Ottawa's Trans Mountain insurance raises hopes in the oilpatch, but plenty of challenges remain - Canadanewsmedia
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Ottawa's Trans Mountain insurance raises hopes in the oilpatch, but plenty of challenges remain

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In the corridors of Alberta's legislature and around the oilpatch, federal Finance Minister Bill Morneau's commitment to backstop construction of the Trans Mountain pipeline project was greeted with optimism Wednesday.

For a project that's been devoid of much hope recently, this was no small feat.

But Ottawa's promise of financial indemnity, which is basically a big insurance policy if Kinder Morgan has to pay for delays caused by the B.C. government, is not a silver bullet for the challenges still confronting the project. Nor is it a guarantee Kinder Morgan will decide by month's end to break ground on the $7.4-billion pipeline that would ship heavy oil to the West Coast.

Not yet, anyway.

Finance Minister Bill Morneau's announcement received positive reviews in Alberta on Wednesday. (Patrick Doyle/Canadian Press)

Kinder Morgan Canada CEO Steve Kean was predictably mum on the subject during the company's annual meeting in Calgary on Wednesday, held a couple of hours after Morneau's announcement in Ottawa.​

Later, Kean said in a statement that he appreciated the acknowledgement of the uncertainty created by the B.C. government's court challenges, but cautioned that "while discussions are ongoing, we are not yet in alignment."

The company has threatened to abandon the project if it doesn't see a clear path forward by May 31.

So, many questions remain. What is the risk to taxpayers? Is this enough for Kinder Morgan? If it's not, will the Alberta government, or another company, step in to build the project?

A big backstop

The indemnity is not a direct subsidy or an ownership stake, but it is significant. Morneau wouldn't provide an estimate when pressed by journalists.

"I think this is exactly the way this commercial negotiation had to go," said Dennis McConaghy, a former senior executive with pipeline giant TransCanada.

"This was never about investing in the pipeline [for the government], it was about taking completion risk to a level that Kinder could bear."

He points to two court challenges against Kinder Morgan. One concerns whether the project falls under provincial or federal jurisdiction, while the other claims inadequate consultation of B.C. communities. With the indemnity, there is much less financial risk for the company.

"The biggest risk they cannot bear is a judicial decision that sets the clock back," he said.

Still, he expects there are a number of key negotiations to take place between Ottawa and Kinder Morgan to decide what exactly the backstop covers and the limit of how much the federal government will spend.

"If you have the will to agree on the key points, papering it can always be done as quickly as people need it to be done."


One risk gone, but others remain

Ottawa's commitment still doesn't protect Kinder Morgan against other potential delays and expenses, such as those caused by protesters.

That's why some experts still aren't convinced it presents a green light for the company.

"I'm not sure that this is a big enough announcement to get Kinder Morgan to be comfortable to move forward," said Richard Masson, the former CEO of the Alberta Petroleum Marketing Commission and executive fellow of the University of Calgary's School of Public Policy.

Opponents of the Kinder Morgan Trans Mountain pipeline extension protest at the company's property in Burnaby, B.C., last month. (Darryl Dyck/Canadian Press)

Certainty is still the No. 1 issue — and Kean hasn't let anything slip.

The statement by Kinder Morgan's chief executive reiterated the company's objectives: clarity on a path forward for the project, particularly the ability to build through B.C., and ensuring adequate protection for shareholders. 

Alberta Premier Rachel Notley said Wednesday that conversations between the provincial and federal government and Kinder Morgan are ongoing but insights into those talks have been sparing.


Potential new owner

If Kinder Morgan abandons the project, experts say there would be suitors to take it over — perhaps even the Alberta government.

The federal government acknowledged that fact by stating the indemnity would be extended to whoever takes charge.

Reading between the lines of Morneau's announcement, Masson can see the scenario where Alberta assumes a bigger role.

"That says to me that there's a high probability that somebody else is going to take over this project," he said.

"The only somebody else I think is practical is Alberta at some level. So it's quite possible that Alberta will end up on the hook for the delays associated with protests, like on-the-ground protesters, while the federal government would be on the hook for delays involved with court cases, and there may be some part of a bargain that's been struck."

If people are serious about getting this project done and in service in 2020, there's only one way to do that — make the deal with Kinder Morgan.– Dennis McConaghy, former senior executive with TransCanada

Masson said there's certainly a business case for Alberta to get involved, considering oil production in the province is rising and export pipelines are full. If even a few hundred thousand barrels a day can't find their way to market, it results in a discount on all the oil produced in the province.

"It costs a fortune in terms of jobs, in terms of taxes, and in terms of royalties," he said. "This project is vital for Alberta."

