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Northern Gateway approval: When oil industry decisions become the 'public interest'

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Image: flickr/environmentaldefence

The National Energy Board has never rejected a major proposal from the oil industry, and so it really comes as no surprise that they have approved the Northern Gateway pipeline proposal. 

If there ever was or could be a pipeline that the NEB could have turned away from on the basis of a social consensus of Canadians, surely Gateway was that pipeline.  But the NEB has just proven that it cares not a whit about how Canadians define the public interest.  The NEB really has only one constituency that it considers relevant; that being, of course, the oil and gas industry.

The Alberta Federation of Labour and the former Communications, Energy and Paperworkers (now Unifor) presented significant economic arguments against the Gateway pipeline.  Here is the NEB's response to those arguments:

"The Alberta Federation of Labour and the Communication Energy and Paperworkers Union of Canada expressed concern that exporting raw bitumen by pipeline has a detrimental impact on domestic investment in upgraders and refineries in Alberta and Canada. The Panel considered these perspectives and finds that they are valid public interest considerations. Based on the evidence before it, the Panel has not been convinced that developing export pipeline infrastructure deters investment in upgraders and refineries in Canada. The Panel finds that it is significant that no commercial party in the refining or upgrading sector expressed opposition to the application on the basis that it would undermine their operations in Canada. The Panel is of the view that properly functioning petroleum markets require adequate transportation capacity to be in place and, further, that the type of commodity to be transported on a pipeline is a decision properly made by the market. The Panel is of the view that well-functioning markets tend to produce outcomes that are in the public interest."

Let's put this in plain language:  The Alberta Federation of Labour and CEP/Unifor presented credible arguments.  However, because no oil company agreed with them or validated their arguments we will dismiss their arguments because oil companies are more credible.  The public interest is determined by the market.  To be clearer, the business decisions of oil companies are the market.

The Board decided not to respond to the detailed economic analysis of either the AFL or CEP/Unifor.  In particular they avoided the jobs analysis submitted on behalf of CEP by the CEO of Informetrica, Michael McCracken.  Informetrica is generally considered to have built one of the foremost econometric models in Canada which has been used by the federal government and a wide array of industry and sector organizations to assess economic trends and options.  Here is McCracken’s assessment of the jobs impact of Gateway:

"In the case of the Northern Gateway Project, our understanding is that the primary purpose of the pipeline will be to export as much as 525,000 barrels per day of conventional light and heavy oil, synthetic oil, bitumen blended with condensate and bitumen blended with synthetic oil.  In addition, the project includes a condensate pipeline running in the opposite direction, with throughput capacity of 193,000 barrels per day. That condensate would be reused to facilitate the transportation of bitumen largely for upgrading in export markets.

"Accordingly, unless there is very rapid development of the oil sands (Scenario 3) the export of bitumen from Canada will preclude the job creation that would follow from establishing upgrading and refining facilities in Canada.  As a first approximation, the incremental jobs involved in upgrading the Gateway volume would be about 26,000. (This is the proportional increase of the upgrading volume from 400,000 barrels per day to 525,000.) Suffice it to say however, that in any scenario, the foregone economic opportunity involved, if measured in jobs created, would be significant and larger than the operational requirements of the Gateway pipeline designed for bitumen exports from Canada."

When it comes to jobs and economic development, the choice that the NEB has made is astounding.  Enbridge’s evidence to the Joint Panel was that the total numbers of permanent jobs that the Gateway pipeline will create – apart from construction – are 268 jobs.  However the incremental jobs that go down that pipeline are “about 26,000.”

The NEB ignored the substantial concerns of almost all of the major opponents of Gateway.  It acknowledged that a pipeline or tanker spill would be a calamity, but passed over that as not likely.  On matters of First Nations rights, climate change policy and even economic policy, the NEB considers these as policy issues for government to decide.

The NEB also closed its ears to another critical point made by CEP/Unifor in its submissions on Gateway.  CEP/Unifor emphasized that the failure of the NEB to even consider the upstream and downstream GHG impacts of pipelines is a fundamental flaw in Canada’s regulatory system, when clearly this is a primary concern of the US over Keystone XL.  The union warned that the failure of governments and the industry to control the pace of development in the oil sands and to reduce greenhouse gas emissions undermines Canadian exports to our major markets.  If the industry has not drawn that conclusion from the Keystone XL debacle, they are as thick as a lump of bitumen.

Surely it is an irony beyond any reasonable coincidence that on the same day as the Gateway decision, Stephen Harper told Global News that new greenhouse gas regulations on the Canadian oil industry are now once again indefinitely postponed.  Harper and the oil industry are saying to Obama and the Americans through the Gateway decision: if you won't approve XL because Canadian greenhouse gas emissions are out of control, we will instead send the bitumen to China. 

Canada's oil industry and the Harper government are playing a dangerous game.  All of the competing proposed pipelines from XL to Gateway to Kinder Morgan to Energy East face continuing challenges and opposition, and not all of them will be built.

While the NEB could have brought some order to Canada's pipeline politics, the Gateway decision sadly only adds more economic and market uncertainty, and certainly ensures rising labour, environmental and First Nation struggles to assert the public interest ignored by the NEB.

Image: flickr/environmentaldefence

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