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Why blocking pipelines is no fix for climate change

Why blocking pipelines is no fix for climate change

 
McKenna, Barrie. The Globe and Mail; Toronto, Ont. [Toronto, Ont]12 Feb 2018: B.12.
Western Canada Select.
 
The phrase is clever branding, conjuring up a product that has been carefully chosen for its quality and distinctiveness. And it's Canadian.
 
Regrettably, the superthick bitumen produced from the oil sands is probably less special than it's ever been. Select, yes, but in a bad way.
 
The price gap between Canada's heavy-oil benchmark, WCS, and the lighter crude produced in the United States - West Texas intermediate (WTI) - has widened to nearly $30 in recent months.
 
Part of the discount is because oil sands crude is more costly to refine.
 
But the recent widening of the gap is almost entirely because producers in Alberta and Saskatchewan are struggling to get their crude to market. Major new pipeline projects are facing regulatory delays and environmental opposition, including TransCanada Corp.'s Keystone XL and Enbridge Inc.'s Mainline pipelines in the United States, as well as Kinder Morgan Inc.'s Trans Mountain line to Burnaby, B.C.
 
Last week's announcement by Ottawa of a new review process for major resource projects is unlikely to lift the cloud of uncertainty over Canadian crude.
 
The latest bit of bad news for oil producers is a warning from the B.C. government that it plans to block new shipments of bitumen until the province can do more studies on the risk of potential West Coast ocean oil spills.
 
That's a diversion. The National Energy Board carefully examined the threat of spills in its 2016 approval of a tripling of Trans Mountain's capacity. Ottawa subsequently pledged $1.5-billion to bolster spill prevention and response.
 
Interestingly, B.C. Premier John Horgan has shown a lot less concern about the prospect of highly combustible liquid-natural-gas ships plying coastal waters.
 
Much of opposition to Trans Mountain isn't about tankers, it's about climate change.
 
It would be nice to think that blocking this and other pipelines would curb carbon emissions and reverse climate change. But that's a dubious proposition, and it comes at a steep economic price.
 
Economist Benjamin Dachis of the C.D. Howe Institute says pipeline bottlenecks are "by far the largest competitiveness cost" facing Canadian producers. He estimates they are losing an average of US$5 a barrel in profits because of pipeline constraints.
 
A far better way to address greenhouse gas emissions is to tax carbon - as Alberta and the federal government are doing.
 
That's because blocking pipelines imposes costs on the economy that far exceed the damage caused by higher emissions, argues Trevor Tombe, an associate professor and economist at the University of Calgary. Based on National Energy Board forecasts, he estimates Alberta's carbon-pricing regime will generate roughly three to four times greater emission reductions at a small fraction of the cost of halting pipelines.
 
"Blocking pipelines is orders of magnitude more costly," he says. "It is not just more costly than carbon pricing, but it's also much more costly than the actual environmental damage from [greenhouse gas] emissions. It's not a good way to lower emissions."
 
The loss of pipeline capacity would result in less investment and lower oil production in the oil sands. Prof. Tombe says the annual hit to Canada's economy could reach up to $18-billion a year in 2025, or $1,500 to $2,000 for every tonne of reduced emissions.
 
Alberta's carbon tax rate for 2018 is $30 per tonne.
 
The cost of pipeline obstruction is exorbitant because keeping Canadian oil in the ground is unlikely to put a dent in overall global oil production. Saudi Arabia, the United States or Iran would quickly fill the gap left by the loss of Canadian crude - keeping our oil in the ground, but creating emissions somewhere else.
 
Polls show British Columbians are about equally split on the merits of the expanded Trans Mountain pipeline, which currently supplies most of the oil used for making the gasoline that's consumed in the province.
 
Alberta's threatened retaliation against B.C. wine and electricity imports suggests this is an interprovincial spat.
 
It is, of course, much bigger than that. Prime Minister Justin Trudeau is correct when he says going ahead with the Trans Mountain project is in the "national interest."
 
The opposite is also true.
 
Blocking Trans Mountain and other pipeline projects would hobble the economy, rendering the entire country less able to combat climate change.
 

Credit: Staff