Tar Sands Express - Enbridge Northern Gateway Pipeline or the Railway? Or Both?
As billionaires invest in the railways, and oil tanker traffic skyrockets along the BC coast, it looks as though the Enbridge Northern Gateway pipeline may have been a ruse all along – a classic “bait and switch” – with a number of PR payoffs.
In the third week of August 2008, two of the richest
men in the world took a brief tour of the tar sands. As Warren Buffett (of Berkshire Hathaway) and Microsoft's Bill Gates viewed the immense strip-mined bitumen fields and the vast infrastructure for tar sands development, much of the business press made it seem as though this was just another celebrity tour of a region that has seen many celebrities come to marvel at the size of the tires on the big yellow trucks.
Just months previous, however, in an interview with the Financial Post (Feb. 7, 2008), Buffet had compared the tar sands to Saudi Arabia and stated: "The tar sands are probably as big a potential source of production 15 to 20 years from now. It would surprise me if the world wasn't wanting to use 200 million barrels per day [of oil] in 15 or 20 years. The tar sands are the biggest single possibility to fill the gap that, it looks like, will otherwise develop in the next decade or two."
Known to be long-term friends, Buffett and Gates are reported to often invest together. In 2008, Buffett and Gates had a combined estimated net worth of $120 billion.
The host was tar sands developer Canadian Natural Resources Ltd. The two billionaires toured Canadian Natural's $9.3 billion Horizon site, located about 100 km north of Fort McMurray.
As a tar sands developer, Canadian Natural doesn't have the same "name recognition" as other big players, so it's curious that the Buffett/Gates tour would be hosted by them, rather than, say, ConocoPhillips -partner with EnCana Corp. and, at the time, part of the Syncrude tar sands consortium. Buffett had been investing in ConocoPhillips since at least 2006, so one would think that company would host the tour, not Canadian Natural. But the Globe and Mail reported that the trip was arranged by engineering/construction giant Kiewit Corp., a contractor on Canadian Natural's Horizon project.
Nonetheless, a look at Canadian Natural's board of directors is helpful. Four are especially noteworthy: there's Frank J. McKenna, former premier of New Brunswick, former Canadian Ambassador to the US (2005-2006), and a director of Brookfield Asset Management Inc. There's Gary Filmon, former premier of Manitoba, chair of Canada's Security and Intelligence Review Committee, and director/trustee of several income funds. There's Catherine M. Best, a director of Enbridge Income Fund Holdings Inc. And there's Gordon D. Griffin, former US Ambassador to Canada (1997-2001), director of CIBC, Transalta Corp., Canadian National Railway, and registered US lobbyist for Nexen Energy Inc., part of Syncrude.
The entity overseeing Bill Gates' personal investment portfolio is Cascades Investment LLC, based in Kirkland, Washington. By 2006, the stock portion of Cascade's portfolio was worth about $3.4 billion, with $1.4 billion of that invested in shares of Canadian National Railway Co. (CN).
Gates has been investing in CN since at least 2000, and during that time CN has been on a buying spree. CN bought up provincially-owned BC Rail in 2004, a controversial decision by then-Premier Gordon Campbell that made CN the only rail carrier in Northern BC - a decision that continues to rankle much of the electorate.
In 2006, CN bought 2 short-line railways in Northern Alberta: Mackenzie Northern Railway in the northwest and the Lakeland & Waterways Railway in the northeast. By the time of the Buffett/Gates visit, CN had also purchased Athabasca Northern Railway Ltd., linking Fort McMurray to Edmonton.
For his part, Warren Buffett had been busily buying up shares in the Burlington Northern Santa Fe Railway (BNSF), which since 2006 has been moving diluents - diluting agents necessary for mixing with tar sands bitumen - from US refineries in the Gulf Coast, California and Kansas to the Canadian border (at Superior, Wis., Noyes, N.D., Sweetgrass, Mont., and New Westminster, BC). The carloads of diluents are then handed over to CN and transported to Edmonton for shipment to the tar sands.
So by August 2008, when Buffett and Gates made their surprise visit to northern Alberta, they were not just celebrities making a casual tour, but already involved in the future of the area.
In fact, just weeks after their tour, BNSF's Manager of Businesss Development, Jane Halvorson, told Railway Magazine (Nov. 2008), "We'll continue moving diluents, but there is opportunity to offer rail service as an alternative to pipelines to get the bitumen blend to the refineries." That, she added, would depend on "partnerships with the Canadian railroads."
Buffett bought the rest of Burlington Northern Santa Fe Rail that he didn't already own for $26 billion in 2010, while Gates has been gradually increasing his stake in CN. Clearly, a key part of the tar sands future, as the billionaire tycoons see it, is "pipelines on rails."
