Canada Is Buying a Tar Sands Pipeline a Major Energy Company Doesn't Want

The nasty place where the oil would come from in Alberta, Canada.
The nasty place where the oil would come from in Alberta, Canada.
Photo: AP

Looks like the fraught Trans Mountain Pipeline expansion isn’t happening after all. Or, actually, wait. It is—but only after the Canadian government decided to purchase the damn thing for 4.5 billion Canadian dollars (roughly $3.5 billion).

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Finance Minister Bill Morneau announced Tuesday in a press conference that the government is buying the 715-mile pipeline expansion and its related infrastructure outright, reports CBC. Speculation around this plan began Monday after Canada’s National Observer obtained information that original owner Kinder Morgan canceled a key permit earlier this month.

Really, though, this drama but has been bubbling for weeks now. Since March, protest and opposition from indigenous nations and environmentalists has grown so severe that Kinder Morgan had set a deadline of May 31 to abandon the project if the situation wasn’t resolved. Protesters didn’t want another project that’d enable the extraction of bitumen from the Alberta tar sands or the transport of said bitumen across their lands. This fossil fuel isn’t your regular oil. It’s highly toxic and super thick, so it’s not easy to clean up.

Now, a giant energy company won’t be held responsible if it spills: For now, that’s on the federal government.

“The Trans Mountain expansion project is of vital interest to Canada and Canadians,” Morneau said during the presser. “Our government’s position is clear: It must be built, and it will be built.”

That’s a fact. Prime Minister Justin Trudeau—supposed fighter of climate change and champion of indigenous rights—is determined to make this crude oil pipeline a reality, calling it “vital” in a tweet Tuesday. Earlier this month, Morneau suggested the administration pay Kinder Morgan for its losses during the weeks construction was on pause. Well, that’s not happening, but it sure is paying Kinder Morgan a lovely sum to buy the Trans Mountain Pipeline.

The government plans to eventually sell the project to a new owner, relieving itself of any technical responsibility should the pipeline suffer an accident. Kinder Morgan published this statement online from CEO Steve Kean:

We are pleased that [Kinder Morgan Canada Limited] and the Government were able to reach agreement on a transaction that benefits the people of Canada, [Trans Mountain Pipeline system and the expansion project] shippers and both [Kinder Morgan, Inc.] and [Kinder Morgan Canada Limited] shareholders. The outcome reached represents the best opportunity to complete [Trans Mountain Pipeline system and the expansion project] and thereby realize the great economic benefits promised by that project.

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This isn’t the end of the story. The province of British Columbia is hell-bent on keeping the project out of its territory. So are First Nations. Lawsuits are ongoing, and it’s unclear how the federal government will begin construction this summer in light of the pending court actions.

What is clear is that those on the opposition won’t sit idly by.

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Yessenia Funes is climate editor at Atmos Magazine. She loves Earther forever.

DISCUSSION

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Whatever you’re doing in the environmental game be it climate science, justice seeking, or cleaning up someone else’s mess - it’s really a good idea to understand how important money is to a lot of people. Given the state of democracy in the world today, money is Trumping justice at the moment. Despite private colleges redoing body counts for an island. So let’s look at why money may be motivating this pipeline nationalization.

The key world market for oil is Asia. Though oil is said to trade globally, it’s really based on several market hubs or field prices like west Texas Intermediate (WTI) Brent sea offshore (Brent) and Middle east (Dubai). US and Canada are highly entangled and with many field (reservoirs) with varying production and quality cost. But deals can always get done. Both US and Canada want to get oil (and gas) to the Asian market.

One of the ways to track the price differential of markets (spreads) is through futures like WTI-Brent Bullet Futures. China wants to get at cheap North America oil. It’s highly dependent on Mideast oil, which tracks similarly to Brent at the moment. Saudi has been price fixing that oil for awhile. US is offering China lots of cheaper oil and thusly China just signed the biggest deal for getting US oil recently. Canada wants to get in the game of exporting directly to China. Right now the spread between WTI and Brent crude is yuge.

The graph is time starting in 2016 to the present. The y-axis is roughly the different between WTI price and Brent price. Since US started exporting the shit out of oil the price spread has grown. It is now to the degree that a hip cool young prime minister of Canada would say, “fuck it, lets nationalize the fucking pipeline. There’s shitloads to be made on direct to Asia exports.” At this point there a $9 difference between barrels of oil sold from these two market. China wants North America oil fast.