The Trudeau government's move to add new hurdles to the pipeline approval process will go down as either the brilliant counterintuitive thrust that creates social licence for languishing energy infrastructure projects or the fatal blow that condemns them to the scrap heap.
Such is the new government's desire to please everyone that it's impossible to tell whether Prime Minister Justin Trudeau is more committed to improving market access for Alberta's oil or to reducing Canada's carbon emissions. He's given both pipeline proponents and opponents hope to cling to. Inevitably, one side or the other faces major disappointment.
Take Wednesday's announcement that, in addition to expanding consultations with affected First Nations, the government will impose a climate test on the Trans Mountain and Energy East pipelines, assessing the upstream greenhouse-gas emissions generated by each project. Depending on the assumptions used, those emissions will either be quite minimal or colossal.
Differing assumptions left the U.S. State Department and Environmental Protection Agency at odds over the impact TransCanada's Keystone XL pipeline would have on greenhouse-gas emissions. It's reasonable to expect a similar clash (behind closed doors, at least) between Natural Resources Minister Jim Carr and Environment Minister Catherine McKenna, whose respective roles position them as antagonists in any debate over oil-sands development.
The issue centres on whether the construction of Kinder Morgan's Trans Mountain expansion or TransCanada's Energy East would lead to an increase in oil-sands production that would not otherwise occur. In the case of Keystone, the State Department concluded that "the approval or denial of any one crude oil transport project … is unlikely to significantly impact the rate of expansion in the oil sands or the continued demand for heavy crude oil in the United States."
The EPA took an opposing view, arguing that declining oil prices rendered alternative transportation methods, such as oil-by-rail, uneconomical for oil-sands producers. Hence, blocking Keystone would landlock the 830,000 daily barrels of oil it sought to transport. Approving Keystone, the EPA countered, would "change the economics of oil-sands development and result in increased oil-sands production and the accompanying greenhouse gas emissions."
Similar reasoning was used by the Pembina Institute in a 2014 study that estimated the upstream greenhouse-gas emissions from Energy East at more than 30 million tonnes, stemming from an increase in oil-sands production of up to 750,000 barrels per day. By comparison, current oil-sands production generates about 70 million tonnes of carbon dioxide equivalent. The Alberta government proposes to cap oil-sands emissions at 100 million tonnes.
"There is an important distinction between the transportation costs that existing producers are willing to pay and the conditions needed to encourage future production growth," the Pembina study said. "So, while rail can be a complement and a stop-gap, oil-sands producers want to see large-capacity pipelines built to give them the confidence to invest in new operations."
That point of view was contrasted in a discussion paper produced for the Ontario Energy Board by environmental consulting firm Navius Research, that the OEB called "the most comprehensive Canadian analysis to date on the relationship between pipeline projects and climate change." It found that rail would indeed make up for a lack of pipelines, estimating that Energy East would lead to an increase in oil-sands production of about only 90,000 barrels per day, or less than 10 per cent of the proposed pipeline's 1.1-million-barrel-per-day capacity.
In its projection of future Canadian energy supply, released Wednesday, the National Energy Board estimated that even in its "pipeline constrained" scenario, domestic oil production would rise to 5.6 million barrels a day by 2040. That's just 8 per cent less than the 6.1 million barrels per day the federal agency projects would be produced with new pipelines and higher prices.
What's more, current analyses of upstream greenhouse gases assume that the emissions intensity of oil-sands crude remains constant. But that intensity has declined dramatically in recent decades and, depending on your faith in science, can reasonably be expected to decline in the future. As the Navius report noted: "Producers are constantly developing new and more efficient ways of extracting bitumen."
Still, not even a favourable upstream emissions assessment will placate environmental groups, more than 70 of which released an open letter Wednesday calling for Canada to "turn away from carbon-enabling infrastructure" such as pipelines and to "leave carbon in the ground."
Sooner or later, Mr. Trudeau must resign himself to the fact that he can't please everyone.
Konrad Yakabuski