Mike Smyth: Pipeline reality check — there’s bitumen flowing through it right now

As Premier John Horgan turns to B.C.’s highest court in his battle against the Kinder Morgan pipeline expansion, his government is taking aim at the toxic stuff that flows through the pipe: Diluted bitumen.

Bitumen is the thick, heavy crude extracted from Alberta’s oilsands that the B.C. government says poses a dire threat to the public.

“Diluted bitumen, when released into the environment, would endanger human health, the environment and communities,” the government said in a statement Thursday. That’s why the government now proposes strict new regulations on bitumen shipments and is asking the B.C. Court of Appeal to confirm its jurisdiction to do so.

But the government says the new permitting process would only apply to “incremental volume” of bitumen from Alberta, and not to bitumen already flowing through B.C. on a daily basis.

Kinder Morgan’s proposed Trans Mountain project is actually an expansion of an existing pipeline that’s been operating in B.C. for 65 years. The pipeline currently pumps an average of 60,000 barrels of bitumen a day through B.C.

I asked Horgan if there’s a possibility of a catastrophic bitumen spill happening in B.C. right now.

“Potentially, yeah,” he said.

So if the stuff is so dangerous, why is his government not taking steps to regulate all of it?

“It’s a question of fairness,” Horgan told me. “We wanted this to be forward-looking in the interest of fairness to those who are already conducting business on a regime that existed when they began their business activity.”

So “fairness” to the fossil-fuel industry is more important to Horgan than taking steps to prevent a spill that threatens human health?

Here’s another rationale for this hypocrisy: Choking off existing bitumen shipments could inflate the price of gasoline in B.C. and spark a possible trade war with the Americans. Most of the bitumen currently shipped through B.C. is sent south of the border to refineries in Washington state. Much of that refined product is then sold back to B.C. as fuel.

“Could you imagine what a conniption Gov. Jay Inslee would have if 10 per cent of his state’s oil feedstock disappeared?” asked industry analyst Dan McTeague.

Inslee is the Washington state governor who has forged a close relationship with Horgan and is touted as a possible Democratic nominee for president. We wouldn’t want to annoy him, would we? And I’m sure Horgan doesn’t want to be blamed for even higher gas prices or worse.

“They likely don’t want a NAFTA challenge,” McTeague said. “It could also cause the Loonie to drop.”

All very unpleasant consequences, so much better to focus on “incremental” bitumen shipments, and accept the current risk of a spill.

So is this fight really about protecting the environment, B.C. communities and human health? Or is it about appeasing environmental activists inside the NDP and Horgan’s governing partners in the B.C. Green party?

The strategy is clearly “death by delay” — tie the project up in court and hope Kinder Morgan gives up and cancels the whole project. The company has set a May 31 deadline to resolve the impasse with B.C., though the court case is certain to drag out beyond that date. That could trigger action by the federal government and Alberta. Both are considering putting taxpayers’ money into the pipeline to save it.

No matter what happens, it appears Alberta’s current bitumen shipments will continue to flow through B.C.




Vaughn Palmer: NDP stacking the deck in favour of proportional representation

When the New Democrats recruited four academics to vet the public consultations on electoral reform, they asked them to take a vow of silence about the government’s methods, process and findings.

“You are one of four academics invited to provide advice and would be privy to confidential information, including draft materials and related commentary,” read the formal invitation from the Ministry of the Attorney-General.

“As a condition of your participation, we ask that you agree to abstain from public comment or academic research related to the B.C. government’s survey methodology, survey results or consultation process.”

The letter went out last Nov. 3 to four political scientists with expertise in electoral reform: Maxwell Cameron from the University of B.C., Genevieve Fuji Johnson, Simon Fraser University, Jonathan Rose, Queen’s University and Peter Loewen of the University of Toronto.

The first three have spoken favourably about the need for electoral change. Only Loewen has much good to say about the status quo first-past-the-post system.

