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Right of Passage

Danielle Smith asks whether potential deal for Northern Gateway could set an unfortunate precedent for the energy industry

Tim Querengesser is senior editor with Alberta Venture. Email Tim

Nov 21, 2013

by Tim Querengesser

The Wildrose speaks oil and gas. Using technical lingo and bringing a stable of Wildrose MLAs with hands-on energy experience with her, party leader Danielle Smith repeatedly underlined the point Thursday to a room full of industry executives at the 2013 Energy Services Symposium in Edmonton. But aside from the political gains Smith tried to make, she raised an interesting question for national pipeline politics. It’s one those industry executives are clearly fretting over.

Two weeks ago, negotiations between Alberta Premier Alison Redford and B.C. Premier Christy Clark ended with a framework deal that could see Clark soften B.C.’s opposition to the Northern Gateway pipeline proposal – and the province’s infamous ‘five conditions’ for approving it. The pipeline would deliver Alberta crude to tidewater and thus international markets, and potentially break Alberta’s so-called bitumen bubble, which sees its geographically limited ability to deliver crude oil to markets result in that oil trading at a discount. But B.C., under Clark, has signalled that it, too, must reap significant economic benefit from the project if it goes ahead — thus those conditions. And that’s where it gets interesting.

Smith asked what that will happen to the oil price that Alberta producers can expect as a result of Clark’s conditions. In particular, she zeroed in on B.C. being offered the provision to negotiate with industry and other players for “right of passage” fees, specifically for oil and gas, as the resource flows through the province.

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“This is unprecedented,” Smith said, questioning whether the other three new pipeline project proposals on the table, which will have to flow through several other jurisdictions, will now be affected by right of passage politics. “Resources are shipped through provinces every day … [but] no province has ever singled out one of these resources for special tax treatment for right of passage to market,” Smith said.

“We have to ask if the precedent from BC is set [for] the other pipelines. What amount of that barrel of oil [price] will be left?”

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