In the highly charged atmosphere of pipeline politics, it
was inevitable that whatever the government’s decided on the Kinder Morgan project
(KM) it would generate furious debate. Had the government rejected KM, opponents
of the project would have hailed this as a great, well considered decision
based on the evidence, while the pipeline proponents would have castigated it
as pandering to environmental politics. And now with the government’s decision
to approve the project, proponents praise the government for its leadership,
while the more virulent opponents see it as caving to corporate interests, a
‘betrayal’ of the public trust.
It is, for far too many, a black and white issue, with
little room for nuanced consideration of the many factors and trade-offs involved.
Public policy debate doesn’t have to be this way. The fact
of the matter is that there are very legitimate interests on both sides of the
pipeline issue and a decision one way or the other has to recognize and balance
competing concerns.
What the general public deserves in all this is a clear,
objective assessment of the positive and negative consequences – the benefits
and costs – that KM is expected to have, and a clear explanation why the
government has taken the position that the positive are expected to outweigh
the negative. What the general public doesn’t need is more hyperbole and
one-sided argument driven by pre-determined positions on the project.
The economic benefits of the KM project, properly measured,
have little to do with the size of the investment and the number of jobs it
will generate – gross economic impacts that proponents often cite. Rather, the
economic benefits depend primarily on the incremental effect that the project
will have on the net benefit or resource
rent Canadian shareholders, taxpayers and oil sector workers realize from
our oil resources – shareholders in higher returns on their investments,
taxpayers from greater industry income tax and royalty payments, and workers
from the much higher wages they receive in jobs that depend on this project as
compared to what they could otherwise earn.
Proponents argue that oil resource rents will increase because KM will provide access to
higher price markets and reduce transportation costs by diverting oil from rail
to lower cost pipeline transport. The higher prices and lower transportation
costs will in turn support higher levels of production. Critics counter that
oil prices are volatile and regional price premiums that exist today may not
hold in the future; transport costs may not fall, particularly if deliveries on
KM are diverted in large part from other existing pipelines as opposed to rail;
and the net benefits from any new production are likely to be small because of
the high cost of oil sands production relative to other world supplies.
The government should clearly indicate what it is assuming
in its assessment of the benefits of the project, and why.
With respect to costs, in terms of the project’s impact on
society as a whole the issue is not the billions that will be spent building
the line and marine facilities. Those expenditures presumably will be recovered
from the regulated tolls KM will charge on oil shipments. To the extent there
are financial risks that shipments and revenues will fall before the line is
fully paid off, that is a matter KM shareholders must carefully consider; it is
not so much a concern of the general public.
The most significant social costs that do concern the general
public are the environmental issues and risks the project raises – in
particular the oil spill risks and the impacts the project will have on GHG
emissions. And it is here where dispassionate analysis must part ways with the
rhetoric and emotion the project generates. This is not to say the environmental
risks and impacts are not significant. They are. Rather it is simply to say it
is important to consider exactly what the impact of the project is likely to be
so that economic- environmental trade-offs, as have to be considered with all
major projects, can be properly assessed.
With respect to oil spills what has to be recognized is that
risks exist even without the project going ahead. The question is how much
greater will the risk be with the additional pipeline throughput and tanker
shipments that the project will entail, bearing in mind there will also be much
greater investment in oil spill prevention and containment should a spill
occur. That requires technical analysis of the net effect, and again the
government should be very clear on the specific assumptions, analysis and
conclusions it is relying on in the decision it has made.
With respect to GHGs, the issue is not, as some opponents
like to argue, how much carbon is contained in the oil that will be shipped on
the line, but rather what is the incremental effect of the project on Canadian
and global emissions. That depends on a number of factors – how much of the oil
shipped on KM would have been produced even without the project, shipped by rail
or other pipeline; how much of the KM shipments displace other sources of
supply; and how much KM actually causes global consumption of oil products to
be higher than it would otherwise be.
To the extent the concern is the consistency of KM with
Canada’s commitments to the Paris accord on GHG emissions, the question must be
cast in the full context of Canadian GHG politics. In particular a key issue is
whether the Alberta and federal carbon tax and coal phase-out policies could realistically
be sustained if the KM project were rejected. Only then can one properly
consider whether KM impedes or potentially enhances our ability to meet GHG
reduction targets over the long term.
It is almost certainly the case that the federal government
considered all of these issues in making its decision. But now is the time for
transparency. What were its assessments of economic benefits, properly defined;
incremental oil spill risks; impact on GHG emissions; and ability to implement
carbon pricing and coal phase-out strategies. How confident is the government
in its assumptions and analysis.
That is the information we all need to have a sensible
debate on the policy decision – one that
is focused on the incremental effects and trade-offs KM entails.
