NEB report supports Trans Mountain pipeline expansion

The National Energy Board (NEB) today released its report on the Trans Mountain pipeline expansion, with an overall recommendation that the expansion project is in the public interest and should be approved. This is welcome news for the Canadian oil industry and its employees who have incurred costly transportation constraints in recent years.

This report comes nearly six months after the Federal Court of Appeal quashed the Trudeau government’s approval of the project, citing inadequate consultation with First Nations and concerns over marine tanker traffic. The Court’s decision sent the $7.4 billion pipeline expansion project back to the NEB for further environmental assessment, including assessing the impact of increased oil tanker traffic on the region’s endangered killer whale population.

In its reconsideration, the NEB concluded that an increase in tanker traffic resulting from the pipeline could adversely affect the southern resident killer whale population, but that these negative consequences are justified in light of the pipeline’s benefits.

The NEB has recommended the project be approved subject to 16 new conditions in addition to the 156 conditions it had originally proposed in its previous report. These new conditions relate to marine shipping including cumulative effects management for the Salish Sea, measures to offset increased underwater noise and increased risks posed to at-risk marine mammal and fish species, and marine oil spill response. The federal government must now review the NEB report and decide whether to proceed with the project.

The pipeline crisis facing western Canadian oil producers is well-known. Due to the lack of adequate pipeline capacity and restricted market access, Canadian producers have received far less for their oil than their international counterparts in recent years. According to Oil Sands Magazine, Canadian heavy crude (WCS) traded for C$34.4 per barrel less than U.S. crude (WTI) in 2018, representing a striking 41 per cent price discount.

In fact, according to a recent study, Canadian heavy oil producers lost $15.8 billion last year in revenues compared to what other producers of similar products received. That’s roughly 0.7 per cent of our national economy lost because we were unable to deliver our product to international markets to secure better prices. This missed opportunity means less investment, lower levels of job-creation and ultimately less overall prosperity.

To make matters worse, the prolonged insufficient pipeline capacity has resulted in a greater shift to crude-by-rail, which is a less-safe mode of transportation. Specifically, pipelines are 2.5 times safer (i.e. less likely to experience an oil spill) than rail transport.

In short, the NEB endorsement of the Tran Mountain pipeline is a step in the right direction. Canada’s insufficient pipeline capacity has resulted in billions of dollars in forgone revenues and missed opportunities for the energy sector and our economy more broadly.