Trans Mountain CEO says expansion will make waters safer even if tanker traffic spikes

Even when oil tanker traffic increases after the Trans Mountain pipeline expansion, CEO Ian Anderson says the marine environment around Vancouver will be safer because of measures to protect orcas.

“There will no doubt be measures taken that will make the transit and the understanding of the marine environment better than it was before,” Anderson said in a podcast interview with ARC Energy Research Institute, the investment analysis arm of an energy-focused private equity fund. “There will be incremental benefits to the whole value chain of marine traffic in the Salish Sea."

Anderson, Trans Mountain Corp.'s president and chief executive officer, was referring to measures recommended by the National Energy Board (NEB) to mitigate "significant" adverse environmental impacts on Southern resident killer whales (orcas) and on Indigenous cultural use related to them.

He also said in the April 4 podcast that "absent an injunction that stops construction," his crews would be ready to break ground and get in the water by the summer, despite what he called "pockets of opposition" from Indigenous groups.

He had hoped for federal approval soon, but the government on April 18 extended its deadline for a decision by about a month to June 18.

The federal government's earlier approval of the project in 2016 was quashed in a Federal Court of Appeal ruling last August. The court said the NEB needed to correct a “critical error” of excluding marine shipping from its earlier deliberations and that the federal government failed in its legal duty to adequately consult First Nations affected by pipeline construction.

The pipeline expansion project by Trans Mountain, a Crown corporation since the federal Liberal government bought it from Texas-based Kinder Morgan for $4.5 billion in May last year, would almost triple the current capacity of 300,000 barrels per day from Edmonton, Alta. to terminals in Burnaby, B.C, on the outskirts of Vancouver.

The company has said it expects the expanded terminal facilities in Burnaby to accommodate 34 tankers a month in the Burrard Inlet and the wider Strait of Georgia that separates the city from the island and the ocean, compared to fewer than five a month that use it currently. The terminals are located on the traditional and unceded territory of the Tsleil-Waututh and Squamish Nations and have been the site of frequent protests.

The NEB issued draft conditions and recommendations in January 2019 for tougher marine monitoring and protections. The NEB also called on other government agencies, such as the Coast Guard, Transport Canada, and the Department of Fisheries and Oceans, to assist in implementing recommendations to help protect the orcas and the broader health of the Salish Sea. Those are recommendations on matters where the NEB has no jurisdiction.

Anderson: new requirements will make sea safer

Anderson said that cruise ships, freighters, ferries, whale-watching boats, and other commercial marine traffic will fall under new rules to lower noise, while a slower speed limit for tanker traffic and underwater monitoring for orcas are also going to make the sea safer.

He said all commercial traffic would be subject to "new requirements that are going to make the sea safer, around ship noise, around tug escort capacity for tankers specifically, underwater monitoring for the behaviour of the orcas, Chinook salmon habitat restoration."

There would also be increased use of tugboats to guide tankers through the narrow inlets and two pilots familiar with B.C.'s coastline on every vessel to steer them to the edge of Canadian territorial waters.

The podcast on which Anderson made his comments is produced by ARC Financial Corp, Canada's largest private investment management firm with $6 billion raised across its energy funds and many customers in the oil and gas industry.

The hosts of the podcast were Peter Tertzakian, a managing director at the Calgary-based firm and its chief energy economist, and Jackie Forrest, a senior vice-president for energy research.

Tertzakian was appointed by the Alberta government to sit on a panel to review the province's royalty regime. The review was criticized for keeping terms too friendly to oilsands producers in 2016.

In the event of an oil spill on the south coast of British Columbia or the southern Salish Sea, Anderson said Trans Mountain “will explicitly improve response capability” to two hours or less via seven new incident response bases costing the company $150 million. He said interested members of First Nations communities could be trained in the use of that equipment and that the bases could be located in Indigenous communities.

'An affront to our intelligence'

Robyn Allan, a former CEO of the Insurance Corp of British Columbia, said the actions Trans Mountain is being told to take are not enough to cover all the possible liabilities.

“If you want to underwrite the marine risk, it is extensive and it is not being addressed by the programs Mr Anderson suggests,” Allan, now an independent economist, said in response to the podcast.

“It’s very clear that increasing congestion in the way that this project is going to do in the marine environment is not going to make it safer than if this project is not built. On any level,” she said in a telephone interview.

“The narrative is being set up as if the environmental risk is very minimal and that it is going to improve the situation if the project is built. That is fundamentally not correct. It is absolutely an affront to our intelligence,” she said.

