Nikiforuk - "A New Low" Even for the NEB

Canada's top energy journalist, Andrew Nikiforuk, sees a litigation-filled future for the National Energy Board's "reconsideration" report on Trudeau's Trans Mountain pipeline.

With its so-called “reconsideration report” on the Trans Mountain pipeline expansion, the board has plunged into the shallows once again. 

After a federal court struck down the project’s original approval because it failed to consider the impacts of increased tanker traffic or consult meaningfully with First Nations, the board pretended to revisit these issues in 155 days. 

In doing so they conducted another flawed paper exercise that will be challenged in the courts again.

But this time around the board did admit that the pipeline and associated tanker traffic could devastate orcas, threaten the marine economy with the risk of oil spills and erode Indigenous cultural practices on the coast.

But hey, the benefits are so worth it, the NEB concluded. 

And how did the board calculate the benefits? 

The Canadian government, which now owns the 65-year-old pipeline, simply dug up the same 2015 Muse Stancil report commissioned by Kinder Morgan to justify the pipeline four years ago. 

How’s that for a new standard of laziness? 

And what assumptions did the outdated report make? 

Well, Muse Stancil said Canada stood to make billions provided that oil prices would be above $100; assumed the Canadian dollar would be on par with the U.S. greenback; that other pipelines would not be built; that increased supply will win higher prices in Asia; and that all bitumen is subject to a North American discount — when in fact only a third is subject to such pricing. 

None of these assumptions hold any water today.

Oil prices have slumped and entered a whole new era of volatility. At the same time the Canadian dollar keeps treading water.

Is the Canadian government, on behalf of a deleriously grateful nation, going to wind up subsidizing costs for pipeline customers?

...By refusing to take a fresh look at the economic data and changing global oil markets, the NEB is misleading Canadians who own the pipeline. 

David Hughes, a leading Canada’s energy analyst and a former researcher for National Resources Canada, says he is scratching his head at the report. 

All the NEB has to do is look at current oil prices to see the claim Asian markets will pay higher prices for oil sands crude is “just bogus,” he said. “The premium for heavy oil is the U.S. Gulf Coast, and not in Asia.”

It's hard to tell what is worse, the Trudeau government's duplicity or its incompetence.

As global heavy oil supplies have declined due to political chaos in Venezuela and other developments, Canada’s best market remains the U.S. Midwest and Gulf Coast where complex refineries exist to handle heavy oil, it found. “Lacking alternative markets, growing heavy oil supply from Canada has taken on an increasing role in meeting U.S. demand,” noted the report. 

And why would NEB ignore economic developments in China? 

Its ravenous industrial economy has made it the largest importer of oil, but that economy is now dramatically slowing.

The board also apparently didn’t look at the latest oil sands report from GlobalData. 

It warned that oil sands “processes are energy intensive, consume large volumes of water and result in emission of greenhouse gases in high volumes,” and that many financial service companies such as Equinor and HSBC will no longer fund such projects.

“Considering the overall complexity of the oil sands extraction process, global prices for crude oil will have to remain at comparatively higher levels to ensure profitability from oil sands projects,” it warned. 

And how is that supposed to happen in a world loosely committed to lessening oil demand?

Show me the money, honey.

Hughes said the idea Canada can get rich through oil sands exports is just not borne out by the data. 

Canadian governments collected $16.6 billion in royalties from oil and gas extraction in 2000, but that number had shrunk to $6.8 billion by 2017, according to figures provided by Canadian Association for Petroleum Producers. 

At the same time Canada doubled oil production, largely from the oil sands. 

“We doubled production and got $10 billion less in royalties,” said Hughes. “We are not getting anything for the resource, and the export of oil is having a huge impact on our GHG [greenhouse gas] emissions.” 

“Obviously we have to ramp production down, and we have to ramp down personal oil consumption.” 

And obviously, the Canadian government and its servant, the National Energy Board, haven’t got a clue.