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Leave the Pipeline Dreamin' to Western Canadians

All the talk recently about the Chinese building a pipeline through British Columbia is what most threatens the project's future. It's also an indication that the private sector does not get it. The pipeline will only be built if Albertans, British Columbians and B.C. First Nations make a deal.

Talk recently about Chinese building a pipeline through British Columbia threatens the project's future more than does any statements by First Nations leaders, Robert Redford, Greens or New Democrats.

It's also an indication that the private sector does not get it. The pipeline will only be built if Albertans, British Columbians and B.C. First Nations make a deal.

This must be an Alberta-B.C. negotiation. This is not about the federal government or regulators. And there's no room for foreigners or those financed by them such as Greenpeace, the Sierra Club or groups that are fronts from rival oil producers in Venezuela, Saudi Arabia or Russia.

It's apparent to me that some opaque "environmental groups" don't disclose their donors or real agendas and have targeted Canada's oil sands. I have written about ending foreign intervention in the regulatory process and foreigners are being excluded. This is not about what companies and their foreign customers want to do. Here is the playbook for a deal:

1. A pipeline through B.C.'s pristine territory must be built and operated with a minimum environmental impact. The pipeline should be buried, have sensors all along the way and lands post-construction should be returned to their original state. This pipeline should be leak- proof. If such safeguards add $5 or more to the cost of a barrel then so be it.

2. British Columbians must share handsomely in the profits from this Alberta oil in the form of a "transmission royalty." In electricity transmission, these are called "wheeling" fees or money paid to jurisdictions for the inconvenience, disruption and potential dangers inherent in running powers lines through their territory.

3. The First Nations' situation is a mess in B.C., thanks to the provincial and federal governments. This won't be cleaned up for decades, so generous First Nations' royalties, equivalent to similar settlements, should be placed in trust for eventual distribution to valid claimants. In addition, First Nations should have the right of first refusal on all jobs and supplier contracts involving these schemes.

4. The Canadian coast guard must supervise all foreign ships picking up or delivering oil in Canadian waters or ports and foreign boats must meet strict safety and integrity standards. The specter of crews from developing nations in rusty boats taking huge amounts of oil along British Columbia's coast and channel is frightening and unacceptable. The costs of supervision and inspection must be paid for by the sellers/buyers of the oil. This would consist of full-time inspector-captains to make sure everything, and everyone, is ship-shape. This is simply a prudent requirement that will, hopefully, insure that there will never be a Valdez event.

5. The oil port operations must also be supervised, at customer expense not taxpayer expense, to prevent dockside or loading spills like the one in China two years ago that released huge amounts of oil in a large port.

6. Railway transport of oil sands to the coast must be optimized too with the same constraints: Government, onboard inspectors must be there at all times to eliminate risk-taking, incompetence or unsafe practices. Rail port and shipping must be Canadian owned, operated and strictly regulated by government officials at customer expense.

Making British Columbians partners with Albertans in the oil sands will prevent interest groups or political aspirants from holding projects hostage. It's also the correct way to proceed. But now there is no guarantee of success.

The oil sector may take a hard line and not share their profits. So may Alberta. The feds may try to force the project. This will simply help the New Democrats win the B.C. election and turn the issue into political theatre that will last for years.

Unless the two provinces get their acts together, the best bet is to push oil sands production by rail and through existing pipelines to the U.S. Then in the fall, the U.S. election will be held and either way, the Keystone XL pipeline will be approved along an altered route. President Obama only postponed it because of politics. Two years before, he approved a bigger oil sands line than Keystone to the U.S. Midwest.

But the pipeline through British Columbia won't happen until there is a dramatic shift in attitude. Albertans must show respect and pay royalties to the people of British Columbia in return for the environmental risk and access they are being asked to give.

The days when decisions about building infrastructure of strategic importance could be left up to the private sector, or imposed by a government, are long gone in democracies like this one.

This article originally appeared in the Financial Post.

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