British Columbia and Alberta Reach Agreement on BC’s Five Requirements to Supporting Heavy Oil Pipelines

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On Tuesday, November 5, 2013, British Columbia and Alberta announced that the provinces have entered a framework agreement on moving energy resources to new markets and confirmed certain principles that will apply to the development of heavy oil pipelines from Alberta’s oil sands to the BC coast. The Premiers have reportedly been at odds with respect to pipeline issues since the British Columbia outlined its five requirements for supporting oil pipeline development.

BC’s five requirements were originally set out in its heavy oil policy paper, and require that the following be established before BC will consider supporting heavy oil pipelines:

  1. Successful completion of the environmental review process. In the case of Enbridge’s Northern Gateway Project, that would mean a recommendation by the National Energy Board Joint Review Panel that the project proceed;
  2. World-leading marine oil spill response, prevention and recovery systems for BC's coastline and ocean to manage and mitigate the risks and costs of heavy oil pipelines and shipments;
  3. World-leading practices for land oil spill prevention, response and recovery systems to manage and mitigate the risks and costs of heavy oil pipelines;
  4. Legal requirements regarding Aboriginal and treaty rights are addressed, and First Nations are provided with the opportunities, information and resources necessary to participate in and benefit from a heavy-oil project; and
  5. BC receives a fair share of the fiscal and economic benefits of a proposed heavy oil project that reflects the level, degree and nature of the risk borne by the province, the environment and taxpayers.

As part of the new framework agreement, the two Premiers confirmed that they have agreed on these five conditions and Premier Clark agreed to sign on to Premier Redford’s national energy strategy.

In clarifying condition 5, the provinces have made it clear that financial compensation will not be negotiated between the governments.  Instead, Alberta agreed that BC has a right to seek economic compensation from industry and both provinces confirmed that Alberta’s royalties and taxes are not open to negotiation with BC.  It remains unclear as to how BC will seek such revenue from the petroleum and pipeline industries.

The framework agreement came as a surprise given that the provinces cancelled meetings a day earlier because there had not been enough progress between the parties on BC’s five conditions.

Premier Redford spoke at an energy-focused Vancouver Board of Trade event shortly after the announcement and she and the new framework agreement were warmly received. During a brief Q&A period at the event, Greg Stringham of the Canadian Association of Petroleum Producers summarized his opinion on the matter concisely by exclaiming, “Yay.”

Of course, the Alberta-BC framework agreement does not mean that any of the proposed pipelines will ultimately be approved or constructed. Nonetheless, the agreement will set the scope for pipeline negotiations between the provinces and industry in the future.

heavy oil pipelines oil sands pipeline

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