Pipes are seen at the Kinder Morgan Trans Mountain facility in Edmonton, Alta., Thursday, April 6, 2017. A spokesman for refiners in Western Canada says any move by the Alberta government to shut off the flow of refined fuel to B.C. could negatively affect the province’s four refineries in the Edmonton area. THE CANADIAN PRESS/Jonathan Hayward

Alberta move to cut energy shipments expected to hit more than B.C. fuel prices

A spokesman for refiners in Western Canada says any move to shut off the flow of refined fuel to B.C. could negatively affect refineries in the Edmonton area

Economic damage will extend far beyond the fuel budgets of British Columbia residents if Alberta successfully enacts a bill allowing it to restrict oil and gas exports, observers say.

The Bill 12 legislation and the trade war escalation it might spark would damage Alberta and Canadian businesses and citizens as well as those in British Columbia, warned Greg D’Avignon, CEO of the Business Council of B.C.

“By punishing British Columbia because of the actions of the government of the day — while it might feel good and I completely understand it — it actually has consequences people aren’t thinking about for the citizens of Alberta and our country as a whole,” he said Tuesday.

Related: B.C. ready to fight back against Alberta fuel restrictions

On Monday, Alberta introduced legislation that would allow the energy minister to use export permits to control how much and what products truckers, pipeline companies and rail operators can ship.

The province says it might use the legislation to fire back at B.C. if it continues to block the Trans Mountain pipeline expansion in the courts. The dispute is headed for a showdown on May 31, the date on which proponent Kinder Morgan Canada Ltd. has said it might cancel the $7.4-billion project unless it is convinced it will be allowed to proceed to completion.

Related: New Alberta law would allow province to restrict flow of oil and gas

D’Avignon pointed out that Alberta and B.C. have the most integrated economies in Canada and, if fuel costs rise in B.C., it will affect the cost of trade goods going to Alberta and the cost to ship Alberta products such as grain from West Coast ports.

He said it could also affect the availability of B.C. residents to work in Alberta’s oilpatch and B.C. exports of electricity and natural gas to Alberta, while possibly reducing federal income taxes paid by B.C. residents.

Alberta’s proposed legislation and B.C.’s response are the latest manoeuvres in the escalating dispute over the $7.4-billion Trans Mountain pipeline expansion that runs from Edmonton to Burnaby, B.C. The federal and Alberta governments support the project, while B.C. opposes it, saying it is defending its coast from a potentially catastrophic oil products spill.

On Tuesday, the Saskatchewan government joined the fray, promising to also pass legislation allowing it to interrupt energy shipments to B.C.

The Alberta government said Monday it might restrict shipments on the existing 300,000-barrel-per-day Trans Mountain pipeline to diluted bitumen, thus displacing the refined products and light oil it carries.

The move would likely push fuel costs higher in B.C. but would also hurt Alberta’s four refineries, said Brian Ahearn, Western Canada vice-president for the Canadian Fuels Association, which represents the refining industry.

He said about 25 per cent of the gasoline, diesel, jet fuel and other products produced at the Edmonton-area refineries goes to B.C., a total of 80,000 to 100,000 barrels per day — the pipeline carries about 45,000 to 50,000 barrels per day and the rest is shipped by train or truck.

“Directionally, we are supportive of the government’s overall objective and the reason is we are a supporter of the Trans Mountain pipeline expansion,” Ahearn said.

“(But) if there’s curtailment all the way to the point of discontinuing that flow of product … that utilization taken away from the refineries would have a pretty negative effect on the refineries.”

Refiners would be forced to find alternative markets, accept lower prices, or run operations at less than optimum capacity to restrict output, he said.

Tighter supplies of gasoline and diesel in B.C. would likely drive up prices in B.C.’s Lower Mainland by about 10 cents per litre, said fuel market analyst Michael Ervin, senior vice-president at the Kent Group Ltd.

The estimate is lower than other experts have estimated, but he said it’s high enough that refiners on the U.S. West Coast or possibly even Asia Pacific would be motivated to overcome logistical hurdles and start supplying the market.

In Alberta, meanwhile, the glut of gasoline and diesel would likely result in cheaper prices for motorists, especially in the Edmonton area, he said.

Ervin said cutting off light oil supplies through Trans Mountain would hurt Alberta-based Parkland Fuels Corp., which bought the 55,000-barrel-per-day Burnaby refinery last year and has enjoyed good margins thanks to its access to low-cost Alberta feedstock.

Imperial Oil Ltd. spokesman Jon Harding said Tuesday the Calgary-based company, which ships refined products on Trans Mountain, “understands the rationale” for Bill 12 and will comply if it’s passed, but hopes a solution can be found that negates the need for its use.

Suncor Energy Inc., meanwhile, has a “vast logistics network” and would look to send refined product out of Edmonton to other markets if needed, said spokeswoman Sneh Seetal.

Andrew Leach, an associate professor with the University of Alberta’s business school, said any economic impact of an Alberta energy export ban would be brief because he doesn’t think the province’s legislation is constitutional.

He suggested any attempts to implement a ban would be swiftly and successfully attacked by interested parties in court.

Related: David Eby calls Alberta’s ‘bluff’ on pipeline restrictions

Companies in this story: (TSX:KML, TSX:PKI, TSX:IMO, TSX:SU)

Dan Healing, The Canadian Press

Like us on Facebook and follow us on Twitter.

Just Posted

B.C. BUDGET: Surplus $374 million after bailouts of BC Hydro, ICBC

Growth projected stronger in 2020, Finance Minister Carole James says

First residents move into Nuxalk Nation’s tiny homes

Four of the tiny homes are now complete and residents have moved in

Province announces $100-million grant funding for Northwest communities

The Northern Capital and Planning Grant will go to four regional districts and 22 municipalities

All Native Basketball Tournament Day 5: Recap

Highlights and results from day 5 at the All Native Tournament

Students give two thumbs up to no more B.C. student loan interest

Eliminating the loan interest charges could save the average graduate $2,300 over 10 years

Ontario man accused of killing 11-year-old daughter dies in hospital, police say

Roopesh Rajkumar had been hospitalized with what police described as a self-inflicted gunshot wound

Manitoba ‘pauses’ link with ex-B.C. premier Gordon Campbell after allegations

Campbell had been hired to review two major hydro projects

Heritage minute features Japanese-Canadian baseball team, internment

The Vancouver Asahi baseball team won various championships across the Pacific Northwest

UPDATE: Woman, off-duty cop in critical condition after stabbing outside B.C. elementary school

The officer was interceding in an alleged assault when he and the woman were stabbed

$10-a-day child care not in 2019 budget, but advocate not irked

Sharon Gregson with the Coalition of Child Care Advocates of B.C. says NDP on track to deliver promise

B.C. Seniors Advocate questions labour shortage in care homes

Are there really no workers, or are care aide wages too low?

B.C. business groups worry about looming economic decline in wake of NDP budget

The party’s second government budget focused on plenty of spending, business advocates say

Man injured in police shooting near Nelson has died: B.C. police watchdog

The death follows an incident in Bonnington on Feb. 13

Most Read