As promised, here is the full version of my 20 minute interview with Ian Anderson, president of Kinder Morgan Canada. We spoke in Vancouver on Thursday, Feb. 12.
Jennifer Moreau: Can we start with just a brief review of the project, where it's at now and what the next steps are?
Ian Anderson: We're about halfway through the NEB process. We're in the midst of responding to our second round of information requests. Those get filed next Wednesday. We have about 5,600 of those to respond to by next Wednesday. After that, there will be a couple of other small rounds of information requests related to Transport Canada's TERMPOL report for some late intervenors participating and the NEB has another round, but really the next major, I would say milestone will be intervenors and their evidence will be presented to the board early this summer. Through the period of early summer into the summer, we're going to be examining that. So other intervenors will be asking question of each other to fill out the record for the board. Then we'll go into the fall where we'll have oral arguments presented to the board for a decision in January at the board.
JM: With the last round of information requests, there was some criticism from the City of Burnaby, Vancouver, the provincial government and some intervenors that the questions weren't answered fully. Can participants in the hearing expect more fulsome response in the second round?
IA: The short answer is yes. The longer answer is that the process itself is defined by the board. So the board defines the scope of the issues that are relevant to their consideration. We then have to work within that. So we need to respect the scope that the board has defined. During the first round, it was up to us to kind of judge that. So we would get a question, it was up to us to judge its relevance related to the scope and respond accordingly. All parties had the opportunity to file motions, as you know, to express their concern about an answer that maybe was or wasn't fully addressed, and the board ruled on that, which provided for us further clarity around scope. So the second round, what we found is there are still questions that are being asked that, in our view, aren't relevant to the scope before the board. Having said that, we're doing I think a more fulsome job of responding to as much as we possibly can within that scope, and I think intervenors will find that as they see the answers. The other important thing to say to that point, Jennifer, is intervenors' questions through the NEB process is not the only way they are going to get answers from us. We're dealing directly with communities on their local issues, their local concerns that may not be relevant to the NEB filing, but may still be relevant to our relationship with the community. We're in an ongoing exchange of information with communities, outside of the NEB process.
JM: I wanted to bring up something the City of Burnaby has been quite critical of lately, it's the firm service fees being used to fund the development costs of the project, and the city has concerns that money is being used to pay for the advertising costs for the pipeline and that the firm service fees are going to drive up crude costs, which will eventually get passed to the consumer, so it's almost like a consumer fee to help pay for the advertising. What do you think about that?
IA: There will be no correlation between what our shippers have agreed to pay for service on our pipeline, to access the dock facilities, to export crude, and local prices and local gasoline prices. Those are globally set, based on global markets and local taxes, and the fact our shippers have agreed to pay more to us - we're not keeping that money. From Day 1, we said if you're paying an extra charge to access our dock, we're not going to keep that. Let's talk about how it gets used. And unanimously, shippers supported - and CAPP (the Canadian Association of Petroleum Producers) supported and the NEB - the use of those funds to help develop an expansion, which is what they all want, so it was as simple as that. So those funds, they only really go to fund that development to an extent. We're spending more in development than we're collecting in firm service fees. So we're at risk for that, but there's no correlation between firm service fees that shippers are paying and the price of gasoline at the pump.
JM: Are you confident the pipeline project will get approval from the NEB?
IA: I am. I fully expect that approval to come with conditions, as did Northern Gateway. We're very attuned to what we expect those conditions to be and are working hard to reduce the number of them. But, we've made commitments throughout the process. We made a filing with the National Energy Board a couple of weeks ago that listed over 400 commitments that we made through the course of examination that we will have to follow through on. Whether or not those formally come back to us as conditions of the board, or they just become commitments of us, is to be determined. But we will have conditions to satisfy and steps to go through further beyond the NEB review, and I fully expect we'll have lots of conditions to meet.
JM: Briefly, what are the conditions you're expecting?
IA: I can give you examples of where I think conditions will be. For example, there will be some final routing decision to be determined in some areas that will need conditions. There will likely be more work on natural habitat and species impact of the project. For example, the south coast resident whale population and efforts we are going to make to work collectively with the port and the aquarium and others, to understand their habitat and health better. There will be conditions around the development of the next version of the development of our emergency response plan that has local input, that has stakeholder consultation built into it. There will likely be conditions around how we are going to cross some rivers or highways and so forth, which methods of construction we use in some places, where valving might be located. There's a whole range of things we expect. I think there will be conditions around completion of detailed engineering and design, which is right now in its initial stages.
JM: Do you think the project has met the five conditions (that B.C. said must be met for the province to support any heavy oil projects)?
IA: We haven't yet. We're still working on it.
JM: What's left on the to-do list?
IA: All of them. If you like, the first condition is the review of the NEB and the environmental review that we are undertaking. The next two are related to both terrestrial and marine response plans and capabilities. We're working on those. The fourth is First Nations involvement and participation, we're working on that, and the fifth is fair share of benefits. We're working on that. So my objective is later this year, we'll be in a position with the province to publicly be able to say we've satisfied them, but we're still working.
JM: In November, we saw quite a bit of unrest and protesting on Burnaby Mountain, and that was only for survey work. If you are confident this project will get approval from the NEB, what do you expect will happen when you actually start building the pipeline?