Just how long they've had that vision in mind only they could say. But it's worth noting the timing of their visit. The Buffett/Gates tour took place only a month after Enbridge's Patrick Daniel announced in July 2008 that ten secret backers had provided $100 million to fund the review process for the Northern Gateway Pipeline project - shelved in 2007 in part because of a lawsuit launched by the Carrier Sekani Tribal Council, which has been fighting the proposal for more than five years.
The only one of the secret backers that has so far been confirmed is China's Sinopec, which bought ConocoPhillips' stake in Syncrude in 2010, and by January 2011 was in talks with CN and Saskatchewan energy minister Bill Boyd to transport oil by rail.
Of course, the re-launch of Enbridge's Northern Gateway set off a flurry of concerted effort by environmentalists and First Nations to stop the pipeline, a key media focus in BC.
By autumn 2008, CN Rail approached the Alberta government with its plan to move tar sands oil. Alberta's Energy Minister at the time, Mel Knight, told Dow Jones Newswire that CN and his government have had "very good meetings," with CN believing that it could eventually transport 400,000 barrels per day from eastern Alberta to the West Coast of Canada.
Just six months later, CN was estimating that it could transport 2.6 million barrels per day to the West Coast if 20,000 railcars were added to its fleet.
On April 15, 2009, the Financial Post's Diane Francis reported that CN "will deliver the oil sands production through the use of insulated and heatable railcars or by reducing its viscosity by mixing it with condensates or diluents. The ‘scalability' of the concept - up to millions of barrels per day - means that the railway can ramp up production cheaply and quickly to provide immediate cash flow to producers which otherwise will have to wait years for completion of upgraders and/or pipelines."
The project, wrote Francis, "will eliminate three barriers" to tar sands development: "the cost, delays and financial risks involved in building multi-billion dollar pipelines; the politics of obstruction south of the border from environmentalists, and the danger of selling oil to monopoly buyers in the US."
An interesting conversation reportedly occurred during an October 2010 Prince George Council meeting, in which the Sea to Sands Conservation Alliance (which opposes the Northern Gateway Pipeline) requested that Mayor Dan Rogers resign his membership in the Northern Gateway Alliance, a lobby group reportedly created and funded by Enbridge. Mayor Rogers also sits on Enbridge's Regional Advisory Board.
As reported by http://www.northofcentre.ca (Oct. 5), Mayor Rogers reminded the meeting that Prince George has an oil refinery, and he "asked if the [Sea to Sands Conservation] Alliance was opposed to sending oil products via rail, with the response being that as that was not being proposed, they have no position on it."
One month later, November 2010, CN Rail director Maureen Kempston Darkes was appointed to the board of Enbridge. Ms. Kempston Darkes is a former (to 2009) vice-president of General Motors (which builds locomotives) and director of Brookfield Asset Management.
During that same month, an important (if little reported) trade mission to Asia took place - the Nov. 1-10 Pacific Gateway Alliance Trade Mission to China, Japan, Korea and Hong Kong - jointly led by BC's then-Transportation and Infrastructure Minister Shirley Bond and Stockwell Day, Treasury Board president and federal Minister for the Asia Pacific Gateway. They were accompanied by executives from Port Metro Vancouver, Port of Prince Rupert, Canadian National Railway, Canadian Pacific Railway, Burlington Northern Santa Fe Railway, and the Vancouver International Airport.
Obviously, both the BC Liberals and the Harper Conservatives have been in on this "pipeline on rails" plan for some time.
By December 7, 2010, the National Post reported on the "alternative plan, if the Enbridge [Northern Gateway] proposal gets bogged down in red tape." Prince Rupert, connected by a CN rail line with the interior, is "the shortest shipping route between North America and Asia - knocking a day and a half off the travel time from Vancouver. The advantage over Kitimat is that it is the deepest natural harbour in North America and is already deemed to be the lowest risk port on the west coast in terms of maritime safety."
By February 7, 2011, the Globe & Mail was reporting that CN "has begun sending oil sands bitumen to California; heavy oil from Cold Lake, Alta., to Chicago and Detroit; and crude from the [Saskatchewan] Bakken" to the US Gulf Coast. CN "boasts that its tracks lie within 80 kilometres of five million barrels a day of refining capacity, which is more than double Canada's entire US exports."
Jim Cairns, CN's vice-president of petroleum and chemicals, told the Globe & Mail, "There's a lot of talk about is it pipe? Is it rail? Our view is pretty simple. It's a big pie...It's not either or. It's maybe both."
