Here's a rare interview with the chief executive of what is surely Canada's most talked about infrastructure project: a twinned crude oil pipeline to the west coast of British Columbia.
It's a saga that is now seven years in the making: the twinning of the Trans Mountain pipeline that will eventually elevate the national wealth of Canada by securing fair market value for Alberta crude oil. It's a project that has faced obstacles at every turn. After the acquisition of Trans Mountain by the Canadian government, company CEO Ian Anderson stayed on in the role. Below is the transcript of an April 5, 2019 interview with Anderson. It was conducted by Peter Tertzakian and Jackie Forrest for their Calgary-based Arc Energy Ideas podcast. Italics represent questions from the two interviewers. Our transcript does not indicate which interviewer is doing the asking. For that, check out the podcast itself.
Peter Tertzakian: This is the Arc Energy Ideas Podcast with Peter Tertzakian and Jackie Forrest exploring trends that influence the energy business. Welcome back, I’m Peter Tertakian and it’s April 4th 2019.
Jackie Forrest: I’m Jackie Forrest. Well, today we have a guest to our podcast, we want to welcome Ian Anderson, president and CEO of Trans Mountain Corporation. Welcome.
Ian Anderson: Thanks for having me.
Today is an opportunity to learn more about this important project. I know many of our listeners probably know a bit about it already. It's an existing 300,000 barrel a day pipeline wanting to expand to 890,000 barrels a day, connecting Alberta oil with our Canadian west coast for shipment to Asia and the US West Coast. So today we're going to talk about the history of the pipeline expansion project, we're going to clarify some facts from fiction on the project.
There's definitely a lot of questions around the environmental impacts and we want to make sure that we get the facts right as well as the next steps. We will start with the history.
I have this book, one of the original corporate Trans Mountain books on the original construction. It was constructed in 1953, in operation for 65 years, and there's been some changes along the way, isn’t that right, Ian?
Yes, that is absolutely right, Peter. I've got the same book and I look at it frequently and hope to write another one. The original pipeline was commissioned after an act of Parliament actually in 1951, designed to move ever increasing Western Sedimentary Basin production to west coast of North America markets whether that was British Columbia or California. So, 1951 – act in parliament, and completed 1953 at a capital cost about $93 million. Came into service in October 1953. Which is quite remarkable as it went over two mountain ranges at least and even in 1953 that was a real engineering feat. There was an expansion about a decade ago. We completed the first phase of this major expansion in 2007/2008 when we completed the twinning of the pipeline through Jasper National Park and Mount Robson Provincial Park. At that point we went from 225,000 barrels a day up to the current 300,000 barrels a day and in our mind it was the first step towards a staged expansion of the asset to the West Coast as shippers and producers looking for more access.
So just before we move on, give a little context in terms of size I always like to do that so 300,000 barrels a day and what is the Trans Mountain the proposal to take it up to?
If we complete the twinning and everything is approved and we get it in service, we will go from 300,000 to the 890,000. We will have two lines between Edmonton and the West Coast will continue to serve the Washington State refinery market. You know almost a half of the current capacity of the line goes into Washington State. We’ll continue to serve that market and we'll have more capacity to move barrels offshore to foreign markets including California, and this is an important point: the British Columbia interior and Lower Mainland gasoline and diesel market and the Parkland Refinery in Vancouver, it provides more capacity to serve all those markets.
Of course there was a major historical milestone last year with the acquisition of the pipeline by the federal government. Yes, we’ve been working on this project since early 2008. We went to the market in 2010/2011 and under Kinder Morgan ownership I had the full backing of my owner and board to proceed with the project as we had the envisioned it. What we encountered through the period of, really, 2016/2017 were repeated consistent obstacles that were presented … that had Kinder Morgan look for another party who would come on patient enough and determined enough to get it built.
So the federal government is now the owner of this, in many ways like a vital piece of infrastructure as you say it serves the energy needs of British Columbia and there is a lot of nervousness or I don’t even know what the word is, all the range of emotions, from anxiety to frustration to outright anger and some constituencies of Canada that the federal government buy the pipeline, but I argue that most of the energy infrastructure in this country is already publicly owned, our electrical utilities and transmission lines, Ontario Hydro, Quebec Hydro, Manitoba Hydro, it goes on and on. So why is there all the consternation out there for public ownership of a piece of energy infrastructure?