IA: I think there will be pockets where there will be opposition stronger than elsewhere. I think we are confident that we can have a construction and operational plan to ensure that everything happens safely and in accordance with what cities and municipalities would want us to do in terms of local construction impacts, the impact on residents and businesses and so forth, to minimize those impacts. I have no doubt that there's going to be pockets where opposing voices are going to be louder than elsewhere, and we'll deal with those on a local basis. Between now and when I would project starting construction, which is roughly the second quarter of 2016, a little over a year from now, we still have lots of work to do in those areas where opposing voices are loudest, where the views perhaps could lead to conflict when we start construction. So we still have lots of work to do, and we're still doing that. So the NEB process isn't all we're doing. We are still working on the ground, in communities to respond to concerns, and obviously we'd very much like to be talking directly to the City of Burnaby more about the city's concerns and observations so we can plan accordingly.
JM: Do you think there's any hope in winning over the City of Burnaby or some of the residents, because Burnaby seems to be ground zero for this project and a hotbed of anti-pipeline activity.
IA: It's hard to equate what happened on Burnaby Mountain and the protest activity with the views of Burnaby. The Burnaby Mountain protest was an aggregation of multiple voices, everything from climate change activists, to large multinational environmental organizations, to local opposition groups, to mothers and children who were interested and concerned. There's a wide spectrum of voices there that I don't think we take as representative of Burnaby's views. We've done lots of work within Burnaby, and there are a good number of places in Burnaby that we have support, that we're working cooperatively with and I think we'll continue to do that. At the end of the day, what's the percentage of Burnaby residents that support us versus oppose us, I guess we'll find out in a year or so.
JM: Oil prices have dropped considerably in recent weeks, and I'm wondering if that affects the project at all.
IA: Not at all. We still have the full support of our shippers, we still have long-term contracts in place, oil sands production is still increasing, perhaps not at the rates it was in 2015/16 but these are long-term investments. The producing community knows there's going to be short-term increases and decreases in volatility in price. And they look past that, and they have with our project.
JM: So the producing community just considers this something that will correct itself, that the prices will go back up?
IA: The producing community knows the prices will always be volatile. They will always be the subjects of supply-demand considerations, geo-political considerations, emerging technologies that bring different supplies into the mix, and they account for that in the commitments they are making the pipelines. The commitments to us have not decreased to us whatsoever.
JM: You also mentioned climate change, and that's something I wanted to bring up, because for many of the opponents to the project I've interviewed, climate change is a front-of-mind concern for them. We have the Intergovernmental Panel on Climate Change saying we need to leave fossil fuels in the ground to prevent a two-degree warming of the planet's atmosphere. What are your thoughts on that, given you're proposing to nearly triple capacity on the Trans Mountain line?
IA: The Trans Mountain pipeline is a small component of the overall Canadian production, the overall global demand for fossil fuels, of which oil is a part. And the demands that we're looking to satisfy are real and present today, markets looking to be accessed, countries looking to have access to Canadian production. And over the next two to three decades, that's not going to change. The globe's reliance on fossil fuels is not going to change so dramatically as to make any current pipeline project redundant. And as far as the climate change aspirations of those who use it as a reason to oppose, we're not of different mind. We acknowledge that as a planet, we need to understand better the impacts of fossil fuel development and use on climate change, establish policies in order to minimize those impacts and improve environmental footprints, etc. and I think there's no better way to develop the technologies that are going to get us there from here than off the riches of the resource development we have. Nobody invests more in clean technology solutions than the oil and gas sector does. And that's where the prosperity lies that's going to create that next generation of energy, and I think we as a country - with high environmental standards, rigorous regulations and legislation - there's no better place in the world to encourage that kind of technology development off of resources of today than Canada.
JM: Do you have kids at all or grandkids?
IA: I do.
JM: Do you ever worry at all about what kind of planet they may inherit?
IA: I think that my son will inherit a planet that continues to progress and continues to change, and continues to evolve and hopefully continues to improve, and I hope that geo-political and government actions don't get in the way of that. And in fact, they help harvest that, and I think he will have a bright future ahead, because I think the future, everybody in our industry respects is necessary, and like I say, that the prosperity necessary to create those technologies comes from somewhere, and in this country, we are a natural-resource rich country.
JM: Is there anything else you'd like to add?
IA: The only thing you didn't touch on that I will touch on is some of the coverage that our emergency response plan disclosure has gotten. The NEB made it very clear that our existing emergency response plans were not in scope for consideration of (the) expansion. Having said that, what we volunteered to do was to file redacted versions of that response plan, which we did, and we have responded to some questions related to it as appropriate with intervenors that have asked. The redactions were made were for two simple purposes: one is to protect the privacy of individuals and companies, two was not to disclose points along the pipeline where we would have security concerns, so where valve spacing is, where control points and where key access points are. Those are very real security consideration for us that we didn't disclose, but neither of those redactions takes away from the rigour and robustness of the plan. And most importantly, what I mentioned earlier, it's the new plan that matters. What does the emergency response plan look like for an expanded system? How much capacity do we have? Where is it located? How many meters of boom do we have? How many boats do we have? How many First Nations do we have trained to respond to incidents in their territory should they ever occur? That's what's important, and that's what we're working towards. We continue to talk to the province about that. And I think the other point to it is, to be clear, municipalities, communities where we operate and the province, they all have the complete plan.
JM: Do you know for sure that the province of B.C. has it?
IA: Absolutely.
JM: What do you think was going on there? Transport Canada has a copy. Western Canada Marine Response Corporation has a copy. They said they've never been asked (for one) by the province, but Western Canada Marine Response Corporation also said they would be kind of surprised if the province didn't have it, and you're saying for sure you know they have it, so why are they insisting on bringing it through the NEB process to make it public. What was going on there?
IA: I don't know exactly what was going on. We continue to talk to the province about that. I think there's a difference of opinion in what needs to be public and what needs to be discussed and planned moving forward. And we're looking to resolve those differences of view.