'Pockets of opposition' and hints at First Nation ownership stake

Anderson responded to a question about where the project faces the stiffest resistance from Indigenous Peoples, by saying that opposition in some communities along the pipeline route "isn’t outright opposition” and Trans Mountain is focused on creating jobs and being environmentally careful.

“You certainly have pockets of opposition, and I would say they are centred in some parts of the Lower Mainland (the region surrounding and including Vancouver); obviously the marine communities around Burrard Inlet have been the most vocal opponents,” he said, referring to the Tsleil-Waututh Squamish by name. "You've got a few in the interior, around the Coldwater region south of Merritt, who have stood in opposition but I'm continuing to talk with the community and the chief and hopefully we can resolve our differences.”

In Coldwater's submission (PDF) to the NEB, the band said Trans Mountain completely disregarded its concern about the "direct threat" the proposed route poses to the aquifer that provides the sole source of drinking water for most of those on reserve and ignored a request to consider an alternative route that passed west of the Coldwater River.

While still under Kinder Morgan's ownership, the company paid professional investigators to infiltrate protest groups that for weeks and months had disrupted operations around Burrard Inlet on the traditional territory of the Tsleil-Waututh and Squamish Nations and in one day in March last year erected a Watch House metres from Kinder Morgan’s property line to keep an eye on construction.

Coldwater First Nation is a Nlaka'pamux First Nations government in Coldwater, near Merritt, the main stop between Kamloop and the Lower Mainland. The band's elected leader, Chief Lee Spahan, has been clear about the nation's opposition to the expansion of the pipeline, whose proposed route runs over an aquifer which provides drinking water for nearly half of the nation's 850 members.

"If we have to, it'll be our Standing Rock," he told APTN last year, referring to the site of conflict between Indigenous and other protestors blocking construction of the Dakota Access Pipeline in North Dakota in 2017.

Coldwater was one of the nations that challenged the National Energy Board's (NEB) approval of the project (along with several other First Nations, two environmental groups and the cities of Burnaby and Vancouver), leading to the Federal Court of Appeal ruling that nixed the government's green light.

Anderson contrasted the "pockets of opposition" with the 43 communities that have expressed explicit support and said the company is working to come to agreements with another 15 or 20 communities.

There are more than 120 Indigenous communities in the pipeline expansion's path, according to a database and mapping project published by Discourse Media, APTN, and HuffPost Canada in May 2018, suggesting perhaps half of the communities whose consent is required have not yet given it.

'More powerful table'

The company and the government, now sitting at what Anderson called a "much more powerful table," must ensure affected communities have since had their concerns addressed, and confirm they have no outstanding issues and no further accommodation was necessary.

Anderson said the court had no problem with Trans Mountain's engagement with Indigenous communities over the years and downplayed the extent to which the ruling invalidated the NEB process.

“There was no criticism of the work we have done as proponent for the last six or eight years in consulting and engaging and meeting with communities,” he said, referring to Trans Mountain under Kinder Morgan. “There was no criticism of the National Energy Board process (of consulting with Indigenous communities). It was really a quite specific period of time that was put in question and that’s what the government is going back and, if you like, redoing.”

The federal court ruling did say that the government failed to offer "any substantive and meaningful response" to Indigenous concerns about the NEB's hearing process and its findings, including that it did not assess the environment affect of increased shipping, did not allow for the cross-referencing of Trans Mountain's witnesses nor force adequate responses from the company to information requests, and issued conditions and findings that lacked specificity.

Anderson, now a public servant, said the pipeline's ownership by the government would make the new consultations more holistic and responsive.

“We are now part of the Crown, we are now a Crown corporation, we are at those tables with the Crown every meeting to discuss the impacts of the projects and to discuss the things we perhaps could do differently to design, build and execute that is more in touch with what our nation’s concerns are, so we have a much more powerful table, if you like, in addressing those concerns than we did before.”

The federal government has said it does not want to own Trans Mountain long-term, while Allan says no one will want to buy for more than Ottawa paid.

Anderson, meanwhile, hinted that the project could ultimately be at least partially owned by one or more such Indigenous groups. He said four or five Indigenous groups had expressed interest and that Finance Minister Bill Morneau is considering it as a vehicle to advance Canada’s reconciliation efforts.

“Whether or not commercially we can find the right terms and the right counterparty we’ll see, but I certainly think it’s part of the fabric of us going forward,” Anderson said.

How much Asian demand?

While Trans Mountain and the NEB says there are currently five tankers a month docking in Burnaby, the expansion project means that could grow to as many as 34 tankers a month.

