BC government $1 billion fiscal deal for Trans Mountain first of its kind in Canada
The BC government issued an Environmental Assessment Certificate for the Trans Mountain Expansion pipeline Wednesday, ending almost five years of brilliant political dekeing and feinting by Premier Christy Clark, who had no legal authority to stop the project, but instead managed to stickhandle a pretty good deal for the province.
Clark doesn’t get the credit she deserves for her handling of Trans Mountain politics.
Under the Canadian Constitution, only the Canadian government has jurisdiction over inter-provincial “works,” which includes pipelines. This authority was first tested at the Supreme Court in 1954, where it was upheld, and there is plenty of precedent since reaffirming exclusive federal powers. First Nations legal challenges, of which there will be many, may slow start of construction, anticipated to begin in Sept., but there is almost no chance it will prevent the pipeline from being built, according to the experts I’ve interviewed.
The backbone of Clark’s strategy was the 5 conditions for the approval of heavy oil pipelines, introduced in 2012 in the midst of the raging battle over the National Energy Board’s review of Enbridge’s Northern Gateway, which was eventually rejected by the federal cabinet in late Nov.
- Successful completion of the NEB review process
- World-class marine oil spill response
- World-leading practices for land oil-spill prevention, response and recovery
- Legal requirements regarding Aboriginal and treaty rights are addressed, and First Nations are provided with the opportunities, information and resources necessary to benefit
- British Columbia receives a fair share of the fiscal and economic benefits
In her public comments, Clark sometimes talked about how meeting the 5 conditions was necessary for her government to “approve” a pipeline, leaving the impression that the Province had more authority than it had in fact. But the Premier’s bureaucrats were always very clear: Victoria could only support, not approve.
Margot Young is a professor with the UBC law school. She says that while the Canadian government enjoys exclusive authority to approve and regulate inter-provincial pipelines, both Ottawa and the provinces are constitutionally responsible for protecting the environment.
“Primary decision-making with respect to the pipeline lies at the federal level,” she said in an interview. “But that doesn’t mean that the pipeline, when it goes through provincial territory, doesn’t also become subject to some of the provincial laws.”
The important point here is that BC cannot enact or interpret any provincial law to “impair” Canada’s authority over pipelines. For instance, Clark couldn’t withhold a permit or order BC Hydro to jack up power rates for Trans Mountain in order to make it uneconomic.
The same principle holds true for municipalities, which have no standing in the Constitution and are considered “creatures of the Province,” since they are governed by provincial legislation. Even though Burnaby Mayor Derek Corrigan is bitterly opposed to Trans Mountain being built through his city, his hands are tied. He and city council cannot enact a bylaw that hampers pipeline construction.
This is why the BC government was always going to grant the Environmental Assessment Certificate, which added another 37 conditions to the NEB’s 157.
“These additional conditions respond to concerns that have been raised by Aboriginal groups during consultation undertaken for the project and address key areas of provincial jurisdiction and interest, such as: vegetation and wildlife, parks and protected areas, greenhouse gas emissions and terrestrial and marine spills,” according to a BC government backgrounder on the EAC.
So, this is what Clark had to work with: political pressure on the federal government and the company generated by her frequent demands that the 5 conditions be met, and a toothless provincial environmental assessment process.
Clark cannily played her weak hand, bluffing and calling Canada until she got the best poker pot possible. Frankly, she didn’t do too badly.
- Trudeau announced the $1.5-billion Oceans Protection Plan, most of which will be spent on the West Coast.
- A commitment from Kinder Morgan that tankers will be escorted by a tug for the entire transit up to Race Rocks, and $150 million investment that will result in a doubling of spill response capacity and halving response times along the Salish Sea.
- Significantly upgraded provincial requirements for for land oil spill prevention.
- Federal commitment to a First Nations monitoring and advisory committee, with $64 million funding.
- Kinder Morgan has signed 41 Mutual Benefit Agreements with BC First Nations worth more than $350 million.
- Economic benefits: 75,110 person-years of employment in construction and operation; $19.1 billion addition to provincial GDP; about $2.2 billion in provincial tax revenue; about $512 million in property taxes to municipalities over 20 years of operation.
Then there the fiscal benefits paid directly to the provincial government. In the first Canadian agreement of its kind, Kinder Morgan agreed to pay BC between $25 million and $50 million annually for 20 years. The money will go into a new BC Clean Communities Program to fund environmental protection projects.
This agreement is meant to offset the charge, commonly made by opponents, that pipelines from Alberta are “all risk and no benefit.”
And the agreement really is unprecedented. Under the Constitution, provinces control natural resources and can levy royalties and taxes to generate revenue. Under normal circumstances, these benefits would accrue exclusively to Alberta.
Carving out some fiscal benefits for BC is a coup for Clark.
You can bet Ontario and Quebec will be closely examining the BC-Kinder Morgan agreement if the Energy East pipeline is approved in 2019.
When you add up all the benefits agreed to by the Canadian government and the company, British Columbia has emerged with far more than could have been expected back in 2012.
Clark deserves her share of the credit for the win.
The chances are she will use some of that credit with the Trudeau government to leverage a federal goody bag for BC in the very near future. It can’t be coincidence that the Environmental Assessment Certificate was granted just 118 days before the provincial election.
What does she want?
Perhaps funding to combat the province’s opioid crisis. Or more federal help to move ahead with building out the BC LNG industry, a promise from the last campaign that has stalled thanks to low LNG prices.
However the May 9 election plays out, voters should acknowledge that Clark negotiated the best deal possible with the Trans Mountain pipeline.