Get ready for higher gasoline prices and shortages in British Columbia and a supply surplus on the Prairies if Alberta Premier Jason Kenney uses a newly proclaimed law to restrict fuel exports to its western neighbour, say industry experts and court documents.
"The one wild card factor that we really can't predict is the political factor: would, in fact, the Alberta government actually put in effect, in practice, the curtailment of gasoline and diesel shipments from Alberta to the West Coast," Michael Ervin, Kent Group Ltd., senior vice-president, said Thursday.
The Preserving Canada's Economic Prosperity Act, the so-called turn-off-the taps law, was passed by the former Alberta government a year ago. Kenney's United Conservatives proclaimed it as law this week and the threat to put the squeeze on B.C. is real, said Ervin, a petroleum market expert.
"The possibility of that certainly changed, increased since Premier Kenney has been elected into office," he said in a telephone interview from Sidney, B.C.
Ervin said he expected gasoline prices in B.C. to jump by at least 10 cents per litre if Alberta started restricting fuel supplies. He said oil companies in Alberta may also feel the pinch because their B.C. customers will be cut off, creating a surplus there.
The B.C. government immediately moved to have Alberta's law declared unconstitutional with a legal challenge, claiming "the central purpose and legal effect of the act is to authorize and provide for discrimination against British Columbia in relation to exports of natural gas, crude oil and refined fuels."
An initial hearing is set for May 7 in Calgary.
An affidavit filed alongside the statement of claim outlines B.C.'s dependence on Alberta fuel products and the potential impacts of cutbacks.
"The threat of refined fuel supply shortages can have rapid price impacts," Michael Rensing, a B.C. government energy expert, says in the document.
He pointed to an anti-pipeline protest in July 2018, where demonstrators hung on lines from a bridge above Burrard Inlet in Vancouver. He said those actions had the potential to cause fuel shortages on Vancouver Island.
"They advised me that if the supply of gasoline to Vancouver Island was interrupted for even 48 hours, that could affect the ability of retail gas stations there to remain open," the affidavit says. "If the volume of refined fuels supplied to B.C. consumers through the Trans Mountain pipeline is significantly reduced, shortages of those products will likely occur."
Rensing's affidavit says an explosion at an Enbridge natural gas pipeline near Prince George last October saw prices increase by 10 cents within 48 hours. The explosion did not disrupt natural gas supplies to the refinery near Vancouver but the possibility of shortages sent prices upwards, it says.
Alberta supplies, directly or indirectly, more than 80 per cent of the gasoline and diesel used in B.C., says the affidavit.
"Each day British Columbians consume between 70,000 and 85,000 barrels of gasoline, and between 55,000 and 70,000 barrels of diesel," says the affidavit. "Approximately 55 per cent of B.C.'s gasoline and 71 per cent of its diesel is imported from Alberta refineries. The majority of these refined fuels are transported to B.C. through the Trans Mountain Pipeline."
Brian Ahearn, vice-president Western Canada for the Canadian Fuels Association, urged Alberta to take a cautious approach on fuel restrictions.
"Because certainly the transportation fuels business is a very integrated business with respect to transportation of fuels between Alberta and B.C.," said Ahearn. "We're really hoping the government will look at other solutions, other options."
B.C. Premier John Horgan, who's already facing daily calls to provide relief to $1.70 per litre gas prices in Metro Vancouver, called Alberta's law regrettable and said the federal government needs to put more fuel in the pipeline.
"We're trying a whole range of factors to reduce costs on people and then the gas price thing comes whack in the middle of that and there's very little control I have over that," Horgan said.
B.C. Opposition Leader Andrew Wilkinson said he isn't buying Horgan's statements about his inability to reduce gas prices. Wilkinson said Horgan can drop some of the estimated 35 cents per litre taxes on fuel prices in the Vancouver area.
"It sounds like we're being told to suck it up," he said.
B.C. Business Council president Greg D'Avignon said concerns about higher gas prices and fuel shortages are causing widespread concern.
"That impacts business," he said. "It impacts families. It impacts the government. It creates a real crisis."
He urged Kenny and Horgan to step back from the dispute and see the strong bonds between their provinces.
"We're the two most integrated economies in the country, on labour, on trade, on the movement of goods, on investment, and there are huge opportunities of things we could be doing to grow our economies, but the Trans Mountain expansion and this energy conflict is in the way of it," said D'Avignon.
The premiers need to find a solution, he said.
"People forget that families, friends and companies move back and forth between Alberta and B.C. everyday," D'Avignon said. "When B.C. gets a cold, Alberta gets sick and vice versa."
Kenny was in Ottawa Thursday testifying before the Senate's energy committee about the bill overhauling environmental assessments. He told the committee that Bill C-69 violates Alberta's constitutional right to regulate its natural resources.