Integrity of Canadian natural resources regulatory system on the line in Trans Mountain Expansion dispute – Prof. Coleman
Jason Kenney and the United Conservative Party want Prime Minister Justin Trudeau use the declaratory power of the Constitution to “declare BC’s actions [impeding construction of the Trans Mountain Expansion pipeline] as being against the national interest.” Constitutional scholar Prof. James Coleman says Kenney and party appear to have misunderstood what declaratory power actually means.
The UCP have created a petition urging Albertans “to tell Justin Trudeau to take action against the BC NDP’s latest obstruction to construction of the Trans Mountain pipeline.” Note to readers: The Trans Mountain 300,000 b/d pipeline from Alberta to Burnaby, BC was built in 1954. The petition should read “Trans Mountain Expansion,” which is a 525,000 b/d second pipeline that was approved by the Canadian Government in late 2016.
More from the petition: “Prime Minister Trudeau can stop the BC NDP today. However, he has refused to invoke the ‘declaratory power’ of the Constitution to declare BC’s actions as being against the national interest. Join the petition below calling on Justin Trudeau to stop the BC NDP’s obstruction on pipelines and to put Canadians first rather than playing politics.”
There are two rather egregious problems with the petition.
One, when Trudeau announced his government’s approval of Trans Mountain Expansion, he said specifically that the project was “in the national interest.”
And almost every time that the Prime Minister is asked to comment on the issue, he pointedly repeats that Government In Council (i.e. the federal cabinet) has declared the pipeline to be in the national interest.
But that is what the declaratory power does: it “declares” that a project in provincial jurisdiction, or over which the Canadian government and a province are disputing jurisdiction, is now the sole and exclusive jurisdiction of Ottawa.
In other words, this issue has been settled for more than a year and re-affirmed more times than we can count.
Two, declaratory power must be invoked by passing federal legislation, in this case a bill that specifically says Trans Mountain Expansion is regulated by Canada. Not BC, but the federal government.
The problem here, says Coleman, is that Canada has enjoyed full and exclusive authority over inter-provincial pipelines since at least 1954 and there is plenty of precedent to prove the point.
“It’s hard to see how that [using the declaratory power] would add anything to what’s already exclusive federal jurisdiction over approving this pipeline,” said Coleman in an interview.
In fact, in recent rulings over the City of Burnaby’s obstruction of Kinder Morgan permit applications, the NEB specifically affirmed that the principle of “paramountcy” (when federal and provincial jurisdictions overlap, Canadian authority trumps provincial) applies in the case of Trans Mountain Expansion.
Why would Trudeau use the declaratory power on a project that is already well-established to be within the jurisdiction of his government?
Coleman says declaratory power is seldom used and usually in the case of a road or bridge, say, that was already under provincial jurisdiction but the Canadian government had deemed it to be critical to national interests.
The fact that BC is arguing otherwise is meaningless, he adds. Trudeau can simply ignore any claims John Horgan’s government may make and the NEB can issue any permits or approvals BC refuses to issue.
So, what should Trudeau do?
This is what I argued in my Jan. 31 column: “The Prime Minister must instruct the NEB to take over all permitting and regulating of the Trans Mountain Expansion project…”
Coleman says the NEB could do that, but assuming those powers would require a lot of bureaucracy and process the national energy regulator doesn’t possess and isn’t interested in developing.
Furthermore, the provincial or municipal interests – blocking streets for construction, say – still have to be protected and the NEB just isn’t set up for that.
“The NEB can order the City of Burnaby or the BC government to issue a permit within a specified time. If the government doesn’t issue it, then the NEB can authorize Kinder Morgan to ignore it,” says Coleman, an expert in Canadian and American energy law and policy at the Dedman School of Law, who until recently taught at the University of Calgary.
“The NEB would rather just declare the permits to be not required. But the NEB would also prefer that the local governments protect their own interests.”
What are the odds that the BC government wins the dispute over Trans Mountain Expansion?
Zero, says Coleman.
For starters, Canadian oil producers have seen the differential between Alberta prices and West Texas Intermediate soar from $9-11 for much of 2017 to over $35.
“It’s ridiculous, they’re getting half the price and that has a huge impact on the Canadian economy,” he said. “The Liberals need to make sure Canada is getting a better price for its oil.”
Just as important is that investors are wondering if Canada will have a stable regulatory system for natural resource development.
Ottawa announced sweeping changes to how energy will be regulated Thursday, including a replacement for the NEB called the Canadian Energy Regulator, and if Trudeau cannot instill confidence in the old system, if jurisdiction over resources appears to be descending into chaos, Canada could lose access to important investment that will find a home elsewhere.
“The federal government has put its credibility on the line. With Northern Gateway and Energy East dead, Trans Mountain Expansion is the one pipeline they approved and if they can’t get that one approved it looks very bad for Trudeau,” Coleman said.
“This isn’t just about pipelines anymore. We’re talking about trade embargoes back and forth, federal vs. provincial jurisdiction under the Constitution, I think the coming months are going to be crucial for the future of Canada’s economy.”
With so much on the line, Jason Kenney and the UCP could provide constructive input, perhaps wording their petition to ask the Prime Minister to direct the NEB to speed up permitting, including issuing them itself or allowing Kinder Morgan to ignore local permits.
Instead, Kenney chose to play cheap politics with an issue critical to Alberta and Canada.
Or, perhaps the former federal cabinet minister just doesn’t understand the Canadian Constitution.
The problem with this analysis, Markham, is that most of the incremental dilbit that will get to the south coast and Sumas through the TMx will go to the US (Washington and California refineries), replacing declining Alaska and California crude feedstocks, and the price discount to WTI will be perpetuated or worsen. That is, in part, why Kinder Morgan has acquired 18 Jones Act tankers over the last 36 months.