Opposition will only grow

A coal slurry was considered at one juncture.

There was corporate excitement. What this newspaper dubbed “one of the longest and bloodiest corporate battles in B.C. history” resulted in a reverse takeover by Inland Natural Gas, which purchased B.C. Hydro’s Lower Mainland gas division, which became BC Gas, which became Terasen Inc., an appropriate new moniker, according to the Daily Oil Bulletin in 2003, because the old name sounded limiting while the new name — “terra” meaning Earth and “sen” implying “sent,” as in sent from the Earth, apparently — delivered a message of growth and ambition. This new identity, said the CEO of the day, “allows us to pursue our goal of becoming one of North American’s leading energy companies.” Expansion of the Trans Mountain pipeline was the company’s core initiative.

Investors included the Ontario Teachers Pension Plan, B.C. Investment Management Corp. and the Canada Pension Plan Investment Board.

So what the heck happened, you may well wonder. And how did the Texans get involved?

Step 1 was the decision by the Gordon Campbell Liberals to undo ownership restrictions put in place by Bill Vander Zalm’s social credit government, which capped singleshare ownership at 10 per cent and collective foreign ownership at 20 per cent. Step 2 was Richard Kinder’s realization that there were handsome profit margins waiting for him in the oilsands, “one of the most magnificent crude assets certainly in North America, and I would argue the world.” The summer of 2005 brought good days and bad days to Rich Kinder. July saw the company slapped with a $500,000 (U.S.) fine from the California fire marshal for failing to accurately mark a pipeline location in the state. Five workers died when the pipeline, carrying petroleum, was struck by a backhoe operator.

August marked the company’s successful acquisition of Terasen for $5.6 billion. In a conference call with analysts the day after the deal was finalized, Kinder sounded over the moon. “I can assure you we would not have done this deal unless we thought there were hellacious opportunities for the upside over the next several years.”

The Canadian corporate structure was initially planned as a “master limited partnership,” which in the U.S. allowed the partnership to be exempt from tax, provided that all free cash flow was paid out to investors. Or, in corporate speak, the company would be committed “to returning cash to shareholders in an economic and tax-efficient manner.” In the end, the master partnership disappeared and a Houston-controlled Canadian public entity was launched. In the initial public offering, Steve Kean, a longtime Kinder Morgan hand who had served as chief of staff at Enron, emerged as CEO of the new entity. Kean is described thusly: “No position description for the CEO of the company has been developed.” (I’ve never seen anything like it.)

This was not, first, about crafting a great deal for Canadians. The potential for high value, direct, long-term jobs could not be realized without investment in upgrading and refineries. Instead, the Kinder Morgan gamble — and that of whichever party steps in ultimately to take over — was to ship the dilbit, or diluted bitumen, to tidewater and beyond by twinning a new pipeline to the legacy asset.

For a primer on the black goo, you can do no better than the series produced by InsideClimate News on the 2010 Enbridge spill of diluted Canadian bitumen into the Kalamazoo River. The Dilbit Disaster: Inside the Biggest Oil Spill You’ve Never Heard Of, won the 2012 Pulitzer Prize for national reporting. It’s an eye-opening account of confusion, delays and mistruths, with the EPA not even knowing what they were dealing with: black gunk that can’t be sucked off the surface of the water, as is the case with conventional oil, but sinks to the river bottom after the added chemicals that have allowed the bitumen to flow have vapourized into the atmosphere. Reading it will correct the mistake of describing the Trans Mountain pipeline as a conveyor of “liquids.” The diluents added to the bitumen to liquefy it can include the carcinogen benzene and the neuropathy-causing chemical hexane.

Pipeline supporters are kidding themselves if they think any reassuring words from the prime minister can dispel fears of tragic outcomes. No doubt my view of this is coloured by a brief domestic sojourn in B.C. in 1990 when anti-logging activists were chaining themselves to trees. In this go-round it’s serious when a company such as Richmond-based Nature’s Path Foods replaces its website with a message of opposition to the pipeline expansion. Nature’s Path products are recognizable to any lover of organic cereals and grainy snacks, but this week it was cautioning that the proposed pipeline expansion “will result in an increase of coastto-port tanker traffic, increasing the risk of an oil spill and disrupting sensitive animal habitat. A leak or spill could cause an environmental catastrophe whether on land or in water.”

Talk like that will only grow louder.

As for history, what it shows is there was a time and place for pipeline talk. The prime minister is gambling on the merits of using the expansion as a bridge to a climate-conscious future. That might have worked decades ago. Today it leaves the young PM sounding very ’80s.