Jason Kenney touts pipeline but industry watcher says price relief not a given
Premier Jason Kenney is offering to help his B.C. counterpart with the high price of gasoline in that province’s Lower Mainland.
As he announced his government has proclaimed Bill 12, better known as the turn-off-the-taps legislation, Kenney suggested the additional pipeline capacity from the Trans Mountain expansion would pay dividends for Alberta and for British Columbians.
“Eight hundred thousand barrels per day will mean that we can increase shipments of refined products to the Lower Mainland. That will reduce gas prices for Vancouverites,” said Kenney.
B.C. Premier John Horgan says an expanded Trans Mountain pipeline is no guarantee of lower gas prices and the current spike in Lower Mainland fuel costs is not his fault.
Prices at the pump have reached above $1.70 a litre in the Vancouver area in recent weeks, and Alberta’s premier says that’s a direct result of the B.C. government’s promise to fight the Trans Mountain expansion.
“Unfortunately, since coming to office in July of 2017, the B.C. government has opposed the expansion of this pipeline every step of the way — most recently at the British Columbia Court of Appeal — and in so doing they’ve driven up gasoline prices in the Lower Mainland,” Kenney told reporters.
His claim seems to be based on the assumption that delays in twinning the pipeline are contributing to higher prices.
But some experts say there’s no evidence that the case before the Court of Appeal, which asks if B.C. has the right to regulate the transport of oil within its borders, is responsible for the pipeline delays.
“There’s no causality here. It’s just like, you take two unrelated things, draw a connection in people’s minds, but it’s not actually there. So I have to call him out on that,” Werner Antweiler, an economist at the University of B.C., told CBC Vancouver.
Andrew Leach, an energy economist at the University of Alberta, agreed.
“What’s delayed Trans Mountain, it has very little to do with the actions of the B.C. government to date. It has more to do with the federal government’s not meeting its duty to consult with First Nations and not adequately following up on it its responsibilities under the Species at Risk Act,” Leach said.
Last summer’s TMX reversal
Those failures by Ottawa are behind the Federal Court of Appeal’s decision last summer to quash the approval for the expansion project, handing Trans Mountain a major setback.
An official with a retail petroleum consultancy said additional pipeline capacity could help ease the gas price situation in B.C., but not for at least a couple of years.
Jason Parent, who is the managing director with Kent Group Limited, also said there are no guarantees the additional capacity will mean more refined product will move westward.
Alberta is keen to see more product from its northern oilsands reach tidewater. How much diluted bitumen and how much refined product makes it through the expanded pipeline isn’t known yet.
“There’s no guarantee that the expansion of the Trans Mountain, that there’d be additional space for refined products,” said Parent.
According to Trans Mountain, almost all of the additional capacity from the expansion project is already spoken for.
“Thirteen shippers have made long-term commitments for roughly 80 per cent of the capacity on the expanded pipeline. We expect the majority of the expansion capacity will be for export,” the pipeline company said in an email.
That would still, theoretically, leave some extra capacity for refined products to be sent to the Lower Mainland.
New pipeline will carry different products
Shippers will indicate their interest in sending products down the pipeline but, if it’s oversubscribed, Parent said the capacity will be divvied up based on a proportional basis.
“If a whole bunch of people nominate for space and it’s all crude as opposed to refined product, that may not necessarily increase the space for refined product on the line,” he said.
He points out that even if construction on the pipeline expansion were to start soon, it couldn’t make a difference to the high gasoline prices B.C. drivers are facing today.
Parent said the high prices currently being seen at some B.C. gas stations is due to a combination of factors, which he calls a perfect storm.
There isn’t enough refining capacity in B.C. to meet demand, which means more refined product needs to be brought in from Alberta. Normally that would come through the Trans Mountain pipeline but it is fully subscribed.
Supply is a major factor in B.C.’s gas prices — the province only has two refineries, and it depends on petroleum from Alberta and refined products from Washington state to make up the difference. When refineries cut back on production because of mechanical issues or scheduled maintenance, B.C.’s supply is pinched, and prices can soar.
So that requires more gasoline from U.S. refineries and costs have gone up due to maintenance work at some of those facilities. Add in higher taxes in B.C., and Parent said that means prices have gone up more in B.C. than in other parts of Canada.
Kenney’s argument is that increasing Trans Mountain’s capacity from 300,000 barrels per day to 890,000 would relieve some of that pressure.
Antweiler, for one, is optimistic that B.C.’s supply will go up and gas price increases won’t be as severe once the expansion is complete.
But some evidence suggests otherwise. A 2015 analysis from oil and gas consultant Muse Stancil, prepared on behalf of Trans Mountain for hearings before the National Energy Board, says that “refined product shipments will not increase as a result of the Trans Mountain expansion project.”
And independent economist Robyn Allan has argued that twinning the pipeline will actually cause gas prices to go up, because toll rates on the existing pipeline will more than double.
B.C. relies heavily on Alberta
According to the B.C. government, 55 per cent of the province’s gasoline and 71 per cent of its diesel is imported from Alberta pipelines. The majority of that product is moved through the Trans Mountain pipeline.
That pipeline also carries crude oil to the Parkland refinery in Burnaby, B.C., which uses that feedstock to produce refined fuels.
The Parkland refinery, which has a daily capacity of 55,000 barrels of oil per day, accounts for 82 per cent of B.C.’s refining capacity.
Due to an inability to access enough crude oil, the Parkland facility is operating at 80 per cent of its normal capacity.
Kenney said he has no intention of actually reducing oil shipments at this time to B.C., or any other part of Canada, but the B.C. government announced it would challenge the legislation in court following the Kenney government’s decision to proclaim Bill 12 hours after being sworn into office.
B.C. Attorney General David Eby has filed a civil claim in Alberta, alleging the new law is unconstitutional, in part because it restricts trade across provincial borders, acts as an export tariff and illegally discriminates against B.C.
Kenney has said his government will respond to those allegations in court.
But Joel Bakan, a constitutional law expert at the University of British Columbia, says the issue is fairly black and white.
“It’s rare in Canadian constitutional law to have an open and shut case, but this is definitely one. The Alberta government is on very, very thin ice in terms of their legal argument,” he told CBC News.
Some argue, however, that the legality isn’t what matters.
“This whole issue of whether or not the Kenney government succeeds in having the legislation upheld in the courts is kind of beside the point,” Jared Wesley, a political scientist at the University of Alberta, said.
“They’re picking a fight and they look good whether the courts hold it up or not. They look like they’re standing up for Alberta’s interests whether or not they’re actually able to use the legislation.
With files from CBC’s Bethany Lindsay and Scott Dippel