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Fact-checking Alberta's pipeline ads

This op-ed by Corporate Mapping Project researcher David Hughes appeared in the Edmonton Journal on February 20, 2019.

As an Alberta-born-and-raised earth scientist who has made a career studying fossil fuels and energy issues, I am dismayed at the bombardment of ads from the Alberta government on the Trans Mountain pipeline expansion.

One ad tells us:

“Canada’s economy loses out on an estimated $80 million dollars in economic benefits every day that the expansion is delayed. Trans Mountain changes that, providing an $80 million-a-day economic boost to our country, supporting thousands of jobs from coast to coast to coast.”

Every day? In fact, the earliest Trans Mountain could be completed is 2022. Two other pipelines under development, Enbridge’s Line 3 (due in late 2019) and Keystone XL (due in 2021) will provide twice the export capacity of Trans Mountain to higher-priced U.S. markets. Trans Mountain is intended to unlock new Asian markets.

The Trans Mountain delay is costing Canada nothing given that pipeline bottlenecks will be eliminated without it. Yet, a counter on the Alberta government’s Keep Canada Working website shows that (as of Feb. 15) the court-ordered shutdown has cost Canada $13.5 billion.

The differential between Alberta heavy oil (Western Canada Select/WCS) and the North American price (West Texas Intermediate/WTI) is normally about $15 per barrel. This is because WCS is priced at Hardisty and incurs a transportation cost of $7 via pipeline to Cushing, Okla., where WTI is priced. And because WCS is lower grade oil than WTI, it incurs a further quality discount of about $8 per barrel as it is costlier to refine.

Lately, WCS has been trading at a differential of less than $11 due to the completion of maintenance at U.S. refineries that had been temporarily offline, shortfalls from suppliers in Mexico and Venezuela and the curtailment of production in Alberta. This amounts to a premium of $4 per barrel or $13.7 million per day on exports compared to normal, not a loss of $80 million per day as stated in the Alberta government ad.

As for the alleged thousands of jobs, Kinder Morgan itself (which sold the pipeline to the Canadian government) stated in its Trans Mountain application to the National Energy Board that only 90 permanent jobs would be created.

Another ad tells us:

“By expanding the capacity of Trans Mountain, we gain access to more markets for our oil, and command a higher price for our resource. The Trans Mountain expansion opens new overseas markets, giving us access to more customers and better prices, generating billions for Canadian priorities.”

In fact, the U.S. has 55 per cent of the world’s heavy oil refining capacity and heavy oil prices on the U.S. Gulf Coast are $3 higher than in Asia which, coupled with higher transport costs to Asia, means that oil transported to the U.S. via Line 3 and Keystone XL will capture a premium of $5 per barrel compared to Asia exports via Trans Mountain. The “billions for Canadian priorities” are a figment of the government’s imagination.

A third ad tells us:

“The Trans Mountain Pipeline will generate billions in revenue to fund innovation and clean technology, speeding our country’s transition to a greener energy future. Expanding the Trans Mountain pipeline provides billions for innovation and clean technology.”

The rhetoric comes right out of George Orwell’s playbook.

Trans Mountain will lose $5 per barrel selling oil to Asia compared to oil shipped via U.S.-bound pipelines under development. And, it will provide few permanent jobs while putting marine habitats at risk in Canada’s most-populated port city.

The Alberta government’s ad campaign has cost at least $23 million to convince the public that it is doing something for the oil and gas industry.

Canada will soon have two new pipelines that will eliminate bottlenecks before Trans Mountain could even be built, and there is no price premium in Asia, so these ads amount to pure propaganda.

It is time for an adult conversation on energy given Canada’s emissions-reduction commitments and the need for long-term energy security. Conducting a misleading campaign with taxpayer’s money is the antithesis of what is required.

David Hughes

David Hughes is an earth scientist who has studied the energy resources of Canada and the US for more than four decades, including 32 years with the Geological Survey of Canada as a scientist and research manager, where he headed unconventional gas and coal research. His research focus has been on unconventional fuels, primarily shale gas and tight oil, but also coal, coalbed methane and other unconventional sources, including oil sands, coal gasification and gas hydrates. Hughes is currently President of Global Sustainability Research Inc, a consultancy dedicated to research on energy and sustainability issues.

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