The Trans Mountain suspension: Ottawa must put its foot down
Montreal, April 9, 2018 – Kinder Morgan has announced it is suspending “non-essential” activities and investments for its Trans Mountain pipeline expansion project. This follows a series of abandoned large infrastructure projects in the country and once again sends the wrong message that Canada does not welcome investors, points out the MEI, which is pushing Ottawa to act to stop the hemorrhaging.
“This is very worrisome news, especially after the suspension and then the abandonment of the Energy East project. The government must absolutely get things back on track, and soon. Because right now, the message that investors are receiving is: We’re not open for business,” says Germain Belzile, Senior Associate Researcher at the MEI. “From this perspective, abandoning the Trans Mountain project would be catastrophic.”
Kinder Morgan justified its decision by invoking the political and social climate, which is hostile to Trans Mountain in British Columbia, where the government and certain groups have thrown obstacles in the project’s path.
The Trans Mountain project would expand export markets for Canadian oil resources and create thousands of jobs. “The National Energy Board projects that the country’s oil production will increase significantly by 2040. But if no new pipelines are built, how will Canada export its production and meet the global demand, which will grow 12% by then?” asks Germain Belzile.
The MEI showed in a publication last October that the fall in oil and gas investment and the abandonment of projects may get worse in Canada, due to the erosion of our competitiveness with the United States in terms of regulation and taxation. The new regulatory obstacles—including the new rules to evaluate industrial projects unveiled by Ottawa in February—add a lot of uncertainty.
“We are less and less competitive. Just since the start of 2017, four large-scale projects worth a total of $84 billion have been abandoned,” notes Mr. Belzile.
Trans Mountain, a $7.4-billion pipeline project already approved by Ottawa, aims to triple the capacity of the existing line in order to carry up to 900,000 barrels of oil a day from Alberta to the port of Burnaby, British Columbia. It represents investments of several billion dollars without any debt and without any risk of cost overruns for taxpayers.
“Ottawa has allowed the hostile environment surrounding this project to drag on, despite having given its approval. It must now put its foot down and make sure that the project goes ahead. At a time when uncertainty surrounding the future of NAFTA is already dampening the business climate, Canada cannot allow itself to harm its own oil and gas industry,” adds Michel Kelly-Gagnon, President and CEO of the MEI.
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The Montreal Economic Institute is an independent, non-partisan, not-for-profit research and educational organization. Through its studies and its conferences, the MEI stimulates debate on public policies in Quebec and across Canada by proposing wealth-creating reforms based on market mechanisms.
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