I think the history has been in Alberta, that the pipeline sector has been invested in and built by investor capital. If you even go back to the early days of the 50s and 60s when producers were the ones who backed the construction of the pipeline infrastructure, that's been our history. But you know any evolution of any asset that's of national importance that I believe this one is, going back to 1951, there are times and places where public ownership perhaps is a necessary element to their success. This project and this asset reached the point in time where it was in all of our interests, I believe, as Canadians, to put the capital behind it that had the right determination and patience to see it through. It's not going to be held by Crown Corporation or by Canada forever. They've been very clear about that, it will be turned back to public hands and my objective is to run it commercially. Whether it's a Crown or not a Crown it's got to be run commercially and viably and at the end of the day deliver Canadians a return on the investment in debate.
Okay, let’s talk about where the current project is, well 10 years if you started in 2008. It’s a long time in the making. But the current step in the process has been to deal with federal court of appeal in August 2018 that said you had to go back and do some work. One was the shipping issues which were recently addressed in a reconsideration report that made 16 new conditions that was released in February of this year and then First Nations consultation by the federal government needs to occur. Now Minister Sohi our Natural Resources Minister said in March that the federal government had met with over a hundred different indigenous communities and said that this process should wrap up and it potentially they could all be up in the position to approve the project by cabinet in the summer. So the first question I have is around the indigenous consultation, I think a lot of Canadians wonder: wasn't this done already by your company, and what's different about what the federal government's doing today vs what's already been done?
The scope of the federal government appeal decision in August last year as it relates to the indigenous consultation was actually quite narrow and specific and what it was instructing the government to do was go back and redo that consultation that had occurred between the time of NEB (National Energy Board) recommendation and Order in Council decision by government. That period back in 2016 was a seven-month period where there's an obligation on the Crown to go back to the [first] nations to review really the outcome of the decision, to address their concerns. Did they have any remaining issues, was there any further accommodation necessary in order to satisfy their concerns? That was the element of consultation was found to be deficient.
There was no criticism of the work we have done as proponent in the last six or eight years in consulting and engaging and meeting with communities. There was no criticism of the National Energy Board process. It was really quite a specific period of time that was put into question and that's what the government is going back and, if you like, redoing.
So there were 156 conditions of the original approval. So basically they are to go back and talk to the First Nations and other indigenous groups around their views of those changes and where they accommodating conditions. Yes, it was to go back to the nations and review the outcome of the NEB decision and the related conditions and did those conditions accommodate, mitigate and respond to their issues and concerns and do that on a local nation by nation basis. And so that's why the minister will refer to over 100 communities having been met with; I think we have 126 on the list right now.
The benefit we have, and it and just goes back to your question Peter about Crown ownership/ current ownership, is we are now part of the Crown. We are at those tables with the Crown every meeting to discuss the impacts of the project and the things that perhaps we could do differently to design build and execute on the project that is more in touch with what a nation's concerns are, so we have a much more powerful table if you like in addressing those concerns than before.
Can you identify for our listeners where geographically or I should use the word territorially where the greatest indigenous resistance to the pipeline is?
Gee, you know we've got 43 explicit supporting communities and we probably got another 15 or 20 that we're working with and for most of them it's not a matter of opposition to the project. It's a matter of ensuring that their local concerns are being protected.
For example, have we got a rigorous submarine response to intervene to anything happen in the water?
Have we considered groundwater aquifer and stream and river protection as we go through the North Thompson?
Have we enabled those communities with opportunities to work for the project into work for me and to gain employment and capacity?
Those are mostly the issues and concerns you certainly have pockets of opposition and I would say they're centered in some parts of the Lower Mainland obviously and in the end the marine communities around Burrard Inlet have been the most vocal opponents. Tsleil-Waututh, Squamish; for example you've got a few in the interior around the Coldwater region south of Merritt who stood in opposition but I'm continuing to talk with their community and the chief and hopefully we can resolve our differences, so it's a bit scattered along the line but we're working hard on all issues
So the other piece of the appeal was the marine issues. As I said there was the report in February with 16 new conditions.
Can you speak specifically to other recommendations were made about the orca in the region that have been declining their population and I guess when I looked at those recommendations I wondered how one a pipeline company can control like marine traffic generally in that large area?
Well, very, very quickly when we started out on this project, one of the things we decided to learn very quickly is that we needed to look at the entire supply chain not just stopping at the dock where our asset ends.
We knew that to be successful we had to think about and deal with marine traffic given the sensitivity in the area.
So we have been partners with, whether it’s the Marine Response Corporation or the pilots or the port or the Chamber of Shipping for a decade now to ensure that all of those pieces of the chain are working well as it relates to the specific reconsideration. The NEB does not have jurisdiction over those [marine] spaces but they made the 16 recommendations on things that those agencies could do differently to help address the concerns as expressed by the federal court of appeals specific to species at risk and the orcas, the southern resident killer whales’ population on the south side of the Salish Sea.