US West Coast Markets
In the January issue of Watershed Sentinel, BC energy writer/activist Arthur Caldicott argued that the Northern Gateway Pipeline project would likely become the cost-effective supplier of a new California market for tar sands crude, with oil tankers from BC delivering the crude to refiners there. Caldicott noted that the Tanker Exclusion Zone, which keeps oil tankers at least 124 km west of Haida Gwaii (the Queen Charlotte Islands), "only applies to tankers sailing to and from Alaska."
Victoria-based marine environmental policy consultant Dr. Gerald Graham confirmed Caldicott's argument in late February. By combing through regulatory documents filed by Enbridge with the National Energy Board (NEB), Graham found that much of the oil planned to go through Northern Gateway Pipeline would be tankered to California and Washington, where a number of tar sands oil producers have refineries.
By March 1, Enbridge was scurrying into damage-control mode. Vern Yu, Enbridge vice-president of business development, told the Globe & Mail, "It's the current expectation of our partners that the crude will be shipped via Northern Gateway to Asia."
But this apparently does not jibe with Enbridge's official filings to the NEB. "I know it looks inconsistent at this time...it's actually not inconsistent...I'm sure this will probably come up in the hearings and we'll probably have to explain that," Mr. Yu told the Globe.
Having read the thousands of pages in Enbridge's regulatory documents, Gerald Graham told the Globe & Mail (Feb. 28): "For the amount of money and time and the number of people involved in producing that application, it's pretty rinky-dink - there's so many holes, and there are contradictions," he said. "This is a document with legal significance. It's before a semi-judicial panel that will look into it. And if [Enbridge] can't get it right to this phase, it does put into question their whole commitment to the project."
Graham is not the first to question Enbridge's commitment to Northern Gateway. After all, the company has put little of its own money into it so far, having been bankrolled by its secret backers to take the project through the regulatory process.
A Bait and Switch Ruse
Now it's increasingly looking as though the pipeline may have been a ruse all along (a classic "bait and switch"), with a number of PR payoffs - as a political bargaining chip with the US on oil security and supply; as a distraction from what the railways have been planning; and as a diversion from the quiet expansion of Kinder Morgan's Trans Mountain pipeline, which has resulted in rapidly increased oil tanker traffic through the Gulf Islands. Kinder Morgan plans to more than double the capacity of its pipeline to Vancouver's Westridge terminal, which would result in more than 150 oil tankers per year plying the dangerous waters near Second Narrows. Starting on August 22, the NEB will begin public hearings into Kinder Morgan's bid for long-term shipper commitments for pipeline expansion.
Enbridge's Northern Gateway seems to have been the "bait," with the "switch" to pipeline-on-rails and Kinder Morgan's TransMountain pipeline to occur at an expedient political moment.
According to O'Dwyer's (the US firm that tracks PR firms), Enbridge is a client of National Public Relations - Canadian affiliate of PR giant Burson-Marsteller, an outfit long familiar with the BC environmental movement. Some of National Public Relations' other current clients include Via Rail (i.e. CN), EnCana, and Imperial Oil.
It looks like Prince George will be the hub for the pipeline-on-rails plan, with shipments south to the US, to Port Metro Vancouver, and to Prince Rupert. Kitimat is apparently to become the designated port for liquified natural gas (LNG) exports. Of course, all the existing Alberta pipelines also plan to ramp up production. As CN's Jim Cairns said of the tar sands, "It's a big pie."
Saving the Whole Coast
Clearly, the number of oil tankers plying BC waters is scheduled to soar. The proponents of the plan intend that environmentalists will get sidetracked into debates about whether rail is less dangerous than pipelines, or Prince Rupert is a ‘safer' port than Kitimat, or whether to protect the North or South Coast from oil spills. So it's crucial to focus on two concurrent goals: first, a legislated oil tanker ban that would protect the entire BC coast.
BC environmentalist Rex Weyler is among those calling for such a ban. "Who divided BC North/South like Korea?" Weyler wrote in a March 11th email. "Tankers threaten our coast everywhere! And we have actual tankers using Burrard Inlet and Georgia Strait right now today." In 2010, Kinder Morgan's tar sands pipeline delivered crude to 71 oil tankers at the Westridge terminal.
"This ‘North Coast' idea," wrote Weyler, "has slipped innocuously into our language, invented by the oil industry and Liberal party insiders because the Liberals can pretend to be against oil tankers when they actually support oil tankers in Vancouver, and support tar sands expansion in Alberta, which is the root cause and reason for these tankers...This ‘North BC' and ‘South BC' language is a divide-and-conquer scheme dreamed up in some Liberal party back room or oil company strategy session. This isn't coming from the people of BC," wrote Weyler "We've never once talked about only saving half the coast, north or south."
The second key goal: shut down the tar sands.
Joyce Nelson is a freelance writer/researcher and the author of five books, including Sultans of Sleaze: Public Relations & the Media.