But Anderson didn't say in the podcast that 34 tankers a month are needed, and suggested that excess capacity might yet be soaked up by markets in Washington state (which takes about half of current flow) or elsewhere in the United States, most likely California. He did not say if he had firm commitments from interested buyers of Canadian oil from Asia, which is one of the arguments by governments and industry for the need for tidewater access.

“I don’t have contracts in hand to move 34 tankers a month,” he said. “I’ve got contracts to move barrels down my pipeline, but those could go to different places, not necessary to port. The market will decide how many ships move.”

While 12 tankers were loaded at Burnaby and sent to China in 2018, all of the tankers that docked in 2016 and 2017 went south, to the United States.

"A significant amount of oil was sent to China near the end of 2018 when the price was very low, and it stopped the moment the Alberta premier curtailed production and the price returned to normal," David Huntley, an academic who monitors tanker traffic at Burnaby’s Westridge terminal, told the Edmonton Journal earlier this month.

That traffic data shows that Trans Mountain has not had five tankers a month use Westridge since 2010. In 2016, there were only 1.2 tankers a month and they all went to the United States. Eighteen tankers were loaded in all of 2017, again all to Canada's southern neighbor, while in 2018 there were 43 tankers loaded, of which 29 went to the U.S., two went to South Korea and the rest to China. So far this year, there have only been three tankers loaded.

The upper limit of 34 is based on physical limitations on moving out of the inlet only during daylight hours at high slack tide, which occurs about once every 20-22 hours, Anderson said.

The company also says that number was realistic based on its 2013 expectation of demand once those sending products down the pipe can secure the increased capacity.

"Thirteen shippers have made significant 15 and 20-year commitments that add up to roughly 80 per cent of the capacity in an expanded Trans Mountain pipeline," the company said in an emailed response to questions about Anderson's comment.

"We expect the majority of the expansion capacity will be for export off the dock," the email said. It did not specify the level of interest Trans Mountain expects from Asia, saying that the "actual destinations our customers will ship to - percentages and volumes - will vary depending on market conditions."

The company includes British Columbia, Washington state and California in its definition of the Pacific Rim, meaning it is unclear how much oil the company expects will cross the Pacific Ocean.

Restoring public trust

The office of Natural Resource Minister Amerjeet Sohi partially responded to a list of emailed questions, deflecting questions about whether there is sufficient Asian demand for Canadian oil and if the government is actively involved in seeking customers. It did not say whether the minister shares Anderson's view that the marine environment will be better protected if the expansion goes ahead.

"Countries around the world are looking for the most sustainably sourced products, and Canada can be that source," said Vanessa Adams, a spokeswoman for the natural resources minister. "That is why we are focused on gaining access to non-U.S. markets, which will also help us get a fair price for Canadian oil."

Alberta's crude has typically traded at a deep discount to U.S. oil for a variety of reasons, including the location of the final buyer and the relative accessibility of the source to suitable refineries.

Adams said the inaction of the previous Harper government meant that 99 per cent of Canada's oil exports are still sold at a discount to the United States, and that the Liberal government is determined to get Canada’s natural resources to market.

"Our government has been clear that our decisions on projects would be based on science, evidence, and Indigenous knowledge, and that the views of the public and affected communities will be sought and considered. Canadians understand this is how we make better decisions and restore public trust," she wrote.

The 'determination and patience to see it through'

Anderson, who has been working on the project since 2008, said it became necessary for the government to step in after then-owner Kinder Morgan encountered “repeated, consistent obstacles that were presented to us, be they regulatory, legal or political for that matter” in 2016 and 2017. He said "this asset reached a point in time where it was in all of our interests as Canadians to put capital behind it that had the right determination and patience to see it through.”

Anderson said the company will be ready whenever a decision is made. "We're developing our plans to be prepared to start construction in the summer. To get back into the ground and in the water, continuing our work on building our dock and working on our right-of-way this summer and we would have full crews on the ground this fall working on the right-of-way if a decision comes in May or June.”

He said construction would likely take between 30 and 36 months, depending on when approval is granted and how that fits in with salmon spawning and bird migration windows.

“Absent an injunction that stops construction,” he said the company will go ahead while possible legal proceedings are underway. “We’re prepared to continue in the face of that if we determine that those appeals are likely to remain in our favour.”

He said Trans Mountain had previously started construction in the face of nine legal appeals, including a reference case the B.C. government has put to that province's court of appeal on whether it has the right to control the movement of hazardous material (in this case, diluted bitumen from Alberta's oilsands) through the province.