But from the outset, the quartet was presented with a bit of a fait accompli — a questionnaire about public attitudes on electoral reform drafted in advance by the government, with a tight time frame to offer comments and shape the final version.

All four wrote back over the next week or so, doing their best to shorten, clarify, correct and add balance to the initial draft. Not all of the advice was taken.

“Are you planning a citizens’ assembly?” asked Prof. Johnson, suggesting an assembly or some other form of public review would be critical to build support and understanding. “Voters have to become very familiar with the alternatives to our political system and the reasons why they are stronger. This can’t be rushed.”

Despite the caution against rushing, the New Democrats had already put the process on the fast track.

“We do not have time to do a citizens’ assembly process,” returned Neil Reimer, director of strategic initiatives in the A-G’s ministry and the lead public servant on electoral reform process. “We have been given fairly tight timelines.”

I’ll say. The date of that email — obtained by the B.C. Liberals under an access to information filing, like other documents quoted here — was Nov. 13. Two days later, Reimer got back to Johnson and her colleagues with a revised questionnaire and solicited a second round of feedback, with responses due by noon on Nov. 17.

The following week the New Democrats launched the public engagement process and the final version of the questionnaire. Included on the How We Vote website, was a carefully crafted nod to the limited role played by its four external academic advisers.

“They reviewed the questionnaire and voting system information presented on this site. They are not responsible for the website’s design or content.”

Next morning, all four received a cautionary email from Kevin Atcheson, the senior policy and legislation analyst in the Justice Services Branch.

“We understand you may receive media requests on the topic of electoral reform and your role in the review of the government’s educational material and questionnaire,” it began before acknowledging that they were, of course, free to comment on the wider referendum process and voting systems in general.

But then came a reminder of the terms on which they entered into the exercise in the first place: “As indicated in the letter requesting your participation, please refrain from commenting on the specific advice you provided and whether that advice was followed.”

Particularly the latter. Much as the New Democrats were happy to cite the four as validators, the last thing they wanted were mouthy academics critiquing the process, the questionnaire and the possible results.

Besides, as one of the quartet disclosed, “I provided some feedback on the survey, but that’s about it.” The more important role in shaping the final text of the survey was the one hinted at in another of Reimer’s emails: “Our minister’s office has also had input.”

Last week, Attorney-General David Eby ducked questions from the B.C. Liberals about the role played by the political staff in his office. Tuesday he admitted all.

“My office did guide the questionnaire,” said Eby, suggesting that his staff had no choice but to take charge because “some of the (academic) experts provided contradictory recommendations.”

Instead of letting the academics speak out publicly about where they disagreed with the NDP questionnaire and why, Eby’s ministry reminded them of the obligation to say nothing on that score. Then Eby and his staff handled the finishing touches themselves.

“So decisions have to be made in politics,” he told the house. “One of the decisions that my office made, and that I stand here accountable for, was to release the survey in the form it was released to the public for completion. I believe the survey struck the right balance.”

I’m sure he does think it struck the right balance. For in many readings of the survey, it was found to be skewed in favour of proportional representation — the outcome sought by both Eby and Premier John Horgan, who appointed Eby as the “neutral arbiter” on this process.

I further expect that when the New Democrats finally get around to setting the question or questions for the referendum, and deciding the other arbitrary rules and procedures, neutral arbiter Eby will say those strike the right balance as well.

All part of an NDP-led deck-stacking exercise that began last fall and continues to this day.


Stephen Bigsby: The NDP’s ‘speculation tax’ vs. the ‘unfair’ status quo a false choice

In an April 5 opinion piece published in this paper, SFU assistant professor Josh Gordon argued that the NDP government’s revised Speculation Tax was “essential for housing affordability” in B.C.’s main urban centres.

He went on to write: “If critics of the Speculation Tax want to keep up their opposition, they must now defend the status quo. And the status quo is hard to defend.”