Notley, who raised the prospect of Alberta taking on the project several weeks ago, repeated Wednesday that the province is prepared to "do whatever is necessary" to get it built.

She also said it was pretty clear from Morneau's statement that Ottawa is prepared to extend the indemnity to "any buyer that came along, if that were the position we ended up in."

However, if Kinder Morgan sells the project, that would also take time and set the timeline back further. That's why McConaghy says the Alberta and federal governments are still hoping Kinder Morgan pushes forward with the pipeline.

"If people are serious about getting this project done and in service in 2020, there's only one way to do that — make the deal with Kinder Morgan," he said. 

"Kinder Morgan is not going to sell the existing assets that they have related to this project easily.

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New Zealand economist says foreign buyer ban unlikely to curb housing prices

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While New Zealand's just-passed foreign buyer ban is getting a positive reception from some in B.C., an economist in the southern hemisphere is calling it misguided.

On Wednesday, New Zealand banned most foreigners from buying most types of housing in that country, where affordability has become a struggle.

B.C. Green Party leader Andrew Weaver wants the province to look at a similar ban, but Auckland, New Zealand-based economist Shamubeel Eaqub calls it "a rushed bit of policy, and not very good."

"Be very careful what you wish for because public policy quite often is complicated and has unintended consequences," Eaqub told On The Coast host Gloria Macarenko.

"Getting rid of the foreigners is not going to make housing more affordable. The way that the legislation has been written… it's probably going to make it harder for overseas investors to supply new housing in New Zealand."

Eaqub says the policy is weak in several regards.

First, foreigners are still allowed to buy apartments in new developments.

Second, it still allows Australians and Singaporeans to buy property in New Zealand because of existing free trade deals. Australians alone, he said, account for about 30 per cent of foreign buyers in the New Zealand market.

But, he also said the ban is a solution in search of a problem.

In Auckland at least, which is the largest urban area of the country, foreigners make up less than 10 per cent of all buyers. "We are trying to deal with something that is very much at the margin."

Home prices are increasing all over New Zealand, he said, not just where foreign buyers are active. There are also widespread supply issues and construction comes at a slow place.

He believes there are better solutions to housing problems in his country: renting could be made more affordable and have more secure rules; social housing supply could be increased; and policies and planning could be improved to encourage affordable housing.

Listen to the full interview:

While New Zealand's just-passed foreign buyer ban is getting a positive reception from some in B.C., an economist in the southern hemisphere is calling it misguided. 9:30

With files from CBC Radio One's On The Coast

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Donors have stepped up, but urgent need for blood hasn't gone away

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Canadian Blood Services issued a call for donors and though Londoners have largely stepped up to help, there remains a pressing need as the Labour Day weekend draws near. 

Kendall O'Neill of Canadian Blood Services says the clinic on Wharncliffe Road South has been busy since a call for donations was issued last week, highlighting a need for 22,000 donors nationally ahead of the weekend.

"The response has been incredible," said O'Neill. 

When CBC News visited the clinic Friday, every donation chair, the waiting area and the post-donation reception area was full of clients there to donate whole blood, platelets and plasma. 

And while it's a welcome response, O'Neill says more donors are still needed to re-stock supply heading into the long weekend. For example, the London clinic needs 50 donors to fill up booking spots for Monday, Sept. 3.

She said getting donors to show up for the Labour Day weekend is a annual challenge. 

"People are on vacation," she said. "They're doing stuff with their families, but it is still important to come out and donate." 

Canadian Blood Services is trying new ways to get younger people to donate, through pop-up donation clinics at schools, including Western and Fanshawe, and an app that will issue a text alert when your donated blood is used.

 There wasn't an app available when 66-year-old Alex, who spoke to CBC Friday at the London donation clinic, began donating as an 18-year-old.

Since then he's donated more than 120 times. 

"I think it's the best gift one human being can give to another," he said. 

Other than free drinks and snacks afterward, donors in Canada aren't compensated. Alex says he's fine with that. 

"It's a natural high," he said. "I feel good after I walk out of here."

For information about how to become a donor visit blood.ca or call 1-888-236-6283.

Blood donation facts

  • The need for Type O-negative blood is always pressing because it's the only type compatible with all other blood types. In an emergency when there's no time to check for blood type, patients receive O-negative.
     
  • Only four per cent of people eligible to donate blood actually donate. O'Neill said  some people falsely believe they aren't eligible to donate when they actually are. "The criteria is alway changing," she said. "It's always good to go on Blood.ca to check availability to make sure you can actually donate."  
     
