‘A lot of strategic stupidity.’ Experts not surprised by pipeline pull back

Vancouver—Experts aren’t surprised by Kinder Morgan’s decision to pull back spending on the Trans Mountain expansion, saying it’s “highly unlikely” the pipeline will be built in the face of enduring resistance and limited demand.

After a years-long battle with B.C. municipalities, First Nations and environmentalists, and now the premier — shaking investors’ faith —the company announced it would stall all non-essential spending Sunday.

“There’s a lot of strategic stupidity here,” said regulatory lawyer Bill Gallagher.

Kinder Morgan should have learned the importance of community support from the projects that failed before them, he said, including Enbridge’s Northern Gateway project in northern B.C. or the much earlier McKenzie Valley pipeline. And Sunday’s announcement was a clear sign its Houston boardroom is starting to “blink or lose their nerve” in the face of investors’ concerns.

“They’re so deep into it they have to devise a strategy that allows them to minimize their exposure and cut their losses,” Gallagher, author of the book Resource Rulers: Fortune and Folly on Canada's Road to Resources, told StarMetro Vancouver. “They should have learned from those other project train wrecks: Having rights-of-way along your route is not enough; you have to win the support of communities.”

Kinder Morgan Canada announced Sunday that it is “suspending all non-essential activities and related spending” on its Trans Mountain project to protect shareholders from risk in the face of opposition from the Province of British Columbia. The project would double its existing 1,100 km pipeline and nearly triple the flow of diluted bitumen west. It would also increase the number of oil tankers in the Burrard Inlet sevenfold.

Concerns about the potential for environmental damage from a diluted bitumen spill and increased carbon emissions in the face of climate change have galvanized opposition to the project in B.C. Though the B.C. Liberals supported the project, NDP Premier John Horgan has been clear he’s against it.

The Alberta and federal governments, meanwhile, are strongly in favour of the project. Prime Minister Justin Trudeau said Monday that the expansion is in the national interest and “we are determined to see that pipeline built,” while Premier Rachel Notley has gone so far as to say her government would invest in the project to ensure it moves forward.

“While we are prepared to accept the many risks traditionally presented by large construction projects, extraordinary political risks that are completely outside of our control and that could prevent completion of the project are risks to which we simply cannot expose our shareholders,” said Kinder Morgan CEO Steve Kean in a statement Sunday.

Kean added that the company plans to work with stakeholders to try and find a way for the project to move forward, but cautioned that if they can’t find an agreement by the end of May that it could spell an end for the project.

In the meantime, Indigenous-led resistance to the project will continue.

Will George, the Tsleil-Waututh Nation member leading the resistance movement behind the traditional Coast Salish Watch House built within sight of Kinder Morgan’s Burnaby Mountain property last month, said he plans to continue occupying the camp until the project is “dead, dead, dead.”

“We’re costing them money and that’s ultimately what we wanted to do to get the investors to realize that this is a poor investment,” he said. “It is a small victory but we’re not going to stop until this is absolutely dead.”

Kinder Morgan is facing legal challenges launched by B.C. First Nations, municipal governments and environmental groups, as well as a reference case sought by the B.C. government to clarify whether it has the right to restrict the flow of diluted bitumen to protect the environment.

At the same time, the project is up against a more public form of opposition that’s drawn hundreds and sometimes thousands of people to protest the project on Burnaby Mountain every weekend for the last month no matter the weather.

At each of those protests, George has addressed the crowds offering words of both inspiration and thanks. But when the throngs have gone home, George and a handful of others remain at a small camp, just a short walk through the trees from the Kwekwecnewtxw Watch House.

“This is really serious what we’re doing, standing up against Kinder Morgan,” he told StarMetro one morning last week as he sat by the sacred fire in his camp.

George, 37, has spent the last 15 summers fishing the Fraser River catching food for his community. For him, this fight is about ensuring the next seven generations can do the same.

“My elders think we can’t let this unfold in court, this is how we see we’re going to stop it, with our spirituality and our culture, by putting that Watch House there,” he said.

“We had those Watch Houses for centuries in strategic locations to watch out for any enemies, invaders, coming after our resources, our land, our people,” he said.

The movement he’s leading is focused on First Nations culture and spiritual teachings.

“We’re changing the tactics from the yelling, the screaming, what we’re going to do is we’re going to teach them. We’re going to teach Kinder Morgan, we’re going to teach the investors,” he said.

The pressure from all sides is working, Gallagher said.

Through both lawsuits and protests Indigenous groups have strategically “applied pressure … not just in courts, but finding choke-points directed at investors and markets,” he said.

In contrast, Trans Mountain and its backers have cited the need to respect the rule of law on the federally approved project. That approach has failed, Gallagher argued. Liberal changes to the National Energy Board were “too little, too late” to shake the “tremendous lack of confidence” in approving it in the first place.

“With the downturn in oil markets that started about two or three years ago, the demand for new pipeline projects has also declined significantly,” said Tom Gunton, the director of Simon Fraser’s Resource and Environmental Planning Program and a former deputy minister of B.C.’s environment ministry.

Of the three major pipeline projects with federal approval, the Trans Mountain expansion is the “most controversial” and the “least likely” to move forward, Gunton said, noting it poses greater environmental risks than Enbridge’s Line 3 replacement or TransCanada’s Keystone XL project.

“They’re less controversial and so those other two projects are more likely to proceed,” he said.

For the Alberta, B.C. and federal government’s the issue’s caused tensions to rise and tempers to flare.

At this point, Gunton said “all parties need to instead of fanning the conflict look for a compromise solution that meets everybody’s interests.”

Kinder Morgan should have learned the importance of community support from the projects that failed before the Trans Mountain expansion, says a leading regulatory expert.

That solution may be to focus on another pipeline project to get Alberta’s oil to world markets with less environmental risk, he said.

“Kinder Morgan is up against a disciplined, strategic mindset I don’t think they properly appreciate,” Gallagher said. “They’re in over their heads in Houston.”

[Top photo: Will George (centre) speaks with organizers during a protest at the gates of Kinder Morgan's Burnaby Mountain facility on Saturday, April 7, 2018.  The next day, Kinder Morgan announced it is pulling all non-essential spending from its Trans Mountain pipeline project.  (JESSE WINTER / STARMETRO, VANCOUVER)]