Bill 12 a double-edged sword for skittish oilpatch businesses
Canada’s energy sector is conflicted about the Notley government’s tough new bill to let Alberta choke off the supply of oil to British Columbia.
The oilpatch wholeheartedly supports Kinder Morgan’s Trans Mountain pipeline expansion, which will triple the amount of Alberta crude shipped to the West Coast.
Yet, they’re concerned political action by Alberta could sideswipe their businesses in the short term.
That’s why the provincial government is promising further consultations with industry — and isn’t ruling out providing compensation to companies affected by the new legislation.
“Right now, if things go as they’re going, we probably don’t need to use it,” Cheryl Oates, the premier’s communications director, said Tuesday.
“In terms of compensation, there is nothing in the legislation that talks about it. But we’ve said from the beginning this is an ongoing conversation with industry.
“So we haven’t ruled it out.” On Monday, the Notley government introduced Bill 12, giving Energy Minister Marg McCuaigBoyd the authority to issue export licences to companies transporting crude oil, natural gas or refined products — such as diesel, jet fuel and gasoline — out of the province.
The bill hands Alberta a sharp stick to poke the government of British Columbia if it throws up more roadblocks to delay the federally approved pipeline.
If used strategically, the legislation gives the minister the power to withhold supply and drive up gasoline prices in the Lower Mainland.
Kinder Morgan wants an agreement in place by the end of May that gives the company assurances it can move ahead with heavy spending needed to get the development built.
Both Ottawa and Alberta are considering taking a stake in the $7.4-billion venture to remove some of the financial risk of additional delays to the company and its investors.
Alberta’s Bill 12 is a different tool.
It serves as the legislative brass knuckles to make sure the project proceeds without more unexpected hindrances from B.C. Premier John Horgan’s government.
The energy sector is generally on board with Alberta’s response, but anxious about how it could affect them.
“We understand the government’s overall objectives,” said Brian Ahearn, vice-president for Western Canada of the Canadian Fuels Association, which represents the country’s largest oil refiners.
“However, we do have concerns on some potential downsides of this particular approach.”
About one-quarter of all production from Alberta’s four refineries, 80,000 to 100,000 barrels per day, is transported into B.C.
Curtailing that amount “would have quite an impact on the refineries, in terms of them slowing down their production, or worst case, shutting down,” Ahearn said Tuesday.
The existing Trans Mountain pipeline supplies oil to the Burnaby refinery owned by Parkland Fuel Corp. of Calgary. The facility supplies about 30 per cent of the Lower Mainland’s transportation fuel requirements.
Without the primary source of feedstock flowing from Trans Mountain, “the refinery would be unable to maintain operations,” Parkland said in a statement.
Alberta producers would also be affected if refineries don’t need their oil.
The Canadian Association of Petroleum Producers backs the province’s aggressive steps to get Trans Mountain built but realizes such action could hurt oil and gas companies in the process.
“This is a political problem and it looks as though this is a political tool and we’d leave that judgment to the politicians,” said CAPP president Tim McMillan. “But the free movement of energy is what we support.”
Notley acknowledged the industry’s nervousness Monday and previously mentioned it’s a case of the oilpatch enduring short-term pain for long-term gain.
The energy minister met with industry leaders last Friday about the bill and has vowed to give affected companies advanced notice before taking action.
“We don’t want to use it, but we absolutely will,” McCuaig-Boyd said Tuesday.
“But I did promise them I would be strategic and thoughtful and work with each company that would be affected.”
The bill would let the minister determine if an export licence was in the public interest. She could impose terms regarding how the product is shipped — by
pipeline, rail or truck — where it can be exported from, and could change or cancel the licences entirely.
Even the whiff of potential gasoline shortages has caught the attention of the B.C. cabinet.
B.C. Attorney General David Eby has threatened to sue Alberta if it uses the new bill, calling it unconstitutional.
“The legislation is a bluff,” he told reporters Tuesday.
McCuaig-Boyd insisted the government is on solid legal ground, although University of Calgary law professor Nigel Bankes isn’t so sure.
He points out the province’s legal protection to take such action rests in section 92A of the Constitution. The clause allows provinces to make laws about exporting “the primary production from non-renewable natural resources,” such as crude oil, to other parts of Canada.
The university’s chair of natural resources law thinks there’s an argument that refined petroleum products aren’t primary oil production and wouldn’t be included in this protection.
Of course, this fight won’t be about legal niceties if Alberta uses its new powers.
If the bill is weaponized, it will get messy, quickly.
The question would then become who blinks first: B.C. facing the prospect of soaring gasoline prices, or Alberta companies squeezed by government action.
No one should be surprised if the temperature keeps rising, regardless of how uncomfortable it makes the oilpatch or anyone else along the way.