Some of those recommendations – I won’t go into all 16 of them – they deal with the speed of ship traffic and not just tankers. [If] the recommendations are pursued they will benefit all traffic and we are but you know 8 or 10% of traffic so there will be incremental benefits to the whole value chain of marine traffic in the Salish Sea.
So what you are saying is from cruise ships to freighters to ferries to whale watching boats, all commercial traffic are going to have new requirements that are going to make the sea safer around ship noise, around tug escort capacity for tankers specifically, underwater monitoring for the behavior of the orcas, Chinook salmon habitat restorations. So ironically what you are saying is, this brings up another important point, that this whole pipeline debate has created a situation where the seas are actually more environmentally friendly, I’ll call it, and safer.
There will no doubt be measures taken that will make the marine environment better than it was before. That is one of the arguments that the oil industry would put forth. The new measures the construction of the pipeline and the addition of some tankers into the mix actually creates an environment where there is more spill response capacity. That, in fact, you know whether there was a spill, say from Washington State out of our jurisdiction but close by, or further up north in Prince Rupert. What do you say about that?
For the South Coast of BC and for the southern Salish Sea there is no doubt in my mind that the measures being taken will improve, well they will explicitly improve, response capability.
We are investing 150 million dollars on seven new bases within that area that are going to reduce response time to any incident, not just a tanker incident, it could be any incidents. The response times going down, capability going up. First Nations are being involved directly in the training and the deployment of that equipment and those bases. We have designs to put some of those bases right in First Nation marine communities so that their people will operate, be trained, and like I said it's not just about tankers at that point, it’s about any traffic that is in distress or relies upon some response capability.
Yes, so I think that is an important point in reading the report, I actually tried to get through a lot of it and I encourage our listeners to do that. There will be more spill response equipment, more bases so all things the same if there were still we should be able to respond faster and then we could today.
So from my perspective things are better. In fact, the regulated response time by NEB and Transport Canada directives will reduce down to two hours or less. So there will be regulated response times that the capacity needs to match, so it won't just be we hope it's reduced, it will be reduced.
Ok, on another aspect that gets talked about is that there will be more tankers so for instance the NEB says that about five tankers are loaded per month today, in Burnaby and that the new project they would expect about 34 per month and you had talked about that would then be 8-10% of all the ship traffic or is it just tanker traffic at that point?
Currently today we are about 6-7%, it will go up to 12-14% of overall traffic.
Is that assuming that the overall traffic is growing too?
Yes, the total traffic of container ships and cargo vessels are increasing as well.
So all things the same, we are increasing the number of tankers that are on the ocean; and all things the same you would think that the oil spill risk would go up as there's more tankers. But are the things that are changing to help reduce the chances of a spill and offset the effect of just having more tankers?
Yes, I mean we've done extensive risk calculations around “does the risk go up or not” and when we look at the mitigating measures that that will put in place, we don't think the risk goes up. We think that the measures such as increased tug escorts with every tanker, the speed of the tankers, the measures were put in place for navigation, the companion length of tugs with the tankers all the way out to the Strait of Juan de Fuca & beyond Victoria, the tugs will be escorting tankers, so it's so there are elements that are going to reduce that, even though tanker traffic does go up.
I would remind your listeners of one thing and that is that we have the capacity today to move generally five tankers a month. We will have the capacity in the future to move up to 34 per month. The market will decide whether they're going to move barrels off the water or into Washington State or some other place.
I don't have contracts in hand to move 34 tankers a month, I've got contracts to move barrels down my pipeline, but those could go to different places. The market will decide how many ships move.
The last point I make is the 34 is a hard number, in other words we can only move loaded ships from Port of Vancouver during daylight high slack tide times, so we can't move ships in and out whenever they want to come in. There's only one high slack tide per 20 - 22 hour period. So we're limited by how many ships we can move and that gets you to the 34.
What is a slack tide?
A vessel can come in under any tide. The vessels go out during slack tide which is the time between when the high tide is at its highest before the low tide at it started, so the waters are still in calm and they're not flooding in or flooding out.
I see, so you’re not getting the rip tide effect.
You’re not getting the movement with the current. The slack tide works right between the periods.
So having tugs around the tanker guiding it out really does … statistically reduce the chances of an oil spill, is that right?
Absolutely, the first is that all these tankers are double hulled, they are segmented, they have two BC pilots trained and experienced on BC waters on every vessel who are managing those vessels in and out.
