Trudeau under growing pressure to resolve pipeline fight after Kinder Morgan suspends Trans Mountain Expansion

Jim Carr leaving Parliament Hill after press conference Sunday

Trudeau has 6 weeks to resolve jurisdictional tussle with BC, but delay sends wrong signals to investors, natural resources sector

What to do? More specifically, what should Justin Trudeau do after Kinder Morgan pulled the rug out from under the Trans Mountain Expansion pipeline after months of legal harassment from British Columbia. To date, the Prime Minister has been content to offer soothing bromides – “This pipeline will be built!” – but no real action. Words are no longer enough. If he doesn’t assert federal authority and back up federal approval of an $8 billion infrastructure project, then the Canadian government’s word means nothing as far as investors are concerned.

KML Chairman and Chief Executive Officer Steve Kean.

“The fact remains that a substantial portion of the Project must be constructed through British Columbia, and since the change in government in June 2017, that government has been clear and public in its intention to use ‘every tool in the toolbox’ to stop the project,” Kinder Morgan said Sunday in a press release.

“The uncertainty created by BC has not been resolved but instead has escalated into an inter-governmental dispute.”

A dispute the company wants no part of.

The Texas-based pipeline giant has set a deadline of May 31 for Trudeau to come up with a solution. If one is not forthcoming, then “it is difficult to conceive of any scenario in which we would proceed with the Project,” says the company.

That warning is Kinder Morgan’s line in the sand. What will the Prime Minister do about it?

His decision is complicated by a number of factors.

One, a judicial review by the Federal Court of Appeal of his government’s 2016 approval of Trans Mountain Expansion. Sixteen First Nations, governments, and environmental groups asked the court to overturn Trudeau’s decision, mostly claiming the Crown failed its constitutional “duty to consult.” Enbridge’s Northern Gateway project was overturned because the court ruled the Stephen Harper government’s consultations were inadequate.

But the Liberals beefed up consultations after being elected in late 2015 with an eye to avoiding that fate. While we can only speculate how the court will rule, chances are Trans Mountain Expansion will not suffer a similar outcome.

Two, national political pressure is ramping up. A Sunday Globe and Mail editorial called Kinder Morgan’s decision an “economic and constitutional disaster for Canada” and warned that “Ottawa can’t allow a provincial government to usurp its authority.”

Chris Bloomer, CEPA CEO.

Chris Bloomer, CEO of the Canadian Energy Pipeline Association, made similar arguments to a Parliamentary committee last week that received national attention.

The perception is now commonplace that Horgan can push Trudeau around and get away with it. As the Globe editorialists opined, “The federal government cannot let this stand. It must use whatever tools it has, courts included, to re-establish its jurisdiction and get Trans Mountain back on track.”

Dennis McConaghy is a former vice-president with TransCanada Pipelines. He says all is not lost yet, but the time for resolute action has arrived.

“If the Canadian government can find a way to step up and ensure that this project is salvaged, then I think investors will say that Trudeau government actually has the capacity to stand behind its own decisions and enforce the rule of law in Canada,” he said in an interview. 

Dennis McConaghy.

If the project breaks down and is abandoned, that’s a terrible circumstance. The reaction to investment in this country will be God-awful, frankly.”

Three, Horgan is not cowed in the least. He spoke to Trudeau Sunday and told the Prime Minister that British Columbia intends to continue “defending the coast.”

During his press conference to address the Kinder Morgan announcement, the BC premier recited his government’s objections to the “flawed” approval process and determination to protect the coastline in the event of a “catastrophic spill.”

Then he got to the heart of the issue: “It is my view that British Columbia should have an equal say to other jurisdictions when these projects come forward.”

“I want to say to all Canadians that I profoundly believe in the rights of British Columbians to stand up and do everything we can to protect the interests of our province. I don’t want to do that in a provocative way, I don’t want any threats or ultimatums,” he added. “In a co-operative federation, we should all be able to work together for the best interests of the Canadian fabric.”

Alberta Premier Rachel Notley disagrees with her NDP colleague, as she has throughout this dispute.

She announced Sunday that her government is prepared to invest in Trans Mountain Expansion and will be preparing legislation “to impose serious economic consequences on BC if its government continues on its present course.”

Gil McGowan, president of the Alberta Federation of Labour.

“The premier’s suggestion that the Alberta government buy into the pipeline is probably the most creative and potentially useful suggestion that I’ve heard in weeks,” Gil McGowan, president of the Alberta Federation of Labour, said in an interview.

“In fact, I think it might be exactly the thing that’s needed to break the log jam and make sure that this pipeline gets built.”

McGowan argues that BC’s obstreperous opposition to Kinder Morgan has increased risk beyond what private investors are willing to bear. Socializing some of that risk provides political support the pipeline project desperately needs.

“In this case, the benefits of getting the pipeline built are so big, not just for the company but also for the Alberta and Canadian economies, that public sector investment to mitigate that risk is entirely appropriate and I would go as far as to say it’s probably necessary,” he said.

Alberta’s offer to invest and its threat to punish British Columbia heaps even more pressure on Trudeau to act quickly.

Under different circumstances he might prefer to wait for the judicial review to be handed down.

But he no longer has the luxury of time.

As McConaghy says, Kinder Morgan has given the Canadian six weeks to do something to salvage Trans Mountain Expansion. The clock is ticking.

“Our government stands behind this project and has the jurisdiction in this matter. Under Canadian constitutional law, this is well-established and clear and has been reaffirmed by multiple courts, including the Supreme Court of Canada,” Natural Resources Minister Jim Carr, who owns the file, said Sunday.

“We are determined to find a solution.

The Liberals must hurry. Every day the Prime Minister delays doing something, his leadership will appear weaker and weaker.

Tick, tock.

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