It’s not easy to build pipelines or expand their capacity in Canada. Last fall, faced with obstacles and lengthening delays, TransCanada abandoned its Energy East pipeline project in Quebec and New Brunswick, valued at over $16 billion. Earlier, in the spring, Ottawa had put the kibosh on the Northern Gateway project out west, valued at $8 billion.
But there are also successes, like the Trans Mountain project, which was approved by the federal government and seemed, up until just recently, about to get moving. But now, thanks to British Columbian politics, this major project of importance for the Canadian economy is also at risk of being derailed.
For months now, the authorities in Burnaby, B.C. have been refusing to issue the necessary permits for the construction of infrastructure required for the Trans Mountain project. More recently, the provincial government (a coalition of New Democrats and Greens) has announced its intention to launch a new environmental evaluation process, which will push back the project’s completion date and add another layer of uncertainty.
Kinder Morgan reacted by indicating that it might abandon the Trans Mountain project. Nothing more was needed for Alberta Prime Minister Rachel Notley to man the barricades. Ms. Notley started last week by suspending negotiations on the purchase of electricity from British Columbia. This week, she put an end to wine imports from Alberta’s neighbour. In short, we have the opening salvos of a trade war, which benefits no one.
This conflict raises two issues. First, there is the rule of law. The best way to kill private investment, one of the keys to a rising standard of living, is to open the door to case by case arbitrary political decisions about which projects will be approved. If any change of government can lead to a substantial increase in costs and delays for companies, they will take their investments elsewhere and save themselves some grief.
Second, there is the constitutional division of powers. When a provincial government and the federal government disagree on a matter of shared jurisdiction, the Canadian Constitution gives the federal government the last word. In this case, it approved the project. And this approval came, it is worth noting, after an extensive environmental review.
The Trans Mountain project is important for several reasons. Canada has the third largest oil reserves in the world. The world needs oil, and will continue to need oil for decades yet. Canadian oil is popular not only among Canadians, but also among our economic partners. Canada produces and transports its oil in a safe and environmentally friendly manner (indeed, much more so than most other countries). Finally, the oil and gas industry accounts for more than 500,000 direct and indirect jobs in this country.
Unfortunately, whereas in the United States a wave of deregulation and corporate tax cuts is fuelling a marked rebound in investments, in Canada, unproductive bickering is sinking them. Investments in the country’s oil transport infrastructure are crucial; without them, the growth of this industry will happen elsewhere, and others will reap the benefits. Currently, the absence of outlets for Canadian production is responsible for a discount of from $25 to $30 a barrel for Albertan oil compared to the West Texas Intermediate (WTI).
Can we imagine the Quebec City region preventing Hydro-Québec from running transmission lines to Montreal? There would be a public outcry, and rightly so. Yet this is what’s happening right now out west. The fact that the conflict concerns two provinces doesn’t change anything. We’re all part of a single country.
Indeed, this week, the federal government announced that a major reform of evaluation procedures will soon be put in place. Federal Environment Minister Catherine McKenna took the opportunity to reaffirm that her government still supports the Trans Mountain project, that it was already approved, and that it would no doubt have been approved under the new evaluation process. Let’s hope that this process does not lead to future projects being blocked. Early feedback to this effect is hardly reassuring.
More than ever, Canada must send a strong signal that the country welcomes with open arms responsible investments in the energy sector. And it should remind the provinces that this also applies to them.
Germain Belzile is a Senior Associate Researcher at the MEI. The views reflected in this op-ed are his own.