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Kinder Morgan will be Trudeau’s Waterloo

The Texas oil company’s problem is now our problem, and it’s all thanks to Justin Trudeau
Photo: Alex Guibord

This morning, Finance Minister Bill Morneau announced that the federal government will buy the existing Kinder Morgan pipeline and its expansion project for a price tag of $4.5 billion. That doesn’t include the cost of building the pipeline, which has climbed well above $7.4 billion, although the company has declined to update its spending estimates. When asked by reporters, Morneau twice dodged the question of how much additional money the government would need to spend on construction.

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May 29, 2018. Remember the date.

This morning Kinder Morgan CEO Steve Kean told a conference call of investors, "We will be paid the $4.5 billion even if a third party buyer is not found.” Their stock price surged immediately on news that they had unloaded this toxic asset.

Finding that third-party buyer the government is promising, however, appears unlikely. To sweeten the pot, the government announced it would indemnify a buyer against losses related to provincial or municipal government actions, but also in the event that the pipeline cannot be completed by a certain date despite “commercially reasonable efforts.” So even if a buyer is found, taxpayers will remain on the hook for billions of dollars.

Congratulations to the Texas oil company formed from the ashes of Enron, you really played us like a fiddle.

I wrote in April about how Kinder Morgan were running a shakedown on Canada, in hopes of unloading a damaged and uncertain asset they no longer had the capital to complete and were unsure would ever be built, or ever be profitable if it was. Their last hope was that the government of Canada would play the sucker, and take it off their hands.

Congratulations to the Texas oil company formed from the ashes of Enron, you really played us like a fiddle. A decision is expected in one of the court cases facing the pipeline in the next couple months. Unlike the B.C. government’s case, the Indigenous case that consultation was insufficient is considered a strong one. If that decision goes against the government, or if it doesn’t but goes against the government on appeal to the Supreme Court, the pipeline is dead. And with it somewhere between $4.5 and $12 billion of our tax dollars.

Kinder Morgan knew this. Why did our government ignore it?

Even if the courts rule in the government’s favour at every step, the Indigenous-led resistance on the ground in B.C. will intensify, and every foot of pipe will be a battle. There will be arrests, people chained to everything in sight, and the cost of building the pipeline will spiral out of control. Meanwhile, Indigenous groups across the country have committed to engage in civil disobedience against the pipeline in their own territories.

Kinder Morgan knew this. Why did our government ignore it?

Most importantly, all indications are that by the time the pipeline is built, the market for the product it transports may not be there. Certainly not at prices that make the investment worthwhile, with experts now forecasting that $50 a barrel oil is more likely than a return to $100 a barrel.

Kinder Morgan knew this. Why did our government ignore it?

Want more bad news? I got you covered. “The United Nations International Maritime Organization (IMO) recently approved new, much stiffer fuel standards for the 50,000 ocean-going vessels which currently burn low-grade, high-sulphur oil.” The new rules, in place by 2020, require no more than 0.5 per cent sulphur, a 700 per cent reduction from the current average. What does that mean for Alberta’s oil?

“Alberta bitumen will likely be a big loser, because it contains on average some 11 times more sulphur than conventional crude, and results in a high ratio of low-grade Bunker C when refined. As of 2020, according to industry reports, U.S. refinery purchases of diluted bitumen for ship fuel will begin slowing to an eventual trickle, Europe will buy none because it has the wrong refinery profile, and Asian refiners will dedicate new refineries to produce low-sulphur diesel for ship fuel.”

Kinder Morgan knew this. Why did our government ignore it?

"Exactly which Asian countries or refiners have signed long-term contracts to purchase more Alberta bitumen for decades to come?" asks journalist Paul McKay in the Energy Mix. "Exactly how much have they committed to pay per barrel delivered?" The NEB didn't ask, and the answer is no one knows.

For a fraction of what we’re paying Kinder Morgan to help them escape their liability-riddled project, we could offer retraining and jobs in renewables to everyone in Alberta and across the country who wants one.

Finally, to consider for just a moment our survival on this planet, let’s look at a new report from the Stockholm Environment Institute. It concludes that “if Canada lets oil production expand as expected, global emissions could increase by 50 to 150 million tons CO2 by 2030 – the equivalent of putting as many as 32 million cars on the road each year.”