According to Gordon, the changes made by the government on March 26 to the original proposal cleared up what critics saw as its only two flaws. Vacation areas such as the Gulf Islands and Parksville were now excluded and B.C. owners of second homes who were undergoing medical care would be exempt from the tax.

With these changes (plus a $2,000 credit for low-income B.C. owners of second homes), the new improved tax was “fixed”, in Gordon’s expert opinion.

Gordon then went on to proclaim that only this amended version of the NDP government’s Speculation Tax could prevent Vancouver and Victoria from becoming clones of Monte Carlo, resort playgrounds for the “global elites.”

For Gordon, at least, the choice on this issue is pretty stark: Either you stand with the global “elites” and their developer/real estate agent cronies or you stand with defenders of the NDP Speculation Tax. There is no middle ground. There are no better alternatives. End of debate.

This is totally illogical and a bit insulting. If graduate student Gordon had used this kind of argument to defend his PhD thesis a few years ago at the University of Toronto, he wouldn’t be teaching today at Simon Fraser University. Gordon knows perfectly well that he is trying to force readers to choose between two options and close the debate without allowing British Columbians to consider better alternatives.

I call this the “Butch Cassidy and the Sundance Kid” choice between two bad alternatives. Either you surrender to the status quo posse tracking you down (probably Albertans) or you jump with Professor Gordon off the cliff into “Speculation Tax Creek”.

So why is the amended Speculation Tax still bad policy?

Gordon focuses his article exclusively on foreign owners of property in Vancouver and Victoria who pay no income taxes in Canada. He adds that only one per cent of B.C. resident owners in the designated areas will now have to pay any Speculation Tax.

Nowhere in his sales pitch does Gordon mention that 100 per cent of out-of-province Canadians, thousands of families, have been caught in the Speculation Tax net. These people pay plenty of federal and provincial tax in Canada for which they will receive no credit. Many of these part-time residents of B.C. purchased properties years and even decades ago. They use these houses and condos regularly. They spend a lot of time and money in their communities.

It’s difficult to qualify these owners as parasites. These Canadians pay full municipal taxes in B.C. Since they are not resident in B.C., they get no reduction for the Homeowners Grant. They pay for education, but don’t use the system. They are not able to use Medicare in B.C. They don’t even qualify for B.C. Senior discounts on the ferry system. They pay for roads through their municipal property taxes and gas tax. They pay for policing the same way. They pay plenty of sales tax.

So, exactly what provincial services do these eastern invaders consume for free? Perhaps beautiful views of the Olympic Mountains or Mount Baker? No, those are in Washington State, aren’t they?

Professor Gordon did also mention these Canadians don’t pay for B.C.’s “legal system”. Perhaps they should. Their lawyers will soon be big users of that system if the Speculation Tax goes ahead in its current form.

The biggest flaw in the application of the Speculation Tax to Canadian owners is that it is, in effect, retroactive. The Horgan Government is preparing to say to thousands of owners: “Thank you for buying your property in B.C. years ago when we were looking for buyers. Thank you for spending lots of money in our province over the years. Thank you for maintaining your property so well. Now, give us back the use of your home or condo. If you can’t afford the 200 per cent annual property surtax (the equivalent of one per cent of evaluation), tough luck. You will have to surrender the use of your property. Either you sell, you rent, or you move to B.C. very fast. And please vote for us.”

This is, in effect, expropriation, without any compensation. The tax is retroactive, because it won’t just apply to future buyers. It applies to all owners, whenever they bought. This will be the basis for the multiple legal challenges the Speculation Tax will face. The class action lawyers are already lining up for this business.

So, what are the alternatives to the current proposal?

There are at least four alternatives. All would be better than the NDP’s Proposal:

1) Eliminate the tax for all Canadian residents who pay income tax in a Canadian Jurisdiction. This is by far the cleanest and best alternative.