We don't us foreign pilots on these vessels when they're in BC waters, so yes you're absolutely right that those tugs are not just accompanying the vessel, you're actually hard tethered to the vessel.
We were on deployment exercises regularly; that experience of rudder failure and have the tug take over control of the vessel through some of the narrowest points of the inlet. So we go through testing to make sure those tugs and those operators are there to take over, really, movement of the vessel in the event of a rudder loss.
So what do they do in Washington state? Just immediately south, do they have this level of stringency? They don't have this level of tug support, they don't have this level of tether tug and don't have this level of tug experts.
Now they're not navigating through Burrard Inlet, they are in more open water as they go in and out of ports in Washington State, but having said that we're going to have by far the most rigorous marine protection and response capability that you find worldwide. And these local pilots are actually in the new scenario, are actually staying on the boat longer than they do today, which is another thing.
They are going to stay on the boat longer, currently today they go from our dock in Burnaby to around Race Rocks which is just south of Victoria, and in the future they will go all the way out to what's called J Buoy or Juliet Buoy out further out on the edges of Canadian waters.
Speaking of Burnaby, we talked about Indigenous resistance and I've been to the facilities are in Burnaby and looked at it and it's in the middle of a residential neighbourhood basically. So can you talk a little bit about the resistance in Burnaby and what the challenges and what's going on there?
Well, first of all, we've been what we think to be an upstanding corporate community citizen of Burnaby for 60 years and the community has evolved from what was an industrial center with four refiners down to what it is today, which is a more park-like residential, you know, city. So it's grown up around us differently than we were before. That said, we have a site that with all the infrastructure in place to expand upon, that we can have met all of your expectations around being that good corporate citizen whether that's in involvement in the community, employment within the community but also safety measures and fire protection measures.
[The City of] Burnaby has been generally, I would say, politically opposed. That has helped translate into what has been general public opposition.
We do our polling and we find that there is moderate support depending upon the poll and the time of year but it still runs around that 55/45 53/47 kind of number.
Like 55 or 54 for or against?
For, ok. But there still is a significant public opposition in Burnaby.
What we are starting to achieve is with the inevitability that, we hope, comes with decisions in the coming months, is really engaging more fully with Burnaby and their citizens around what might this look like and how might we execute on this project so they can be secure in, and safe in, the asset being there in the community.
So what are the concerns on the coast? Is it that diluted bitumen behaves differently in ocean and freshwater than other types of oil and potentially could sink faster making it harder to the respond to spill's and making the environmental cleanup more difficult, is this true?
Well, all the science that we've been a part of or that we have participated in or helped fund or read would suggest that diluted bitumen is a heavy oil. I mean, lots of people like to talk about diluted bitumen because it's got some connotations that there are two separate parts of it that somehow separate once they are exposed to the environment.
It's heavy oil and heavy oil floats on water…we've done extensive study around that and there are different grades of commodity and their different the marine conditions that are continuing to be tested. The evidence to date would suggest that the oil floats and the key to it is response time, so it goes back to what's our response time, how quickly can we gain access because there are circumstances, obviously, like with anything that you get water movement, you get wave-action, you get sediment in the water. Those are the things that would contribute to any commodity in the water sinking as those conditions separated it and I think that it goes then back to a risk-based response plan, which we have in place that will be at any incidence in less than two hours with capability of cleanup. So we think that with all of the technology we’re bringing to the response side of it, and the investments there, combined with the safe tug in the safe tanker for operations, combined with the trained personnel… Now we have committed to the NEB and the public at large that we will continue the research. We're going to continue the research into the fate and behaviour of oil commodities in water and we are obligated to continue to be a part of that research and adapt with that research as it continues. So research is continuing on different marine conditions with different substances and we will be part of that and will respond accordingly.
You know there are a lot of data in that report, chapter eight has information around it and there have been a lot of studies and they are having large tanks that they exposed to the elements and see how long the diluted bitumen will float and it's finding, the conclusion that I got out of it is, as you said, very similar to other heavy oils and not unique from Maya crudes are other heavy crudes that would be shipped on the ocean, or even bunker fuels that are in the tanks of many ships that are transiting of the Lower Mainland.
Absolutely, like cruise ships. Cruise ships or any ships, bunker fuel today and I know it's changing maybe in the future is as we move our off bunker fuel, for today most ships are running with bunker fuel which would be very similar and its properties.
All right let's talk about the steps for the pipeline, Ian, so as I said earlier in March, Minister Sohi commented that Ottawa was in a strong position to wrap up the indigenous consultation with the potential for cabinet to approve the project by summer. If that were to occur what do you think that would mean for the project timeline and potential operating date?
