The agreement on pipelines recently announced by the premiers of B.C. and Alberta is another step forward in B.C.’s efforts to accommodate Alberta’s desire to ship oil through B.C. to Asia. Although there is nothing new in this endorsement, the announcement is important because it indicates that B.C. is open to a deal on pipelines if its five conditions are met.
The key question for British Columbians is: Are these five conditions set by Premier Christy Clark adequate to protect B.C.’s interests? Unfortunately, the answer is no.
Two of the conditions — approval by the National Energy Board and meeting legal obligations to First Nations — are just a restatement of existing legal requirements and add nothing new to the approval process.
The next two conditions are the requirement of “world-leading” oil-spill prevention and recovery systems. B.C. has convincingly documented that current standards in B.C. are woefully inadequate and certainly not world-leading. According to B.C.’s own reports, oil-spill responses would recover only three to four per cent of spilled oil along the north coast, leaving the rest in the marine environment.
More important, even if B.C. had world-class standards, there would still be significant damage from oil spills because the best standards in the world do not prevent accidents. Enbridge maintains that it is an “industry leader in pipeline safety and integrity,” yet has an average of 74 spills a year on its pipeline system. The internationally recognized U.S. oil-spill risk analysis model forecasts that the Enbridge project will result in an average of one tanker spill over 1,000 barrels every seven to 17 years. Even Enbridge forecasts an average of one pipeline spill every two to four years.
If oil spills are inevitable, who will cover the damage costs? The only reasonable answer to this question is that those responsible for the accident — Enbridge — should cover the costs.
The problem is that Enbridge is unwilling to accept liability for spill costs. Enbridge has set up a limited-partnership company to ship oil that fully exonerates Enbridge from liability. The limited-partnership company is liable, but if damages exceed the financial resources of the company, the taxpayer is liable for the difference. As the $1-billion cost of Enbridge’s recent Michigan spill shows, damage costs can be significant.
Enbridge also refuses to accept liability for oil-tanker spills. The liability is held by the tanker companies, but the problem is that the government has capped the liability at $1.3 billion. Enbridge’s own estimates show that the damages for a large tanker spill would be $9.6 billion, well in excess of the $1.3-billion cap. Again, the taxpayer would be liable for the difference.
The last B.C. condition of a “fair share” of benefits has generated the most controversy. As the premier points out, B.C. incurs 100 per cent of the marine risk and 58 per cent of the pipeline risk, but gets only eight per cent of the benefits. The problem is that B.C. has provided no definition of what a fair share is.
A more concrete condition is that B.C. receive a “net benefit” from any pipeline project, meaning that the benefits must exceed all the costs, including risks of oil spills and other environmental damage. The techniques for determining whether there is a net benefit are well developed and would provide an effective test of whether the pipeline project should be approved.
In sum, B.C.’s five conditions might sound reasonable, but they are seriously deficient. Two of them simply restate existing legal obligations and provide no additional protection. One dealing with a fair distribution of benefits is too vague to be useful and needs to be replaced with a “net benefit” requirement. The two conditions dealing with world-class standards are laudable but will not prevent spills or the risk to B.C. of paying for the damages.
Clearly, B.C. needs to address this deficiency by strengthening the existing five conditions and adding a sixth condition that requires pipeline shippers to accept full liability for damages and specifies the damages that will be covered.
Finally, if B.C. wants to enforce its conditions, it needs to terminate the agreement it signed delegating its approval authority to Ottawa. Otherwise, B.C. is little more than a spectator relying on Ottawa to protect B.C.’s interests.
Thomas Gunton is director of the resource and environmental planning program at Simon Fraser University and a former B.C. deputy minister of environment.