‘Ready and prepared to turn off the taps’: Notley issues stark warning to B.C. as pipeline fight escalates

CALGARY – Alberta Premier Rachel Notley threatened to cut off oil shipments to British Columbia “very quickly” on Wednesday, as her government passed its controversial new law that grants the government sweeping new powers over oil and gas shipments.

Notley said she would use the law, first introduced last month and passed Wednesday, if construction does not begin on Kinder Morgan Canada’s $7.4-billion Trans Mountain pipeline expansion soon.

“Albertans, British Columbians and the rest of Canada should understand that if the path forward for the pipeline through B.C. is not settled soon, I am ready and prepared to turn off the taps,” Notley said Wednesday.

The comments are the most direct threat Notley has made regarding the province’s new powers to cut off all oil shipments to B.C. for that province’s opposition to the pipeline.

The law is necessary as all export pipelines leaving Alberta are full and that has resulted in Canadian oil being heavily discounted relative to U.S. and global oil benchmarks, the Alberta Premier said. “Alberta has the right to act in the public interest to reduce the cost to the treasury.”

Canadian heavy oil traded at a discount of $19.19 per barrel on average Tuesday, according to GMP FirstEnergy. Scotiabank estimates that the Canadian economy would lose $15.6 billion this year if heavy oil prices were discounted by US$24 per barrel, and called the situation a “self-inflicted wound” in a report in February.

Notley cited that economic impact when she indicated Wednesday that a move to cut off all shipments to B.C. could be imminent.

“I’m not going to map out our specific schedule on this. It could happen very quickly. It could happen in 24 hours. It could happen over a longer period of time,” Notley said in response to questions about the timing of an oil flow restriction.

If Alberta does turn off the taps soon, the result would be an immediate increase of 30 to 45 cents per litre in Vancouver, GasBuddy senior analyst Dan McTeague said. The current average wholesale price of gasoline in the Vancouver area is $1.56 per litre, he said.

The additional costs would bring the cost to fill up a typical 60-litre-tank car in the area up to $120.

“The numbers clearly show that the market is extremely sensitive to these kinds of disruptions,” McTeague said, noting the existing Trans Mountain pipeline and refineries in Edmonton currently supply most of the oil used in Vancouver and in cities like Kamloops and Kelowna.

When the Parkland Fuel Corp. refinery in Burnaby, which is connected to the existing Trans Mountain pipeline, was under maintenance earlier this year, McTeague said, “Vancouver was importing 900,000 litres of gasoline a month.”

B.C. Premier John Horgan did not respond to a request for comment Wednesday on Notley’s plans to turn off the taps, but issued a press release in response to Finance Minister Bill Morneau’s announcement earlier Wednesday that it would indemnify Kinder Morgan for any additional costs relating to the B.C. government’s opposition to the project.

“The federal finance minister is trying to use our government as an excuse, as the federal government puts taxpayer money on the line to backstop risks to private investors, while completely ignoring the risks to B.C.,” Horgan said.

“The fact is, we’ve been issuing permits in a fair and timely manner, and have proposed new regulations that are now referred to court to confirm our jurisdiction,” he said.

Environmental groups sided with the B.C. government, noting that political leaders were grasping at straws in willingness to bail out pipeline company.

“It’s fiscally irresponsible and ignores the growing protests to the project and the federal government’s own promises on Indigenous reconciliation,” Tzeporah Berman, campaigns and communications director, Stand.earth said in a statement.

Business groups in B.C. blasted Horgan for his opposition to the pipeline and said they are preparing for costs to escalate as trucking companies implement fuel surcharges.

“I think Premier Notley is acting out of frustration and desperation and she’s taking the only path that seems to be available to her,” said Chris Gardner, president of the Independent Contractors and Businesses Association of British Columbia.

He believes Horgan is responsible for the situation, calling the premier’s actions toward Kinder Morgan “irresponsible” and “reckless.”

At this point, however, he said his member companies have not been stocking up on gasoline and diesel ahead of a potential restriction from Alberta.

“I don’t think anyone is, at this point, making those kinds of preparations. Given that we seem to be at an impasse, I think it’s going to become an issue that’s going to be top of mind at businesses in remote communities,” Gardner said.

• Email: gmorgan@nationalpost.com | Twitter: geoffreymorgan