Pipeline agreement with Alberta is not in B.C.’s best interest
Opinion: Shippers should accept full liability for any damages they cause
The agreement on pipelines recently announced by the premiers of British Columbia and Alberta is another step forward in B.C.’s efforts to accommodate Alberta’s desire to ship oil through B.C. to Asia.
In the agreement, B.C. endorsed Alberta’s energy plan to ship oil and Alberta endorsed B.C.’s five conditions for approving oil pipelines in B.C.
Although there is nothing new in this endorsement and there is no actual signed agreement, the announcement is important because it indicates that B.C. is open to a deal on pipelines to ship heavy oil through B.C. to Asia if its five conditions are met. The key question for British Columbians is: Are these five conditions set by the premier adequate to protect B.C.’s interests? Unfortunately, the answer is a clear and unequivocal no.
Two of the conditions — approval by the National Energy Board and meeting legal obligations to First Nations — are just a restatement of existing legal requirements and add nothing new to the existing approval process. In fact, given that the B.C. government strongly argued that the NEB should not approve the Enbridge pipeline, it is hard to see how NEB approval would justify the pipeline proceeding.
The next two conditions are the requirement of “world-leading” oil-spill prevention, response and recovery systems for the land and marine environment. B.C. has convincingly documented that current standards are woefully inadequate and certainly not world-leading. According to B.C.’s own reports, oil-spill responses would recover only three to four per cent of spilled oil along the North Coast, leaving the rest in the marine environment where it will cause severe environmental damage.
More importantly, even if B.C. had world-class standards there will still be significant damage from oil spills because the best standards in the world do not prevent accidents. Enbridge maintains that it is an “industry leader in pipeline safety and integrity” yet has an average of 74 spills per year on its pipeline system. The internationally recognized U.S. Oil Spill Risk Model forecasts that the Enbridge project will result in an average of one tanker spill over 1,000 barrels every seven to 17 years. While Enbridge insists that the risk is lower, even it forecasts an average of one pipeline spill every two to four years and an 18-per-cent probability of a tanker spill.
If oil spills are inevitable, who will cover the damage costs? The only reasonable answer to this question is that those responsible for the accident — Enbridge — should cover the costs.
The problem is that it is unwilling to accept liability for spill costs. Enbridge has set up a limited partnership company to ship oil that fully exonerates Enbridge from liability. The limited partnership company is liable but if damages exceed the financial resources of the limited partnership company, as occurred in the Lac Mégantic oil train accident, the taxpayer is liable for cleanup and compensation. As the over $1-billion cost of Enbridge’s recent spill in Michigan shows, the damage costs can be significant.
Enbridge also refuses to accept any liability for oil tanker spills. The liability is held by the tanker companies but the problem here is that the government has capped the liability at $1.3 billion. Enbridge’s own estimates show that the damages for a large tanker spill would be $9.6 billion, well in excess of the amount that would be covered by the current system. Again, the taxpayer would be liable for the over $8 billion in additional costs.
The last B.C. condition of a “fair share” of benefits has generated the most controversy.
As the premier points out, B.C. incurs 100 per cent of the marine risk and 58 per cent of the pipeline risk but gets only eight per cent of the benefits.
The problem is that B.C. has provided no definition of what a fair share is.
A more concrete condition is that B.C. receives a “net benefit” from any pipeline project, meaning that the benefits must exceed all the costs, including risks of oil spills and other environmental damage. The techniques for determining whether there is a net benefit are well-developed and would provide an effective test of whether the pipeline project should be approved.
In sum, B.C.’s five conditions may sound reasonable, but they are seriously deficient in protecting B.C.’s interests. Two of them simply restate existing legal obligations and provide no additional protection. One dealing with a fair distribution of benefits is too vague to be useful and needs to be replaced with a “net benefit” to B.C. requirement. The final two conditions dealing with world-class standards, while laudable, will not prevent the occurrence of spills or the risk to B.C. of paying for the damages from the inevitable spills that will occur.
Clearly, B.C. needs to address this deficiency by strengthening the existing five conditions and adding a sixth condition that requires pipeline shippers to accept full liability for any damages they cause and that defines the damages that will be covered by this indemnification. Without this sixth condition, the B.C. government will leave taxpayers vulnerable and oil shippers exonerated from accepting full liability for their actions.
Finally, if B.C. wants to enforce its conditions it needs to terminate the agreement it signed delegating its approval authority to the federal government. As long as this agreement exists, B.C. is little more than a spectator relying on Ottawa to protect B.C.’s interests.
Thomas Gunton is Director of the Resource and Environmental Planning Program at Simon Fraser University and a former Deputy Minister of Environment for B.C.
Access article: http://www.vancouversun.com/news/Pipeline+agreement+with+Alberta+best+interest/9157868/story.html#ixzz2lmSMRPR0