Yes, it’s the $64,000 question. If there is one thing that I have learned on this journey for the last 6 or 8 years, it is that it's almost impossible to predict the timing of things. Having said that, we know that the Crown is diligently undertaking these engagements, as Minister Sohi was at those tables as well.
There is a volume, volumes of information and data, being undertaken. The 90-day or 3-month period after NEB recommendation, that's a legislative time period that the government has to issue an order or extend the time. So that comes due on May 22nd. So by May 22nd there either needs to be a decision or another order in council to extend the period and I don't know which way it's going to go.
Only really the cabinet will make that decision in due course. We will be ready for a decision whenever it is made.
We’re developing our plans to be prepared to start construction in the summer to get back in the ground and in the water, continue our work at building a dock and work on it right away this summer… We would have full crews on the ground this fall working on the right of way, if a decision comes in May or June; if it's after that then we'll adjust accordingly and will be patient, will be resilient and be prepared to go when the decision does finally get made.
We're looking at, depending upon when we start, about a 30 to 36-month construction period for everything to get done. So, you handicap your dates for when a decision might come out but you can then look at 30-36 months depending upon… marine windows, salmon spawning windows, bird migration windows, those things affect what we can actually do ….political windows, elections, so all those things will affect….summer construction season.
So depending when you get a decision, that is why I say 30-36.
We have talked, Jackie and I, on the podcast previously about how the whole approval process for energy infrastructure is now fragmented in beyond the regulator, into the judiciary, into the political system, not only political system, also provincial, then federal. So okay, Minister Sohi comes out in the next 90 days before June and says it's okay, let's greenlight, let's go. There is a potential for other wild cards here politically judicially, is there or no?
I have no doubt that there will be a judicial review sought, that there will be appeals taken to either the regulator or to the court of appeal, and we will look at those when they arise. We will evaluate what we think the merits might be, what we think the success could be, and I would expect to proceed on the basis that we have an approved project at this stage.
I want to talk about that topic. One specific appeal, the reference case the BC government has put towards the court of appeal to determine if BC can control the movement of hazardous materials through their province, in which they define diluted bitumen to be one of those and basically control the fact that they can allow oil but not a particular type of oil. Can you just tell us where that's at and the potential that has to slow down the project?
Yes, I don’t know if there was a direct relationship between it and the project, but if the BC government was successful in their reference case it would give them the authority to control the movement of hazardous substances in the province, which could be diluted bitumen and … to any transportation mode – truck, train, pipeline. So it's not unique to us, but certainly it would be applicable to us if they chose to. That case has been heard, it concluded a couple of weeks ago before the BC court appeal and we're now waiting for a decision. In our view that decision is 2-4 months from the end of March. So it is probably the summer, fall as well.
We'll have more clarity on that. It doesn't necessarily in and of itself mean anything unless a) it is upheld and that there's nobody successful on appeal on quashing it, and also that it is actually put into regulation.
But you know, as a pipeline operator I move all kinds of different commodities: I move gasoline, diesel, light oil, heavy oil, and I'll continue to move whatever my producers and shippers put in the pipeline and commit to us.
So it really becomes more of a producer issue than it does a pipeline issue.
I can still have the expansion proceed and then it becomes what can producers put in it and so that will require a lot of a hard thought by the producing community if it was ever successful.
You have been really generous with your time and thanks for coming and one final thing left. Let's go full circle, we talked at the outset about the federal government buying the pipeline. Let talk about when it may have intent to sell and I know there's some noise in the media right now about potential sale to indigenous groups and so on. Can you comment on any of that?
The only thing I would say is Canada has been very clear that this is not a long hold. My mission is to generate value for Canadians in a subsequent sale of this asset; make it worth something that's greater than what Canada paid for it. It’s been my sole purpose for the next several years as far as the ownership makeup, it going forward. I think there has been a number, I count them a probably four or five different indigenous groups, that have raised their hand to be interested in some ownership, and the minister has been pretty clear that he will consider a process to determine who those parties might be, how they might get involved, when you might get involved.
I think that they want to go about that in a commercially minded way as well, but certainly it provides a vehicle through which Canada can continue to execute on its reconciliation plan. I mean reconciliation doesn't happen as a single event, it's a bunch of little things that add up and this is one where I think that opportunity will be presented, where … I can find the right terms in the counterparty. We'll see, but I certainly think it's part of the fabric of us going forward.
Well let's hope. I think it makes a lot of sense.