Buying Kinder Morgan pipelines solves short-term problems for Trudeau, but creates a mountain of new ones

Finance Minister Bill Morneau

Finance Minister Bill Morneau. Photo: CBC.

Constitutional challenges, First Nations law suits, huge protest movement in Vancouver, regulatory reform still to be dealt with

The Canadian Government’s purchase of Kinder Morgan Canada for $4.5 billion answers some questions about the fate of the 590,000 b/d Trans Mountain Expansion project, but it raises others that may not have answers for months, says constitutional expert James Coleman. And the Alberta labour movement is already preparing to pressure governments to stay in the pipeline industry to ensure the construction of more infrastructure that supports expansion of the Alberta oil sands industry.

“The important question is what this means for future projects. Does it reassure investors that they will be paid for their investment, one way or another? Or does it tell companies that even if their project is approved, someone else will reap the benefit?” Coleman, professor of energy law at the Dedman School of Law, Southern Methodist University, said in an interview with Energi News.

From Gil McGowan’s point of view, the best answer to those questions is continued public ownership of the Trans Mountain pipelines.

“Why shouldn’t the public take the profits after it takes the risk?” the president of the Alberta Federation of Labour asked in an interview.  “Why should they open themselves to the whim of a big corporate investor that will have control over an important piece of economic infrastructure?”

The government of Canada’s interests – as well as those of Alberta, which has been a close political ally of the Trudeau Government on energy and climate policy – have always been related to the oil industry’s interests because of the royalties and jobs that governments depend on, says Coleman.

“When foreign investors sold their projects to Canadian investors over the past years, that meant Canada’s interests were even more aligned with industry,” he said.

“This new step with the Canadian government owning a new pipeline that is dependent on and crucial to the oil industry will just draw them closer.”

Thus far, industry is taking a cautious approach to having Ottawa join the ranks of Canadian pipeline companies.

“The Canadian Energy Pipeline Association is pleased that the Trans Mountain Expansion Project will be constructed,” the organization’s CEO, Chris Bloomer, said in a statement.

“CEPA is deeply concerned that the government needed to purchase the project for it to be built and to assert federal jurisdiction. We do not believe that this outcome will instill investor confidence in Canada.”

As the political conflict over Trans Mountain Expansion between Alberta, British Columbia, and Ottawa deepened over the past few months, the pipeline project became a proxy for the integrity of the national approval and regulatory system.

Finance Minister Bill Morneau tried to reassure investors in his speech announcing the government’s purchase.

“…the dispute that has arisen between Alberta and BC cannot be allowed to fester. Especially not when the resulting impasse threatens both the livelihood of thousands of workers and Canada’s solid reputation as a good place to invest,” he said.

“To investors who are considering Canada as a place to build big, important, transformational projects like the Trans Mountain Expansion – know that you have a partner in Ottawa. One who not only respects the rule of law, but who understands the challenges you’re up against, and who will work with you to find solutions that work for everyone.”

Morneau says Ottawa has no intention of being the long-term owner of the Trans Mountain pipelines.

“At the appropriate time, Canada will work with investors to transfer the project and related assets to a new owner or owners, in a way that ensures the project’s construction and operation will proceed in a manner that protects the public interest,” he said.

The government says it will indemnify the eventual new proponent against “additional costs caused by the discriminatory and unjustified actions of a province or municipality,” and further costs if the proponent abandons the project because of that opposition.

Canada says that it wants this investment to be temporary, says Coleman, but to ensure the value of its investment the government will still have to overcome all obstacles to construction, including continuing constitutional challenges from British Columbia and First Nations, as well as a significant protest movement in Metro Vancouver.

“ A very bittersweet outcome. Yes, the country is better off with this pipeline being built,” former pipeline executive Dennis McConaghy said in an email.

“But a country where its regulatory approvals are not sufficient for the private sector to accept completion risk is really dysfunctional.”

As the country digests the Trudeau Government’s decision to buy the highly controversial pipeline project, the old questions remain about constitutional jurisdiction and West Coast opposition and the soundness of the Canadian regulatory regime, but still more have been added.

Once Canada is in the pipeline business, should it stay in and use the crown corporation to build more pipelines?

Do the steps necessary to deal with legal and political challenges from the NDP government of John Horgan change now that the federal government is buying Kinder Morgan Canada?

Will the Trudeau Government take the opportunity to include First Nations and indigenous communities as owners in the crown corporation?

How does the pipeline purchase affect Ottawa’s proposed changes to the environmental impact assessment process (Bill C69) and the creation of a new national energy regulator to the replace the NEB?

If Canadians think today’s announcement ends the rancorous debate over pipelines to tidewater, they may be disappointed. Chances are what came before was just the under card to the main bout.

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