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February 20, 2011

No Northern Gateway Pipeline!

SS Editorial

No Northern Gateway Pipeline!

National Energy Board (NEB) hearings in British Columbia have opened to fierce opposition by aboriginal communities and environmental activists to the Enbridge proposal to build a pipeline across Northern British Columbia to ship tar sands oil to Asia.

The proposed 1,172 kilometer line will cross over 800 fish spawning streams and forested areas in a mountainous terrain where landslides are common. On arrival at Kitimat, the bitumen heavy oil will be pumped into Supertankers that will traverse 400 kilometers of narrow channels and open seas in what the Canadian Coast Guard classifies as the fourth most dangerous water passage in the world.

Despite these environmental threats to the existing resource and tourism economy, the Harper Conservative government has declared it is a national priority to build the Northern Gateway pipeline.

What is driving this development agenda and why should we oppose it?

The Political Economy of Canada’s Oil Exports

The International Energy Agency predicts global energy demand will grow by 35% by 2035 and that the majority of that energy will still consist of fossil fuels. Yet fossil fuel reserves appear to be reaching a peak oil supply situation where more costly sources such as heavy oil and ‘fracked’ natural gas have to be tapped.

From an oil business point of view this is an unprecedented opportunity to reap super profits – increasing exports to the United States (where Canada supplies 25% of US imports) and accessing new markets in Asia, in Japan and China, where fossil fuel is sold above US prices – if liquefied natural gas and heavy oil can be cheaply transported. Such opportunities have made oil Canada’s leading export.

Enbridge, the Canadian corporate sponsor of the Northern Gateway Pipeline, therefore, has initiated a National Energy Board and Environment Canada assessment to get a recommendation to go forward by the mid 2010s. The Hearing process will take all of 2012 and into 2013. The NEB will then write a report and a recommendation will be made by the end of 2013. The proposal will go forward to the Harper Conservative government for a decision in 2014.

As part of Enbridge’s corporate strategy, and the federal Conservatives’ export led economic strategy, there is an effort to create a vested interest in this project by creating other stakeholders – native elites and BC political-business elites. Enbridge has promised ten percent equity in the project to aboriginal groups and, with the Alberta government, is working on an oil pipeline royalty fund for an industrial corridor investment fund for northern British Columbia.

But the Northern Gateway proposal faces many barriers: environmental risk, aboriginal title, and existing northern interests.

Environmental Risk

Northern Gateway is one more project to facilitate exploitation of northern Alberta’s tar sands, one of the world’s three great oil reserves (with Saudi light oil and Venezuela’s light and heavy oil reserves).

But tar sands oil is remarkably energy intensive (and expensive). Where the extraction of Saudi light oil requires one barrel of oil to obtain 20 barrels, the tar sands only yields five barrels. It is estimated that 80% of the oil sands can only be accessed by in situ steam extraction that will consume so much natural gas that not only will the oil sands become the leading producer of carbon emissions in the country – but that Canada can’t meet even its 2050 goals of carbon reduction.

While the tar sands threaten long term risk, the transport of heavy oil across Northern British Columbia threatens short term catastrophic risk through spills such as the Enbridge 2010 Kalamazoo River spill in Michigan and, especially, the example of the Exxon Valdez tanker spill.

On March 24, 1989 the oil tanker Exxon Valdez ran aground on Bligh Reef in Prince William Sound, Alaska. 42 million liters of oil spilled to pollute 1,900 kilometers of coastline and 28,000 square kilometers of sea. The result was devastating. The commercial fishing industry temporarily collapsed as billions of Herring and Salmon eggs were destroyed. While the wild pink salmon fishery has recovered, the Pacific Herring fishery, which accounted for one half of fishing income, has remained closed.

Hundreds of thousands of sea birds also died from contamination with maritime predator species such as Sea Otters (some 2800), Eagles (hundreds), and Whales (tens of local pods) dying as well.

It took a decade to clean up the majority of the surface spill. But it is estimated the area’s ecological system will only return to normal in seventy years as the bulk of the spill gradually disperses. And this was just one spill by a tanker that was carrying one eighth of what hundreds of supertankers will carry from Kitimat.

What is of more concern is that the Exxon Valdez spilled its oil cargo, not because of the weather, but because of human error induced by market greed.

The Exxon Valdez in 1989 was only crewed at half its normal complement, with the reduced crew exhausted from working 12 to 14 hour shifts. Nor did the radar work. It turns out the owners refused to fix the radar, which had been broken for over a year, for reasons of economy. So when the tanker left the normal sea lanes to avoid icebergs, it had no capacity to navigate close to shore.

