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North American Oil

Conclusion: Canada and the provinces need to tax imports and exports of oil shipped by tankers in order to build a reserve fund of at least $20 billion, so that the taxpayers don't end up paying for a major spill.

Points to Ponder on Alberta-BC Trade Dispute

Taxation

1. BC has the right to tax the Trans Mountain Pipeline into bankruptcy if it wants to.

a. All provinces have the right to tax most land and property.

According to s. 92(2) of the Constitution Act of Canada

In each Province the Legislature may exclusively make Laws in relation to Matters coming within the Classes of Subjects next hereinafter enumerated; that is to say,

(2) Direct Taxation within the Province in order to the raising of a Revenue for Provincial Purposes.

b. Any land or property belonging to Canada may not be taxed by the provinces.

c. The Trans Mountain Pipeline and most of the property under it does not belong to Canada.

d. BC can tax pipelines, railways, terminals, and ports and anything else they want, as long as it's not situated on federal lands.

Cost of Oil Spill Cleanups

BC owns the land under the water between Vancouver Island, Haida Gwaii, other islands and the mainland, as well as the beaches on the shore of all the islands and the mainland, except the shores that face the Pacific ocean - e.g., the west coast of Vancouver Island.

In warm waters such as the Gulf of Mexico, there are oil-eating organisms that break down oil. These organisms can't survive in cold water, so the oil persists.

The cost of an oil spill cleanup is generally tax-deductible to the corporation paying the costs. This is why fines are usually also levied, to cover the cost of tax which is lost to the government (and taxpayers) by the tax deduction.

Below are 3 oil spills for which we could find cleanup costs.

Deepwater Horizon - 2010 oil spill Gulf of Mexico

- Estimated 4.9 million barrels of oil was spilled from an oil rig.

- Some oil floated, some was suspended in the water, and some fell to the ocean floor.

- Cost of cleanup and fines was $62 billion US, paid by BP.

Exxon Valdez - 1989 oil spill off coast of Alaska

- 250,000 barrels of oil was spilled from a ruptured tanker

- Lots of oil is still on the ocean floor

- Cost of cleanup, resident compensation and fines was $3.8 billion US paid by Exxon.

- The cost of cleanup would be approximately $7 billion US in 2017 dollars.

Amoco Cadiz - 1978 oil spill off Atlantic coast of France

- 1.26 million barrels of light crude oil were spilled when the tanker was broken into pieces in a storm

- Most of the oil is now gone, either evaporated or broken up by storms.

- Cost of cleanup was $85.2 million US. It was paid by the government of France, and later recovered from Amoco after a court case.

- Cost of cleanup today would be $304 million US.

Oil Tankers Using Vancouver BC Harbour

- All oil tankers using Vancouver harbour are double-hulled.

- Because of restrictions in the harbour, the freighters are limited to 120,000 tonnes capacity.

- The freighters can only be filled to 80% of their capacity, because of the depth of the harbour.

- The maximum oil that can be carried in these tankers is 630,000 barrels.

Who Is Liable For Oil Spills in Canada?

On Land:

- Pipeline:

- Oil spills must be cleaned up by the pipeline company.

- Every pipeline company must have $1 billion available for cleanup.

- Pipeline spills are smaller and easier to cleanup than a tanker spill.

- Pipeline companies are financially secure, probably will not go bankrupt paying for cleanups and liability.

- Railways:

- Oil spills must be cleaned up by the railway company.

- They have to have insurance, but the amount of insurance is not specified.

- CN and CP are probably financially secure enough that they would not go bankrupt paying for cleanups and liability.

- Small railway companies may not be financially secure enough to cover cleanups and liability.

- The MMA Railway responsible for the Lac-Mégantic accident only had $25 million insurance, so MMA went bankrupt.

- Taxpayers had to pay everything over the $25 million, less proceeds of the bankruptcy. Costs and lawsuits are still ongoing.

- Terminals:

- The terminal operators are responsible for any oil spills caused by the loading or unloading process.

- A crew is onsite for these operations, so spills are usually small.

- At the Westridge Terminal in Burnaby BC, a boom is in place while loading, and would contain any oil spill.

- Oil Tankers:

- Ship owners bear the most responsibility.

- Canadian fund - Ship-source Oil Pollution Fund (SOPF). See Transport Canada Marine liability and compensation: oil spills.

- An international fund (IOPC) has about $1.4 billion Cdn in it.

- The government of Canada, when a Canadian pilot is on the ship, is probably liable.

