Part 5 in a series of 18 discussion papers
Between 2013 and 2016, Canadians had an opportunity to examine the climate implications of Canada’s expanding oil production during the lengthy inquiry process that preceded the final decision by the Federal cabinet authorizing the construction of the Trans Mountain Pipeline (TMX) Expansion. The Federal Government at that time was also preparing to authorize the construction of a second pipeline expansion, known as “Line 3”. Line 3 was completed in 2021. By early 2024, when TMX is completed (assuming it is completed), the two projects together will provide 910,000 barrels per day (bpd) of new shipping capacity.
An increase in shipping capacity by 910,000 bpd is highly material: it is almost exactly equivalent to the entire current projected expansion of Canada’s oil production between 2020 and 2030.
The National Energy Board Inquiry (2014 to 2016)
The government based its approval of the TMX project on a multi-volume report by the National Energy Board (NEB), which recommended on May 19, 2016, that construction of the pipeline expansion proceed.
The NEB inquiry was a public hearing process and it had full powers to call evidence. However, at the start of the hearing in early 2014, the NEB took the view that evidence about the “upstream emissions” released into the atmosphere at oil sands production sites in Alberta did not fall within the scope of the inquiry.
The City of Vancouver (an Intervenor at the Inquiry process), seeking to challenge the NEB’s refusal to consider climate evidence, applied for an order to expand the scope of the inquiry to include those issues. Other intervenors made submissions supporting the City of Vancouver’s motion. The NEB panel in a ruling on July 23, 2014 (NEB Ruling 25) rejected the application by the City of Vancouver to expand the List of Issues, which would have permitted intervenors to call expert evidence about emissions and climate change.
The rational for excluding that evidence, according to the Inquiry, turned on the distinction between “direct impacts” and “indirect impacts”:
The project does not include upstream production and is not dependent on any particular upstream development and, therefore, any link to environmental changes caused by such upstream production is indirect and not “necessarily incidental to the project”.
— NEB Ruling 25 (emphasis added)
Accordingly, the inquiry excluded all evidence about greenhouse gas emissions from expanding oil sands production in Alberta – and it excluded all scientific evidence about the impact of emissions on the climate system.* The City appealed the NEB refusal, but the Federal Court of Appeal dismissed Vancouver’s appeal on October 16, 2014.
As a result, the NEB during its inquiry did not consider the emissions implications of the additional volume of oil sands production that would be facilitated by the proposed very large expansion of pipeline shipping capacity. The NEB excluded all evidence about climate science and climate change. The final report released on May 19, 2016, was silent on those questions.
“Upstream Emissions Assessment” report (November 25, 2016)
The second “review process” in 2016 was the Trans Mountain Expansion Project Review of Related Upstream Greenhouse Gas Emissions Estimates (informally known as the “Upstream Emissions Assessment”). It was initiated in March 2016. It produced a draft version of its report on May 19, 2016, which was made available for public comment, and released its final report on November 25, 2016, four days before the Federal Government authorized construction of the TMX pipeline expansion.
It was not a public process. It was a closed process with no hearings, an internal government exercise which excluded any media scrutiny. Only the “proponent”, namely the pipeline owner, could participate or present evidence. The government and the pipeline company controlled the flow of information. The procedure required that only “publicly available data provided by the proponent will be used”. No representatives of the public could participate or demand the right to call evidence.
The Upstream Emissions Assessment in its final report avoided making any determination of whether the planned expansion of Canada’s crude oil production would be compatible with the Paris Agreement commitment to limit average temperature rise to well below 2°C and pursue efforts to limit the increase to 1.5°C. Instead, it provided only this highly equivocal answer:
A number of studies have considered scenarios where global warming is limited to 2°C. However, these scenarios utilize different modelling frameworks and can have vastly different assumptions around technological and economic progress. The role of technological innovation, policy design and stringency, and consumer and business behaviour, both in Canada, and globally, can have significant implications on Canadian oil sands production in these scenarios. As a result of the differing treatment of these variables, conclusions across scenarios are not uniform, and the impact on Canadian oil sands production is not clear. However, a common result of modelling efforts to analyze a 2°C world is that overall global crude oil production declines relative to the status quo.
— Review Upstream Emissions, November 25, 2016, B.2.6. at p. 28 (emphasis added)
The assessment therefore declared that the answer to this fundamental question was “not clear”. It merely acknowledged, in general terms, that global crude oil production would need to decline overall to limit warming to 2°C but offered no guidance on the magnitude of the required future reductions, or the timelines. And it was completely silent about the deeper reductions that would be needed to meet the 1.5°C goal.
The impact of the TMX pipeline on emissions: “incremental emissions are unlikely”
The Upstream Emissions Assessment (formally referred to as the Review of Related Upstream Greenhouse Gas Emissions Estimates)accepted that oil sands emissions will continue to increase and they will be the main driver in the growth of Canada’s total emissions to 2030:
The growth in emissions to 2030 is driven largely by growth in the upstream oil and gas sector and, in particular, from the oil sands. ECCC projections indicate that GHG emissions from the oil sands are expected to increase from 62 Mt in 2013, to 90 Mt in 2020, and up to 116 Mt in 2030.
— Report, November 25, 2016, section B.2.2, p.22 (emphasis added)
Yet the report concluded that the expansion of pipeline shipping capacity provided by the TMX Project would be “unlikely” to contribute to any increase in Canada’s greenhouse gas emissions. That paradoxical conclusion is explained by the very specific “methodology” that defined how the assessment process was obliged to calculate the impact of the new pipeline on Canada’s emissions growth.