  • A common misconception is that blood donations are only used in emergency situations. "That's not usually the case," said O'Neill. She said blood is needed for everything from treating cancer patients to surgeries like hip replacements.
     
  • Blood donated in London is taken to a screening facility in Brampton. Then it comes back to be used in the community where it was donated. Most blood units are used within five days of donation.

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Trump administration reverses decades of policy, says conserving oil no longer an economic imperative

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Conserving oil is no longer an economic imperative for the U.S., the Trump administration declares in a major new policy statement that threatens to undermine decades of government campaigns for gas-thrifty cars and other conservation programs.

The position was outlined in a memo released last month in support of the administration’s proposal to relax fuel mileage standards. The government released the memo online this month without fanfare.

Growth of natural gas and other alternatives to petroleum has reduced the need for imported oil, which “in turn affects the need of the nation to conserve energy,” the Energy Department said. It also cites the now decade-old fracking revolution that has unlocked U.S. shale oil reserves, giving “the United States more flexibility than in the past to use our oil resources with less concern.”

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With the memo, the administration is formally challenging old justifications for conservation — even congressionally prescribed ones, as with the mileage standards. The memo made no mention of climate change. Transportation is the single largest source of climate-changing emissions.

President Donald Trump has questioned the existence of climate change, embraced the notion of “energy dominance” as a national goal, and called for easing what he calls burdensome regulation of oil, gas and coal, including repealing the Obama Clean Power Plan.

Despite the increased oil supplies, the administration continues to believe in the need to “use energy wisely,” the Energy Department said, without elaboration. Department spokesmen did not respond Friday to questions about that statement.

Reaction was quick.

“It’s like saying, ‘I’m a big old fat guy, and food prices have dropped — it’s time to start eating again,“’ said Tom Kloza, longtime oil analyst with the Maryland-based Oil Price Information Service.

“If you look at it from the other end, if you do believe that fossil fuels do some sort of damage to the atmosphere … you come up with a different viewpoint,” Kloza said. “There’s a downside to living large.”

Climate change is a “clear and present and increasing danger,” said Sean Donahue, a lawyer for the Environmental Defence Fund.

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In a big way, the Energy Department statement just acknowledges the world’s vastly changed reality when it comes to oil.

Just 10 years ago, in summer 2008, oil prices were peaking at $147 a barrel and pummeling the global economy. The Organization of the Petroleum Exporting Countries was enjoying a massive transfer of wealth, from countries dependent on imported oil. Prices now are about $65.

Today, the U.S. is vying with Russia for the title of top world oil producer. U.S. oil production hit an all-time high this summer, aided by the technological leaps of horizontal drilling and hydraulic fracturing.

How much the U.S. economy is hooked up to the gas pump, and vice versa, plays into any number of policy considerations, not just economic or environmental ones, but military and geopolitical ones, said John Graham, a former official in the George W. Bush administration, now dean of the School of Public and Environmental Affairs at Indiana University.

“Our ability to play that role as a leader in the world is stronger when we are the strongest producer of oil and gas,” Graham said. “But there are still reasons to want to reduce the amount we consume.”

Current administration proposals include one that would freeze mileage standards for cars and light trucks after 2020, instead of continuing to make them tougher.

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The proposal eventually would increase U.S. oil consumption by 500,000 barrels a day, the administration says. While Trump officials say the freeze would improve highway safety, documents released this month showed senior Environmental Protection Agency staffers calculate the administration’s move would actually increase highway deaths.

“American businesses, consumers and our environment are all the losers under his plan,” said Sen. Tom Carper, a Delaware Democrat. “The only clear winner is the oil industry. It’s not hard to see whose side President Trump is on.”

Administration support has been tepid to null on some other long-running government programs for alternatives to gas-powered cars.

Bill Wehrum, assistant administration of the EPA’s Office of Air and Radiation, spoke dismissively of electric cars — a young industry supported financially by the federal government and many states — this month in a call with reporters announcing the mileage freeze proposal.

“People just don’t want to buy them,” the EPA official said.

Oil and gas interests are campaigning for changes in government conservation efforts on mileage standards, biofuels and electric cars.

In June, for instance, the American Petroleum Institute and other industries wrote eight governors, promoting the dominance of the internal-combustion engine and questioning their states’ incentives to consumers for electric cars.

Surging U.S. and gas production has brought on “energy security and abundance,” Frank Macchiarola, a group director of the American Petroleum Institute trade association, told reporters this week, in a telephone call dedicated to urging scrapping or overhauling of one U.S. program for biofuels.

Fears of oil scarcity used to be a driver of U.S. energy policy, Macchiarola said.

Thanks partly to increased production, “that pillar has really been rendered essentially moot,” he said.

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