2) Apply the tax only to properties which are truly vacant (ie: not regularly used). This would require self-reporting and some audits. This is how Canadians declare their income taxes. It seems to work.

3) Apply a 10 per cent refundable tax to purchases made by out-of-province buyers after Jan. 1, 2019 (or a date set by the Legislature). The tax would be 100 per cent refundable (without interest) if the buyer moved to B.C. within three years and refunded on a declining scale reaching zero after six years;

4) Apply a “Provincial Services Surtax” to second properties owned by out-of-province Canadians purchased after Jan. 1, 2019 (or a date set by the Legislature). Similar to a levy used in Prince Edward Island, the surtax would be set at 0.20-0.25 per cent of evaluation. This would increase average property taxes by 30-40 per cent. The surtax would cease if the owners moved to B.C. The tax would be significant but bearable for most owners.

Options 1 and 2 are clearly the best. However, Options 3 and 4 might help cool demand. More important, they are not retroactive, unlike the current NDP proposal.

Gordon and his academic colleagues have a right to their opinions. But, when they go into full salesman mode, they should be honest enough to admit their arguments are aimed at stampeding their audience towards a preferred ideological solution. There are other, better choices.

Stephen Bigsby is a third generation Victorian. He served as Director of Economic Development for Metropolitan Montreal from 1980 to 1995. He is a resident of Toronto. Since 2008, his family has owned a 1,000 sq. ft condo in Esquimalt. Depending on which lawyer or accountant he talks to, he may or may not be a “speculator.”


Vaughn Palmer: Fall referendum looks anything but a fair, open process

A year after the New Democrats vowed to change the electoral system and six months after they launched the enabling legislation to do so, the B.C. Liberals this week sought key details about the fall referendum.

They got no answers, only pushback from Attorney General David Eby, the NDP’s purported “neutral” arbiter on what is looking less and less like a fair and open process.

“To the attorney general,” challenged B.C. Liberal MLA Michael Lee Thursday, “when will he inform British Columbians of the referendum question they will be asked in just a few months’ time?”

Patience, returned Eby. The government was sorting through a “huge amount of public feedback” from “the largest public engagement in B.C.’s history.” The contents will be translated into a public report with recommendations on the “question or questions” and other details. When and where, he didn’t say.

“He has yet to announce the campaign rules. He has yet to even provide the exact date of the referendum,” returned Lee. “Can the attorney general explain why he hasn’t told voters something as basic as what the question will be, when we’re mere months away from this referendum?”

Fair concerns, given the need to get people up to speed on the issues before putting the matter to a fall ballot-by-mail. But not to Eby’s way of thinking.

“We are compiling that information for all members to be able to review,” returned Eby. “What better process than this to set the question and the rules?”

But the Liberals had their suspicions about the NDP process. In their hands, via a freedom-of-information request, was a memo from the public servant who oversaw the drafting of the questions with a hand-picked group of academics.

It disclosed that “our minister’s office has also had input,” which suggested a role for the political staff in Eby’s ministerial office in shaping the questions.

What about it?, asked Liberal MLA John Martin. Eby dodged the question about political staff, referring instead to the role of the academics.

Would Eby “table in this house all input his political staff had into the drafting of the questionnaire?” challenged the Liberal.

Not a chance. Besides, Eby assured the house, the Liberals already had obtained everything they needed via FOI requests.

Another dodge. The Liberals have made multiple requests. But some returned with blank pages, others with filings for extensions. None, not surprisingly, contained the slightest indication of how political staffers had inserted themselves into the process.

Eby wasn’t done. As he often does when pressed by the Opposition for details on the referendum, the NDP’s designated “neutral arbiter” slipped easily into attack mode.

“I will not be lectured by members from a government who put forward a referendum called by pollster Angus Reid as ‘one of the most amateurish, one-sided attempts to gauge the public will that I have seen in my professional career,’” Eby fired back.

“That referendum about whether or not First Nations people had rights — unacceptable.”