The Order in Council of November 29, 2016, which formally authorized the TMX pipeline expansion, included this summary of the findings made by the Upstream Emissions Assessment regarding the impact of the pipeline on Canada’s total emissions.
The assessment indicated that incremental emissions are unlikely to be expected as oil production is expected to grow by more than the capacity of the expanded line regardless of whether the line is built.
— Order in Council, Explanatory Note, “Climate Change”, p. 9 (emphasis added)
To understand what that statement really means, it is necessary to carefully examine the procedure that governed how the assessment was done. On March 19, 2016, the Liberal Government released details of the Interim Measures to assess emissions associated with pipeline projects. A notice published in the Canada Gazette explained the procedure:
The assessment of upstream GHGs will consist of two parts: (A) a quantitative estimation of the GHG emissions released as a result of upstream production associated with the project, and (B) a discussion of the project’s potential impact on Canadian and global emissions.
— “Estimating upstream GHG emissions”, Canada Gazette, March 19, 2016 (http://www.gazette.gc.ca/rp-pr/p1/2016/2016-03-19/html/notice-avis-eng.php#nl4)
The document described the procedure as “the methodology”. The first step was to calculate the “estimated throughput” (i.e., how much diluted bitumen would be carried by the project). Part A of the assessment would calculate the total GHG emissions “associated with the project” – i.e., the volume of emissions generated every year in the course of producing the amount of bitumen that could be transported to markets by the new pipeline, if it were built. Part B of the assessment promised to provide Canadians with “a discussion of the project’s potential impact on Canadian and global emissions”.
The “methodology” designed for Part B is formulated in a particular way, which significantly limited the scope of the inquiry:
The second part of the analysis discusses the conditions under which the Canadian upstream emissions estimated in Part A could be expected to occur even if the project were not built.
— Canada Gazette, March 19, 2016 (emphasis added)
The above wording means that when it examined the impact of “the Project”, the assessment was bound to ask this question: will the future increase in oil sands production (and therefore the future increase of emissions) made possible by the additional transport capacity of this pipeline occur even if the pipeline is not built? Clear guidance was provided on what steps the assessment must follow to answer that question:
The second step involves evaluating the technical and economic potential for alternate modes of transportation to be used in the absence of the proposed project.
Rail transport is the alternative. The assessment was therefore required to evaluate whether rail transport would be an economically viable method to transport the increased bitumen production to market. To do that it was directed look at the “economic and technical potential” (i.e., cost) of the alternate mode of transport. Rail transport is more expensive than pipelines (about US$10 more per barrel, according to the assessment). The crucial question was whether long-term oil prices will be high enough to cover the extra cost of rail “in the absence of the proposed project.” The report found that provided oil prices are $80 per barrel or higher over the long-term, rail transport will be a viable alternative.
The methodology prescribed by the March 18, 2016 notice was absolutely clear on how the assessment should proceed:
As an example, when considering whether Canadian GHG emissions would increase as a result of a crude oil pipeline project, the primary factor will be the potential increase in Canadian upstream oil production that would be expected to occur if the pipeline were not built.
Therefore, if rail transport is an economically viable alternative, then the assessment was obliged to decide that the increased production that will be carried in the proposed pipeline will be produced anyway, even if the pipeline were not built. In that case, the new pipeline would not make emissions any worse – because the increased production would still occur even if the new pipeline were not approved.
It was clear that emissions would grow if oil production increases. The Kinder Morgan assessment found that the amount of increased bitumen production carried by expanded pipeline capacity would account for an additional 13 Mt to 15 Mt of greenhouse gas emissions every year (which would represent about a 20% increase of the industry’s total emissions, based on the 2015 level) – a significant increase in our total emissions.
However, in line with the methodology, the report was able to show that the “incremental” emissions caused by the Kinder Morgan expansion will be “minimal”: (see Report, Table 8, p. 39). Evidence was produced at the assessment to show that long-term oil prices will increase to about US$78 per barrel by 2020 and will continue to rise gradually to US$102 by 2040. The assessment therefore concluded that the pipeline would cause only minimal “incremental” emissions, because the same amount of production increase (and the same emissions growth) would occur if the pipeline were not built – because rail transport would be economically viable as an alternate form of transport.
In truth, the accumulating concentration of CO2 emissions in the atmosphere is the problem we are trying to solve. In the context of solving that problem, the distinction between pipelines and rail transport is meaningless. If we increase production by 590,000 bpd (the increased capacity added by the Kinder Morgan expansion), Canada’s total emissions every year will be higher by 13 Mt to 15 Mt – whether the increased output is shipped by pipeline or shipped by rail.
* The Federal Court of Appeal decided in its ruling on October 16, 2014, that the NEB’s jurisdiction did not require that it examine the emissions implications of the pipeline. After assuming power from the Harper Government in October 2015, the Trudeau Government had the full opportunity and the legislative power to amend the law to require that the NEB look at emissions and accept and consider relevant expert evidence about climate science before the inquiry ended. The Trudeau Government chose not to do so (that decision was announced publicly on January 27, 2016). The very limited scope of the NEB’s environmental examination of the pipeline project, allowing it to exclude climate science, was the deliberate choice of the Trudeau Government.