This will frustrate global climate targets, and slow the global transition to a low-carbon future.

“SEI’s findings raise questions about efforts to expand Canadian oil production, including new, long-lived infrastructure such as the Kinder-Morgan pipeline.”

“The Canadian federal government can significantly increase its ambition and contribution to global climate goals by limiting the future expansion of oil sands extraction,” said SEI Senior Scientist and author of the report Peter Erickson. “Conversely, a failure to do so could almost fully counteract the climate benefits of its current Climate Action Plan.”

That’s right, Trudeau and Environment Minister Catherine McKenna aren’t “balancing the environment and the economy” as they claim, they are screwing the climate and the world in pursuit of political convenience. Think Trump is bad? Nothing he has done or will do will have as big an impact on climate change as our supposedly progressive government’s myopia here in Canada.

Kinder Morgan knew this, but they didn’t care. Why doesn’t our government?

For Justin Trudeau, this will be his Waterloo. The same younger generation that propelled him to victory in the last election feel lied to and jilted. Our political leaders are unwilling to lead on the single most crucial issue of our times, and we will not forget their cowardice, or their betrayal.

But no matter what we do, or who we vote in to replace the serial liar who inhabits 24 Sussex Drive, we’re about to lose billions of dollars. Money that could have paid for hospitals, schools, affordable housing and public transit. Money we could have invested in making Canada a leader in the renewable energy of the future, instead of clinging to the whale oil of the past.

Today our government went to war with Canada’s young people, with our future, and all for the corporate profits of a handful of companies.

May 29, 2018. Remember this date.

It’s the day our government went to war with Canada’s young people, with our future, and all for the corporate profits of a handful of companies.

Because this was never about jobs, that’s a fairy tale we’re told in hopes we don’t examine it too closely. The pipeline expansion will produce under 100 permanent jobs, with thousands more temporary jobs in its construction.

For a fraction of what we’re paying Kinder Morgan to help them escape their liability-riddled project, we could offer retraining and jobs in renewables to everyone in Alberta and across the country who wants one.

Construction crews don’t care if they’re building a pipeline or a solar grid, they want jobs. A forward-thinking government would see the inevitable collapse of the fossil fuel industry on the horizon, retrain workers for the jobs that will be most in demand over the next thirty years and invest in becoming a world leader in the energy of the future.

In the United States Donald Trump has played a cruel joke on coal miners. Promising them that the jobs they’ve lost will come back, and feeding them bile and resentment instead of helping them retrain and find new jobs.

Here in Canada, Justin Trudeau is playing an equally cruel joke on our workers. Selling them a bill of goods about the oil industry instead of helping them to ensure their future, and that of their families. When oil crashes, and we know it will, these workers will be left high and dry.

Instead of the climate champion we thought we were electing, we now get a government whose very survival is tied to keeping its head in the sand about climate change.

Morneau claims that the purchase is temporary, that the government plans to unload the project to a buyer once the “uncertainty” of court cases and protests is resolved. But, leaving aside for a moment the unlikeliness of all that “uncertainty” magically disappearing, what if no one wants to buy it?

Morneau made a public call for other buyers during his negotiations with Kinder Morgan, and none stepped forward. That’s not surprising, global oil companies know all the things mentioned above, and have been pulling out of Alberta in droves. Recent years have seen international oil companies like Petronas, ConocoPhillips, Royal Dutch Shell, ExxonMobil and many others all walk away from projects in Alberta.

“The only people buying oil sands reserves are Canadian operators,” energy economist Jeff Rubin told Vice. “Foreigners are saying look, this doesn’t make sense today.”

May 29, 2018. Remember this date. It’s the day our government bought the largest white elephant in history, and blew a multi-billion dollar hole in our national budget.

The pipeline is unlikely to ever be built. Kinder Morgan knew that, it’s why they complained about regulatory delays when they hadn’t even applied for half of all the permits they needed to build the pipeline.

It was always a con, but they took us for suckers, and now we own it. Kinder Morgan’s problem is our problem, and it’s all thanks to Justin Trudeau.

Instead of the climate champion we thought we were electing, we now get a government whose very survival is tied to keeping its head in the sand about climate change.

Welcome to the petrostate.

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