Granted, the Liberals’ 2002 referendum on the negotiating mandate for treaties was wrong-headed, as I and many other observers argued at the time.

But not clear why Eby thinks that would excuse him for stonewalling on the details of a referendum to change the system for electing governments in this province.

Undaunted by the attorney general’s non-answers, the Liberals challenged him over major changes in the NDP’s position on the referendum.

Premier John Horgan promised to “set up an all-party committee to hear from citizens and formulate a referendum question.” What happened to that?

All MLAs had a chance to speak during debate on the enabling legislation, replied Eby, and all political parties had made submissions in the engagement process. That would have to do.


Nelson Bennett: Adding up the cost of pulling the plug on Trans Mountain pipeline

BC assumes most of the risks but gets few of the benefits.

That’s been the main argument against the $7.4 billion Trans Mountain pipeline expansion project in B.C. from the beginning – an argument that was used even by the former BC Liberal government, before it granted its support, after Kinder Morgan Canada (TSX:KML) agreed to a $1 billion revenue-sharing agreement with the province.

It’s not clear whether that offer is even still on the table now, although if it were, it’s just a fraction of the billions that won’t be coming B.C.’s way if Kinder Morgan decides to pull the plug on the pipeline expansion project.

On April 8, Kinder Morgan announced it was suspending all but essential work on the pipeline expansion project and has given the B.C. and federal governments until May 31 to provide “clarity” on whether the company can proceed.

Otherwise, the company said it will pull the plug on the project – something that is becoming all too familiar in B.C., which saw the cancellation last year of the $36 billion Pacific NorthWest LNG project and the cancellation of the $7.9 billion Northern Gateway project the year before that.

While it is true the Trans Mountain expansion would benefit Alberta more than B.C., should Kinder Morgan cancel the project, the loss for B.C. in potential jobs, direct spending, tax revenue and federal government funding for things like the $1.5 billion Oceans Protection Plan is significant.

Because $1.1 billion has already been spent, there is still another $6 billion that won’t be spent in B.C. and Alberta if the project is cancelled.

The main benefits to B.C. would be during the construction of the pipeline, although there would also be ongoing benefits.

For example, the Conference Board of Canada estimates that each Aframax tanker that would come to the Westridge Marine Terminal in Burnaby would result in $366,000 in spending in the Port of Vancouver. It estimates the annual spending for port activities to be $127 million from the increased tanker traffic alone.

At peak construction, Kinder Morgan would spend between $300 million and $400 million per month.

Kinder Morgan estimated that 9,000 workers would be employed on the B.C. section of the pipeline and terminals over a four-year period.

In addition to the pipeline itself, the Westridge Marine Terminal in Burnaby would be expanded, as would the tank storage facilities in Burnaby and Sumas.

B.C. would lose an estimated $5.7 billion in tax revenue over 20 years, according to the Conference Board of Canada. B.C. municipalities would lose close to $1 billion.

The total loss to Canada in tax and royalty revenue is calculated at $46.7 billion over 20 years.

Indirect investments in B.C. that are tied directly to the Trans Mountain project include the federal government’s $1.5 billion Oceans Protection Plan, the lion’s share of which the federal government had earmarked for B.C.

Earlier this year, Prime Minister Justin Trudeau made it clear that program is tied directly to the Trans Mountain pipeline and would not materialize without it.

Also lost would be the $150 million Kinder Morgan committed to improving B.C.’s marine oil spill response through the Western Canada Marine Response Corp. (WCMRC) – another investment that is contingent on the project.

Last week, the WCMRC put the construction of six new bases in Vancouver and on Vancouver Island on hold. If the bases are not built, the job loss would be 125.

Roughly $7 million in community benefits agreements signed with 11 B.C. communities would also evaporate, because the agreements are contingent on the project being approved and built. The City of Chilliwack, for example, signed an agreement under which Kinder Morgan would contribute $1.2 million to the Vedder Greenway pedestrian trail bridge; Abbotsford would get $1.3 million for the revitalization of a city-owned golf course.

