revenue for the provincial government of British Columbia and the federal government spending in the region because of the proposed project, Kinder Morgan estimates that the construction of the proposed pipeline will result in about $400 million in fiscal benefits for the Province of British Columbia for the approximated three-year project timeline (Goodman & Rowan, 2015). This means that in every year for the entire construction period, the Province of British Columbia will earn an additional $130 million in fiscal benefits. Although a positive development for the region, this amount is equal to about 0.03 percent of the region’s current total revenues (Goodman & Rowan, 2015).
Increased revenue benefits for crude oil producers.
Undoubtedly, the proposed Trans Mountain Expansion pipeline project will result in increased crude oil production on the west coast of Canada due to increased pipeline capacity. Consequently, the expanded capacity will provide the tar sand producers with an expanded pipeline that will deliver bigger volumes of their products to their markets. Most importantly, the expansion of the Trans Mountain oil pipeline will link the region of tar sand production with the Pacific waters, thereby facilitating access to Asian markets and the West Coast of the United States. In total, Kinder Morgan estimates that the expansion of the current Trans Mountain pipeline will generate revenues for tar sand producers in the excess of $2 to 4 billion per year for the next 20 years (Goodman & Rowan, 2015).
Potential Risks Associated with the Trans Mountain Expansion Pipeline Project
Even though the proposed Kinder Morgan’s Trans Mountain pipeline project will result in job creation and tax revenues, the risks associated with it to the communities in west coast are substantial. Indeed, the current controversy characterizing the evaluation and review process is a clear manifestation that some quarters of the Canadian population are vehemently opposed to the proposed project. Indeed, this opposition is founded on several facts, which concern marine and terrestrial environments, as well as human health and general climate change. For example, the process of extracting bitumen, considering that Kinder Morgan has emphasized that the proposed new pipeline will be concerned with the transportation of the diluted form of the product, involves substantial volumes of water and a great deal of energy, besides producing a combination of greenhouse gases into the atmosphere (Conversations for Responsible Economic Development, 2013).
On the other hand, in the whole controversy surrounding the proposed pipeline project, one of the most articulated concerns is the expected marine life interruption from increased tanker traffic entering the Burrard Inlet. According to environmentalists, this traffic growth portends risks to marine life in the region due to potential oil spills (Environmental Justice Atlas, 2016). Environmentalist argue that the sensitivity of the Burrard waterway and the high productivity of the surrounding ecosystem stand threatened by the expected large tanker traffic. Indeed, environmental scientists note that a single substantial spill of diluted bitumen, which has a high concentration of dilbit, would be detrimental to marine life in the region. Specifically, environmental and civil groups are concerned about the safety of Orcas, which are a common phenomenon in the region’s marine ecosystem (Environmental Justice Atlas, 2016).
One of the reasons for concern demonstrated by environmentalists is the fact that the Kalamazoo River dilbit spill is still fresh in the minds of many Canadians, where it resulted in severe marine life damage and interruption (Environmental Justice Atlas, 2016). In this accident, as the dilbit separated from the water, toxic fumes were generated and released into the atmosphere, while the heavy bitumen sank lower into the surface of the riverbed. The most significant environmental concern is that the proposed pipeline expansion could result in such a spill, where it requires considerable resources to clean up (Environmental Justice Atlas, 2016). Sadly, the group argues that such cleaning difficulties would be compounded by the accumulation and dispersal of the bitumen materials. On the terrestrial landscape, environmentalists argue that a spill of diluted bitumen would create serious health concerns for human beings and wildlife. Even though reaching the groundwater table would reduce terrestrial risks to humans and wildlife, environmentalists argue that it would also result in wider contamination and thereby increase the likelihood of toxin release (Environmental Justice Atlas, 2016).
Even though the impacts to human life that would result from a diluted bitumen spill is still a subject of debate in the current Trans Mountain Expansion pipeline project proposal, the Kalamazoo spill is indicative of the likely effects. After the spill, almost 40 percent of residents of communities living in close proximity to the Kalamazoo River developed serious health complications and symptoms, including severe headaches, fatigue, nausea, coughs, and dizziness (Conversations for Responsible Economic Development, 2013). According to health experts, diluents from such spills contain a number of solvents most of which are toxic carcinogens, such as benzene (Conversations for Responsible Economic Development, 2013). However, it has remained a challenge to determine the exact combination of solvents since oil companies are not required by law to reveal such information to the public.
Another issue raised by opponents of the proposed Trans Mountain oil pipeline is the frequency of oil spills associated with Kinder Morgan, which poses significant threats to the integrity of its facilities (Bailey, 2014; Olsen, 2016). In the west coast of Canada, there have been four major oil spills involving the Trans Mountain oil pipeline since 2005 (Bailey, 2014). For example, the first spill, which occurred in 2005, resulted in over 200,000 liters of crude oil spill due to a pipeline rupture in Abbotsford in the Province of British Columbia (Bailey, 2014).
