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Sensibly Rational Policies to deal with Environmental Risks

Appeared in the Vancouver Sun, Trail Daily Times and New Brunswick Telegraph-Journal
Authors:
Release Date: August 1, 2012

BC Premier Christy Clark’s demand for payments in return for permission to ship oil across BC lands is ill advised. It does not matter whether this payment takes the form of a claim on Alberta’s royalties or is based on the amount of oil flowing through the pipe; it is equivalent to a tax on trade and which, like tariffs on imports from abroad, results in high administrative costs, raises consumer prices and lowers living standards of all Canadians. It is rightly prohibited by federal legislation.

One way to extract money from the proposed pipeline that cannot be prevented by federal legislation involves using provincial regulation to delay indefinitely the construction of the pipeline unless payments are agreed to. If the BC government were to adopt this policy, it would almost certainly invite retaliation from other provinces on the same grounds used by BC. All shipments using roads, rail and air, like pipelines, carry the risk of accidental environmental damage justifying the issuance of use permits unless payments for such damages are agreed to by the users of the facilities.

However, the most important objection to the BC demands is that they do nothing to address the public’s real concerns over the potentially high costs of oil spills on the environment and taxpayers: Tolls would not reduce the likelihood of accidental spills from their presently feared levels.

Currently, operators of pipelines are legally required to pay for all clean-up operations. To reassure British Columbians that these potential costs will be met, the government could insist on setting minimum levels of insurance coverage, much as it does for private automobile insurance. It could also insist on establishing a trust-fund to be available in the case clean-up costs exceed what is covered by the insurance.

But for some vocal British Columbians, setting aside monies to clean-up any accidental spills is not enough. They also experience a psychological loss from the knowledge that it always takes some time for nature to return to its original state after an oil spill. To compensate the public for these psychological costs, the BC government could impose an extra fine on the pipeline operator by an amount equal to some percent of the objective clean-up costs for every accidental spill.

These types of policies raise the costs of operating pipelines and encourage the adoption of costly and presently unprofitable measures to reduce the likelihood and severity of oil spills. Among the measures that pipeline companies could adopt the use of thicker or double-walled pipes, the installment of pressure gauges with automatic shut-off valves at closer intervals, the maintenance of facilities to allow quicker and easier access to accident sites and the stationing of repair tools and materials in many more locations along the line.

The incidence and severity of tanker accidents could be reduced similarly by the use of triple-hulled ships and most easily, the propulsion of such ships only by several powerful tugs that push them through treacherous waters at mandated low and safe maximum speeds and only in the absence of dangerous weather conditions.

But no measures, no matter how expensive, will guarantee no oil will be spilled, as the small minority of self-appointed guardians of the environment and their allies in the media are fond of pointing out. Only the outright prohibition of all oil transports will end all risks.

However, the majority of British Columbians are sensibly rational on this issue, realizing that without ways to transport oil and gas, the incomes of Canadians would be greatly reduced until, at some very distant future, less risky and reasonably priced alternative sources of energy are available.

Politicians should note that until this distant point in the future, most British Columbians will vote for politicians who allow them to keep their homes warm, their cars running, and store shelves stocked, while ensuring that the risks of environment damage are as low as possible and determined by the wise government incentives they have created.



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