And, while the United States passed the Oil Pollution Act in 1990 to demand higher safety standards, the actual damages Exxon has had to pay have been reduced by 90% by the US Supreme Court – a fact that doesn’t build confidence in more regulation.

Enbridge today says that supertankers will be double-hulled and be tugboat guided in the extremely narrow Douglas and Principe channels (1.4 kilometers wide). But the history of oil shipping on the Pacific North coast is of ship owner greed and lax government enforcement.

In 2010 Canada’s Parliament recognized this history of risk by voting to ban Pacific coastal oil shipping – despite better regulation.

Aboriginal Rights?

The other great problem raised by a giant resource project like this is aboriginal land title. British Columbia is the one province where aboriginal title has never been extinguished. The British colonial government negotiated a few modest ‘friendship’ treaties on Vancouver Island. But the new Canadian province of British Columbia simply moved to a forced reservation policy in the 1870s. And the Northern Gateway pipeline will cross some two score of first nations’ lands whose status is up in the air.

In theory, the provincial Liberal government has committed itself to a modern treaty making process but very few treaties have been signed, with the Gitxsan as a northern example. The vast majority of aboriginal nations still have no treaty and no guarantees as to how infrastructure and resource issues are to be compensated.

Enbridge has tried to induce native leaderships to sign up for stakeholder status in the project, with the promise of thirty years of annual rent revenue. In the one public example of this strategy where the Gitxsan administrative leadership signed on, traditional chiefs, the tribe’s political leadership, repudiated this agreement.

With no clear process or significant revenue outcome, the majority of BC aboriginal nations have declared opposition to the project on the dual grounds of catastrophic environmental risk and violation of aboriginal land title rights (see the Fraser River Declaration).

At a very minimum, if the Conservative government goes ahead and approves the project in 2014, there will be a legal challenge to test the 1997 Delgamuukw Supreme Court decision that aboriginal people, in the absence of treaties, still have aboriginal title and deserve ‘consultation, accommodation and compensation’.

Managed or Plundered Growth?

The risks of the Northern Gateway proposal reveal the market chaos that drives Canadian energy development.

While energy is legally defined as a public good, it is regulated at the provincial level where market development has been prioritized. Alberta has one of the lowest tax royalty systems globally, with average royalties below 20%, while the international average is at 50%. Oil Sands project are virtually untaxed as tax exempt ‘energy development’ projects. And the oil industry is barely monitored as confirmed by a Royal Society of Canada report in 2011.

What royalties that are collected by Alberta are squandered almost immediately in being diverted to the province’s operating budget, while the Heritage Fund for long term savings has been reduced and plundered repeatedly (as in this year’s pre-election Redford budget).

When there was a national energy policy in the 1980s, it was dismantled by the Mulroney Conservatives.

But at what price? While the Canadian economy resembles an advanced capitalist service economy, economic growth is driven by exports (some 30% of GDP), which is reverting to the pre-1945 resource led model. This kind of less diversified export led model can lead to a return of the old boom and bust cycle of rapid inflation and deflation.

A Petro economy also tends to generate political authoritarianism and political disengagement as the history of Alberta since World War II demonstrates – and what Harper majority federal conservatism models.

An alternative example is Norway. In 1990 the Labour government established a royalty system of 65% taxation, a state oil corporation, and put the majority of revenue (90%) into a long term investment fund. This has generated a fund of some 600 billion dollars, which will reach one Trillion dollars by 2020. Windfall resource rents have been collected and can be used in a planned, long term way for economic diversification and stability.

Of course, the objective problem with Norway’s oil fund is that it still defined by market relations and dynamics – and it is not genuinely accountable to Norwegian workers. But even the partial example of Norway shows there is a far more rational approach to energy development through public ownership and planning.

Two Years of Struggle

Despite Harper’s pronouncement at Davos, Switzerland that Northern Gateway will likely go ahead and Joe Oliver’s, the Minister of Natural Resources, demonization of anyone who might question the project as foreign eco-terrorists, this energy project is not supported by economic facts (as there is plenty of carrying capacity to American markets and the Trans Mountain line to Vancouver for Asian markets is likely to be twinned) nor by the potential catastrophic risks of a heavy oil spill in the fragile northern environment.

But the Northern Gateway project does raise all the contradictions of corporate resource capitalism in the search for a higher rate of profit – in overriding existing northern economies which depend on responsible environmental management and the national rights of First Nations peoples.

We have two years of NEB hearings to make these points and defeat this project.

For a description of the Exxon Valdez spill see John Keeble’s Out of the Channel (1999).