Thereafter, in 2007, another spill occurred in the City of Burnaby, where over 200,000 liters of crude oil was spilled. In the same region, a leak in a storage facility led to over 200,000 liters of crude oil being released into the environment (Bailey, 2014). Recently in 2012, another leak in a storage facility in Abbotsford in the Province of British Columbia released over 100,000 liters of crude oil into the surrounding environment (Lee, 2013). The integrity of the company’s facilities in the United States has also been put to question (Parfomak, 2015; U.S. Department of Transportation, 2012).
Recommendations
Based on its outlined findings, the report recommends that the proposed Trans Mountain Expansion oil pipeline project be rejected by the federal government. It is apparent that the potential risks associated with the proposed pipeline expansion exceed the potential economic benefits thereof. However, the federal government can still approve the proposed Trans Mountain pipeline project, but only if Kinder Morgan accepts to satisfy the following conditions:
The company should demonstrate disaster preparedness and response throughout its key installations on the Trans Mountain oil pipeline route.
The company should demonstrate its commitment toward environmental protection by adopting policies that are environmentally-friendly throughout its operation of the Trans Mountain oil pipeline on the west coast of Canada.
The company must, as a matter of priority, initiate deliberations and consultations with the communities living along the Trans Mountain oil pipeline route, who stand to be affected by any modifications and oil spills.
The firm must adopt corporate social responsibility and demonstrate the same by initiating socially engaging activities along its Trans Mountain oil pipeline corridor.
The company should take steps toward affirming the security and integrity of its Trans Mountain Oil Pipeline, as well as all other related facilities in Canada.
The firm should demonstrate its commercial support of the proposed Trans Mountain Expansion pipeline project in terms of the allocated budget.
The company should demonstrate the willingness to meet all financial obligations in the event of an oil spill or accidents related to its facilities in Canada.
References
Bailey, I. (2014, November 24). Protesters rally against Trans Mountain pipeline, but drilling continues. Retrieved from http://www.theglobeandmail.com/news/british- columbia/protestors-rally-against-trans-mountain-pipeline-but-drilling- continues/article21743986/
Conversations for Responsible Economic Development (2013). Assessing the risks of Kinder Morgan’s proposed new Trans Mountain pipeline. Vancouver, BC: Conversations for Responsible Economic Development.
Environmental Justice Atlas (2016, March 6). The Kinder Morgan Trans Mountain pipeline expansion project in British Columbia, Canada. Retrieved from https://ejatlas.org/conflict/the-kinder-morgan-trans-mountain-pipeline-expansion-project- in-british-columbia-canada
Gilchrist, E. (2014, July 15). Decision on Kinder Morgan’s Trans Mountain oil pipeline delayed until after next federal election. Retrieved from http://www.desmogblog.com/2014/07/15/decision-kinder-morgan-trans-mountain-oil- project-delayed-until-after-next-federal-election
Goodman, I., & Rowan, B. (2015). Economic costs and benefits of the Trans Mountain Expansion project (TMX) for BC and Metro Vancouver. Retrieved from http://www.thegoodman.com/pdf/TGG20150204_SFU_EconCostBen_TMX.pdf
Hume, M. (2014, February 13). First Nations sign up for Kinder Morgan pipeline hearing. Retrieved from http://www.theglobeandmail.com/news/british-columbia/first-nations- sign-up-forkinder-morgan-pipeline-hearing/article16888886/
Kheraj, S. (n.d.). Historical background reports- Trans Mountain pipeline, 1947-2013. Retrieved from http://vancouver.ca/images/web/pipeline/Sean-Kheraj-history-of-TMP.pdf
Kinder Morgan (2015). Projects. Retrieved from http://www.kindermorgan.com/business/canada/projects.aspx
Lee, J. (2013, December 06). Small crude oil spill on Kinder Morgan’s Trans Mountain pipeline generates big reaction. Retrieved from http://www.vancouversun.com/Small+crude+spill+Kinder+Morgan+Trans+Mountain+pi peline+generates+reaction/8520302/story.html
Lee, J. (2014, December 05). Vancouver joins list opposed to expanded Kinder Morgan pipeline. Retrieved from http://www.vancouversun.com/business/Vancouver+joins+list+opposed+expanded+Kind er+Morgan+pipeline/9834567/story.html
National Energy Board (2016, May 19). Trans Mountain pipeline ULC- Trans Mountain expansion. Retrieved from http://www.neb- one.gc.ca/pplctnflng/mjrpp/trnsmntnxpnsn/index-eng.html
Olsen, T. (2016, January 14). Pipeline company must do more to prevent spills, Abbotsford tells NEB. Retrieved from http://www.abbynews.com/news/365326501.html
Parfomak, P. W. (2015). DOT’s federal pipeline safety program: Background and key issues for Congress. Washington, DC: Congressional Research Service.
U.S. Department of Transportation. (2012). Pipeline safety update. Retrieved from http://phmsa.dot.gov/pv_obj_cache/pv_obj_id_2B909D42932E6FF5310D6436D7A47D6 4993E1500/filename/Pipeline%20Safety%20Update%20Oct%202012.pdf
Voss, C. (2015). The Kinder Morgan Trans Mountain pipeline expansion project in British Columbia, Canada. EJOLT Factsheet No. 33. Retrieved from http://www.ejolt.org/wordpress/wp-content/uploads/2015/07/FS-33.pdf