- If a spill occurring in Canadian waters drifted into US waters, Canada would probably be liable (there are many BC/Canada/US agreements regarding management of navigable waters).

- Tug companies are liable if the ship is under their partial control, but they probably have limited financial resources.

- The cost of an oil spill cleanup could easily be $22 billion Cdn, judging by the Exxon Valdez costs.

- It could cost Canadian taxpayers over $20 billion Cdn.

- Canada has the longest coastline in the world, and has coasts on 3 oceans. The Northwest Passage will probably be a major shipping route in the future.

- Obviously, BC and Canada need to put aside more financial resources to deal with an oil spill from a tanker or an offshore drilling rig.

Why Do We Export Oil Out of North America?

Oil Production - barrels per day (2016 estimates from CIA World Factbook)

- US 8.9 million (actual Jan 2018 10 million)

- Canada 3.7 million

- Mexico 2.2 million

- Total 14.8 million

Refined Petroleum Products Consumption - barrels per day (2016 estimates from CIA World Factbook)

- US 19.7 million

- Canada 2.4 million

- Mexico 2.0 million

- Total 24.1 million

Refined Petroleum Products Production - barrels per day (2016 estimates from CIA World Factbook)

- US 20 million

- Canada 1.9 million

- Mexico 1.0 million

- Total 22.9 million

Imports Into North America Needed to Satisfy Demand (2016)

- 8.1 million barrels of oil per day

- 1.2 million barrels of refined petroleum products per day

Any oil that is exported from North America must then be replaced by importing oil back into North America.

It would reduce the chance of a major tanker oil spill if oil was not exported by tanker in the first place.

Data from CIA World Factbook - 2016 to 2018 estimates - Country Comparisons

Crude Oil Production

Crude Oil Imports

Crude Oil Exports

Refined Petroleum Products Production

Refined Petroleum Products Consumption

Federal and Provincial Rights Under the Canadian Constitution Act

BC has the exclusive right to:

1. tax anything in BC, except for federal property

2. regulate the removal of trees

3. regulate any excavation or tunneling

The provinces have exclusive powers to make laws under the Constitution, including in these 5 categories that would pertain to pipelines, railways, etc:

- s. 92(2) taxation

- s. 92(5) management of public lands and timber and wood thereon

- s. 92(10) local works and undertakings, except for certain classes

- s. 92(13) property and civil rights

- s. 92(15) imposition of punishment by fines, penalty or imprisonment

S. 92A and the Sixth Schedule explain the powers of the provinces related to non-renewable natural resources and forestry resources.

The federal government cannot infringe on these powers, and the Supreme Court cannot change these powers. The Supreme Court can interpret unclear parts of the Constitution, such as s. 92(10)(a), (b) and (c).

The federal government has exclusive powers to make laws under the Constitution, including in these categories:

- s. 91(2) The regulation of trade and commerce

- s. 91(24) Indians, and Lands reserved for the Indians

The federal government has the right by default to make laws in the following categories. Any disagreement with the provinces would be decided by the Supreme Court of Canada.

- s. 92(10)(a), (b) and (c) - has not been used since 1961, as per The "Declaratory Power" in the Canadian Constitution by Claude Bélanger, Marianopolis College.

- s. 91 for the Peace, Order and good Government of Canada

- s. 91 in relation to matters not assigned exclusively to the provinces

Anything argued under the last 2 points above has resulted in a division of responsibility between the provinces and Canada.

The only way to change the exclusive powers assigned by the Constitution is by agreement between the federal and provincial governments.

If the federal government invoked s. 92(10)(a), (b) or (c), this would cause a huge constitutional fight, with all provinces against the federal government. If they invoke this, it would also give them the power and opportunity to regulate all the oil and gas works in Canada. Return to the National Energy Program?

The only way for this to be resolved without an extended court battle is by agreement between the provinces.

Oil Refining in Canada

Oil Sands Production - When Started

- 1964 Esso Cold Lake

- 1967 Suncor

- 1978 Syncrude

Refineries

- By 1980, the oil companies knew there was going to be large production of oil from the oil sands

- Since 1980, 23 refineries have been shut down in Canada

- Capacity of shut-down refineries was 1.04 million barrels per day

- In 2016, 1.2 million barrels of refined products per day were needed to satisfy North American demand

- The reason the oil companies want to export oil is either because of:

- lack of long range planning, or

- there is, or once was, more profit in producing the oil than in refining it.

- The refining methods of many other countries are not as environmentally friendly as those in Canada.

Canada probably has the largest oil and gas reserves in the world. These assets should be managed to benefit all Canadians.

Revised: October 26, 2023