Consequences of cancelling pipeline

The ongoing debate about the building of the Kinder-Morgan pipeline seems to me to be missing something. I’m unaware of any of those protesting its construction discussing the consequences if they are successful in stopping its construction. What would happen next? I’ve tried to think through just what the cancellation of the expansion of the pipeline would mean for British Columbia, Alberta and Canada. Now, while I may be wrong in my thinking, I’d like to put forward for discussion some predictions for the possible knock-on effects of a victory for the protesters.

Denied the increased capacity, Alberta’s producers of bitumen and other petroleum products, I anticipate, could decide to ship to Burnaby only the diluted bitumen (“dilbit”) because it is so costly to produce. By exporting it to world markets they can avoid the discounts they are forced to accept when selling their output in the United States. This, in turn, could mean a decrease in volumes of other petroleum products, including lighter traditional crude used by refineries in the lower mainland and refined products shipped by pipeline to B.C.

So, if refined products or traditional crude were to be shipped into B.C. from Alberta it would arrive either by rail or truck. Rail shipments are subject to derailments and consequent spills can have a catastrophic impact on the environment especially if the spill catches fire.

Rail companies in Canada treat derailments as a cost of doing business. There are no penalties that incent them to improve both the operating condition of their road beds and the maintenance of rolling stock. And trying to meet the demand for refined products within the entire province would severely strain the existing capacity of the tanker truck fleets.

Alternative supply of both traditional crude and refined products would have to come from the U.S. and perhaps some other distant nations. In any event, it could be expected that the increased demand on alternative sources would increase the price of petroleum products in the B.C. market. Moreover, since it would be coming from offshore and billed in US dollars, the Canadian price would also vary with the U.S./Canadian exchange rate.

To avoid the higher price of jet fuel in Vancouver, international airlines might decrease the direct non-stop flights from Vancouver by instituting short flights from Vancouver to Seattle and then going nonstop to Asia, Europe and Africa.

That would negatively impact the business generated by housing of flight crews and catering for intercontinental flights. For cross-Canada flights, expect non-stops to Toronto, Ottawa and Montreal to be cancelled in favour of flights from Vancouver to Calgary and then non-stop to eastern destinations. This would be inconvenient for travellers and could rapidly turn Vancouver airport in a less active terminal.

Alberta would still have limited access to tidewater but not the capacity the twining of the existing pipeline would offer. In all probability, the result would be a cancellation of any plan for Alberta to buy electricity from B.C., thereby reducing the demand for Site C’s power and increasing the probability that Site C would become a massive white elephant.

In retribution for the actions of the B.C. government in delaying the expansion Kinder Morgan and coddling the protesters, Alberta could impose a significant license fee for the right to sell B.C. wine in the province.

Now consider the impact upon Canada as a whole. First, the supposed supremacy of federal jurisdiction over interprovincial trade would be to all intents negated. It would still be exist on paper but endless legal delays would render it inoperative.

Second, inter-provincial co-operation would become even more difficult to achieve if each province believed that protecting local interests at the expense of the federation would offer a more secure hold on elected power. Canadian unity could be tested to the breaking point.

It’s time the opposition to Kinder Morgan spelled out their vision for the world if they succeed.

David Bond is a retired bank economist who resides in Kelowna.