When it comes to First Nations, there would be more losers in B.C. than in Alberta if the project were to be cancelled.

Of the 51 benefits agreements that Kinder Morgan signed with First Nations along the pipeline route, only 10 are in Alberta – the rest are in B.C. Those agreements would provide $400 million in benefits.

But B.C. First Nations that have signed benefits agreements haven’t been exactly vocal in their support for the project. Some resigned themselves to signing agreements that might benefit their communities rather than try to fight the project in court. Their support for the project has been lukewarm at best.

Steve Patterson, natural resources manager for the Yale First Nation, which signed a benefits agreement, does not expect that First Nations in B.C. will be all that troubled if the project never gets built.

“If it does not get built, we would just adapt and pursue other options,” Patterson said. “This project doesn’t fit squarely within the core of where we’d like to go in terms of economic development, but it’s something that we’ve had to accept, as it avoids other risky transport methods such as rail.”

Here is a tally of the taxation and other investment losses for B.C. if the project is cancelled:

  • $1 billion revenue-sharing agreement with B.C.;
  • $1.5 billion Oceans Protection Plan;
  • $5.7 billion in provincial tax revenue (over 20 years);
  • $922 million in municipal taxes (over 20 years);
  • $127 million annually in oil tanker port spending;
  • $150 million investment in marine spill response;
  • $400 million in First Nations benefits agreements; and
  • $7 million in community benefits agreements in B.C.

Less obvious, but just as important, is the billions that will be lost to the Canadian economy in general. Alberta has long made a disproportionate contribution to Canada’s economy because of its oil industry.

Between 2007 and 2015, Albertans paid $188.6 billion more in federal taxes than they received in transfers and federal programs, according to the Fraser Institute, and between 2004 and 2014, Alberta created 32% of all private-sector jobs in Canada, despite representing just 12% of the nation’s population.

It has been estimated that Canada is losing $15 billion a year due to the discount on Alberta oil, which is at least in part the result of a lack of pipeline capacity.

That discount doesn’t just hurt Alberta – it depresses Saskatchewan’s oil revenue as well, which explains why Saskatchewan’s premier recently announced that his province would join Alberta in a trade war against B.C. if it continued to try to block the pipeline’s expansion.

Saskatchewan also stands to lose steel making jobs if the project is cancelled. Kinder Morgan agreed to use Canadian steel for the pipeline, with much of the work being done at steel mills in the Evraz mill in Regina.

Stephen Hunt, director for United Steelworkers District 3, estimates that 900 jobs in Regina are tied to the Trans Mountain contract.

A Muse, Stancil and Co. analysis calculates that oil company revenue in Canada would rise $73.5 billion over 20 years if the Trans Mountain pipeline is expanded. The conference board estimates that would generate total fiscal benefits of $23.7 billion for Canadian and provincial governments.

Keith Sashaw, president of the Association of Consulting Engineering Companies of BC, said engineering accounts for 2% to 5% of the total budget for a project like Trans Mountain. Some of the engineering work is already done.

The association’s biggest concern, if the project is cancelled, isn’t the potential loss of work for B.C. engineering firms on this one project, but the loss of confidence in B.C. as a place to make large-scale investments.

“There is still a lot of construction, a lot of engineering yet to do obviously,” he said. “What’s a primary concern for us is the message this might have on future projects in the province of British Columbia.

“Here we have a project that received all of the necessary approvals, went through the steps, appears to be going ahead and now is gridlocked. Our concern is just, what will this be doing for investors in the future?

“We have some LNG plants under consideration right now, there’s mines, there’s pulp mills – there’s all sorts of capital projects. We’re just concerned that taking actions like this is just sending a message to potential investors that they have to be more cautious with B.C. than other places they could invest in.”