Perplexing Pipe Problems: Public Policies and the Debate on Pipeline Construction

Pipelines have been filling the front pages of North American newspapers for months now. Perhaps none of these pipelines have received more media coverage than TransCanada’s proposed Keystone XL pipeline. Initially proposed in 2005, the project is still awaiting regulatory approval from the U.S. State Department. The pipeline system is designed to transport oil from Alberta to Nebraska, and allow easier access to the U.S. market for Albertan oil and gas resources. Numerous oil producers and refiners have signed contracts to eventually send thousands of barrels of oil per day to the American market once the project is completed.

Unfortunately for TransCanada and the pipeline’s proponents, Keystone XL has run into numerous problems while attempting to gain regulatory approval. Constant objections from environmental activists and numerous regulatory processes and requirements have prevented the project from even beginning construction. Keystone XL even impacted the 2012 Presidential race in American politics, as President Barack Obama and challenger Mitt Romney sparred over whether or not to approve the pipeline.

Keystone XL is a single example of a pipeline project that is being challenged by a variety of public policy issues. Numerous other pipeline projects have run into the same quagmire of issues: the Northern Gateway proposal from Enbridge, and numerous proposals to ship Western Canadian resources towards New Brunswick and Canada’s East Coast. While there are numerous public policies impacting these pipelines, three specific issues are common to recent pipeline debates: environmental impacts of proposed routes, the difficulty of coordinating multiple jurisdictions to gain regulatory approval, and the economics of exporting resources to new markets.

Environmental Impacts: One of the most significant barriers to pipelines like Northern Gateway or Keystone XL is the concern over environmental impacts that these projects will have. For example, thousands of protesters stood outside the White House in November of 2011 to attempt to persuade President Barack Obama to reject the pipeline based on fears of potential oil spills damaging local ecosystems along the pipeline’s proposed route.1 In an attempt to recognize and manage these concerns, TransCanada amended the pipeline’s route to avoid areas in Nebraska that contain rich aquifers underground.2 However, even the newly amended route was not enough of a change to satisfy environmental activists.

It seems increasingly clear that these environmental activists will continue to oppose the construction of new pipelines to transport oil and gas resources. In order to manage these types of public policy problems in the pipeline debate, companies and individuals must demonstrate that they care deeply about the environment, and that they are investing significant amounts of company resources to reduce potential impacts. While these efforts are unlikely to sway all environmentalist critics, concerns about the environment are heavily impacting public policy decision makers as they continue the discussion regarding pipelines.

Coordinating Multiple Jurisdictions: In addition to environmental concerns, pipeline proposals also have to contend with crossing multiple jurisdictions and coordinating multiple governmental actors at once. The Northern Gateway proposal between Alberta and British Colombia is one example of the difficulty in managing multiple jurisdictions to gain approval. While the government of Alberta is supportive of the pipeline, BC Premier Christy Clark has enumerated five preconditions that Northern Gateway must meet before it will receive approval from Victoria.3 These preconditions cover environmental review requirements, new spill response measures put in place by Enbridge, and a demand that British Colombians receive a “fair share” of revenue resources—all without explaining specific details of these preconditions. Add in the requirements that Enbridge consult with Aboriginal organizations and regulatory bodies, such as the National Energy Board from the federal government, the sheer number of participants that need to be coordinated in order to achieve success is daunting. These types of challenges in coordinating multiple stakeholders are prevalent in any pipeline that crosses borders, and it adds considerable complexity to any public policy debate.

Exporting Resources to World Markets: Driving all of these debates about the need for new pipelines is the desire to export Canadian resources to access new markets. As a single example, Premier Alison Redford of Alberta notes that the low price of oil in North America cost her government up to $1 billion in lost royalties in 2012 alone.4 This is just a single government within Canada reporting losses, and does not account for lost potential from private sector companies, other Canadian governments, or other actors linked to the success of the oil and gas sector. This lost potential, caused by being so heavily linked into the North American market, is a key driver of the policy debate on pipelines, and helps to animate why pipelines are so important for the future of the Canadian oil and gas industry. If resources could be shipped to new markets, Canadians could receive much higher prices for their resources.

These are just three examples of public policies that affect pipeline debates. In order to have a constructive debate about pipelines, it is essential that decision makers develop evidence-based policy to allow the rewards of natural resources to be felt across Canadian and American societies. Oil and gas professionals can be a key voice in these debates that call for good public policy being formulated. By acting as this key voice in debates, the discussion around pipelines can finally become less perplexing.

Keystone XL even impacted the 2012 Presidential race in American politics, as President Barack Obama and challenger Mitt Romney sparred over whether or not to approve the pipeline.

1. “Thousands Protest at the White House Against Keystone XL Pipeline,” article by Suzanne Goldberg at the Guardian, published on November 7, 2011.

2. “Keystone Pipeline Builder Proposes Changing Nebraska Route,” article by Kim Murphy for the Los Angeles Times, published on Nov. 15, 2011.

3. “B.C. Seeks ‘Fair Share in new Gateway Pipeline Deal,” CBC News Article published on July 23, 2012.

4. “Premier’s Address to Albertans,” delivered by Premier Alison Redford on January 24, 2013.