Alberta is handing itself the power to restrict fossil-fuel shipments outside the province, a move designed to raise the spectre of soaring fuel prices in British Columbia in an escalating political showdown over the expansion of the Trans Mountain pipeline to bring oil sands bitumen to the Pacific coast.
Premier Rachel Notley says her province might use the legislation if Kinder Morgan Inc. kills its plans for the $7.4-billion pipeline expansion, a threat that looms larger since the company set a May 31 deadline earlier this month to be given legal and financial certainty for the project.
“Every day that goes by without the expansion in place means less revenue for schools, less revenue for hospitals and more dependence on one market for our products – the United States,” Ms. Notley told reporters.
The bill – likely to be passed in the weeks ahead – received immediate pushback. B.C. Attorney-General David Eby said if his province determines the bill is unconstitutional, his government could sue Alberta. “If there is anything in this legislation that even suggests the possibility of discrimination against British Columbians, we will take every step necessary to protect the interests of British Columbians because it will be completely illegal,” he said.
Chris Bloomer, president and chief executive of the Canadian Energy Pipeline Association, said “we are concerned that the measures being considered in Bill 12 could have longer-term, unintended consequences for industry and the public at large. We hope that the measures will not need to be implemented and that we are able to find a prompt resolution to the current impasse.”
Ottawa and Alberta see the project to twin the existing Trans Mountain pipeline to make room for more diluted bitumen as key to reaching new overseas markets, but environmentalists and some First Nations view it as an unacceptable increase in the risk of oil spills. The Alberta bill comes one day after Prime Minister Justin Trudeau interrupted an international trip to meet with Ms. Notley and British Columbia Premier John Horgan – with Ottawa promising to give financial backing to the project and to introduce legislation to ensure it is completed.
The Alberta government first floated the idea of restrictions on oil shipments last month in its Throne Speech as a means to push back against “extreme and illegal actions on the part of the B.C. government” in efforts to block the expansion. But on Monday, Ms. Notley tried to frame her government’s bill as about giving Alberta more strategic control over the shipping of its resources to maximize profits. She said her province is rapidly running out of pipeline space to ship its heavy oil.
She said under the legislation, the province might determine at one point that pipelines do not have enough capacity for bitumen, and therefore more of the 80,000 barrels of refined fuels that go to B.C. every day will need to be shipped by rail. According to the National Energy Board, most of the gasoline consumed in B.C. comes from Alberta, delivered primarily via Trans Mountain.
“And it is true that it going on rail may inadvertently impact the price that people pay for it on the other end of the train track,” Ms. Notley told reporters.
Kinder Morgan suspended all “non-essential” spending on Trans Mountain a week ago. On Monday, Ms. Notley said if on May 31 her province is seeing significant investor uncertainty about the prospects of increased pipeline capacity being built, “then that might be the point at which we’re going to have to be a lot more strategic around what products get shipped to what markets, by what means.”
The new bill would give the province authority to require that companies exporting energy products from Alberta get a licence – including for products such as crude oil and refined fuels, such as gasoline, diesel and jet fuel − which previously were not needed. The province’s Energy Minister could set parameters for how products are transported, be it by pipeline, rail or truck. The province will also be able to take other, broader actions such as setting maximum daily quantities of products that can exported.
Fines for companies in breach of the orders will go to as high as $10-million a day – and for individuals, up to $1-million a day. The issue of compensation for energy, pipeline or other companies that could lose revenues as a result of the legislation is not addressed in the bill, provincial officials said. Ms. Notley has said in the past there might be short-term pain for the industry, but insisted on Monday there will be no surprises for energy companies.
But the threat to throttle the province’s energy shipments could stoke more uncertainty in an industry already struggling with choppy prices and investor apathy. Companies that ship oil and other products on Trans Mountain today include some of the world’s largest energy groups, such as BP PLC and PetroChina Co. Ltd. Oil-sands giants Suncor Energy Inc. and Imperial Oil Ltd. also deliver gasoline and diesel on the line from big refineries in the Edmonton region.
The Alberta legislation could be followed quickly by similar action in neighbouring Saskatchewan. Late Monday, Premier Scott Moe told reporters his government will, within days, introduce a bill that will restrict oil shipments to B.C.
“We’d like to pass it as quickly as possible so that in the event that Alberta moves on their legislation, and does turn off the taps – if you will – to British Columbia,” Mr. Moe said. “The province of Saskatchewan would be the next logical place for B.C. to look for fuel products.”
Mr. Moe said Saskatchewan hopes the legislation never has to be used.
On Monday, a spokeswoman for Kinder Morgan Canada had no comment, even though the legislation could directly affect the company’s biggest asset and a major source of revenue. However, company president Ian Anderson said earlier this year “it’s not feasible” for Alberta to curtail shipments of energy products on its existing pipeline to the West Coast.
The Alberta Premier said Section 92 of Canada’s constitution allows the province to regulate exports. Ms. Notley acknowledges the legislation is likely to attract a legal challenge but will withstand objections.
But Mr. Eby said the B.C. government will be assessing the bill carefully to ensure it is not designed to punish British Columbians.
“The constitution forbids discrimination around energy, between provinces,” he said in Victoria.
Several First nations challenged Ottawa’s approval of the project in federal court, and a decision on whether the Liberal government met its constitutional obligations is expected soon.
Grand Chief Stewart Phillip, president of the Union of BC Indian Chiefs, said the Alberta legislation would not deter protesters in opposing the expansion of the Trans Mountain pipeline.
Mr. Phillip described the legislation as an “absolute act of desperation” by the Alberta government.
With a report from Shawn McCarthy in Ottawa