Ottawa’s purchase of the Trans Mountain expansion project in British Columbia won’t solve anything.
The action was taken because American owner Kinder Morgan Inc. was about to quit the project following years of putting up with hearings, court cases, criticism, protests, and finally an NDP-Green provincial government that flouts the rule of law.
Its departure, on the heels of another last July by Malaysian giant Petroliam Nasional Berhad, or Petronas, that cancelledits $36-billion liquefied natural gas proposal, has solidified that B.C., and Canada, is no longer open for business.
The Malaysians politely explained their withdrawal as being caused by a downturn in LNG prospects. But LNG is booming around the world with rising prices and dozens of new entrants into the market from the U.S. and elsewhere.
While Petronas has looked to return with a more modest investment in Shell’s LNG project on the West Coast, the Canadian energy industry has been rocked by the departure of major international companies including ConocoPhilips Corp., Chevron Corp., Total SA and Statoil ASA in the oilsands, while a number of international firms have delayed or cancelled their LNG projects in B.C.
Petronas had abandoned its own massive project because the newly elected NDP-Green government declared war against them. With the province’s incredible LNG potential damaged, the next target was Kinder Morgan’s fully approved $7.4 billion pipeline expansion project.
The company has been bombarded with nasty headlines and government threats ranging from new court challenges to higher taxes, more onerous environmental rules, and greater demands by First Nations.
The attack has been not only abusive but illegal. Both projects had been approved by every regulatory and political body at every level of government, a process taking years. And both were critically important nation-building projects for Canada.
Now the federal government has been left holding the bag for Kinder Morgan’s pipeline which is of critical importance to Alberta. This controversy has already led to open warfare between Alberta and B.C. governments.
But it should never have come to this.
The federal government should have intervened last summer to salvage the $36-billion megaproject, as it was legally and constitutionally entitled to do. But it didn’t and now it is left to rescue the project by nationalizing the pipeline and pledging to finish the expansion.
The maneuver is head-scratching. About the only strategic benefit is that federal ownership will be able to limit B.C.’s legal options to stop construction on the basis that the pipeline is owned by the government and is in the national interest.
But the ownership of the pipeline was never the issue, and Ottawa’s participation pours more gasoline on the flames, not water. Nothing will abate the harassment by the B.C. government, abuse of the courts, protests, First Nations demands, environmentalist stunts, or other forms of sabotage.
Even more puzzling, Ottawa claims it will only hold the assets until another private-sector buyer can be found.
But the reality is the departure of major global companies underscores to the world that British Columbia, and indirectly Alberta, are not investment worthy. The message is that Canada simply doesn’t have its act together and the prospect of a new entrant is remote. Hopefully, this speculation is wrong.
Most of the blame belongs to a lawless B.C. government that Prime Minister Justin Trudeau should have chastened, then disciplined. The consensus by constitutional experts is that provinces like B.C. have a right to regulate, but not to stop a pipeline.
Trudeau now invokes federal authority with billions in taxpayer dollars instead of pursuing other options. These include fast-tracking references around constitutional questions, and simply asserting federal jurisdiction.
This is a huge black eye for Canada and a worrisome outcome that bodes badly for the nation’s economic future.
Kinder Morgan and other international companies did nothing wrong except invest billions in Canadian resource projects. They were not perpetrators, but victims.
Now Canada’s taxpayers are victims, too.
first published Financial Post