Why Canada’s Justin Trudeau just spent $3.5 billion to nationalize an oil pipeline

Why Canada's Justin Trudeau just spent $3.5 billion to nationalize an oil pipeline.

by Brian Lee Crowley · June 10, 2018
According to the Canadian Encyclopedia, the network of oil and gas pipelines in Canada is 840,000 kilometers long. And virtually every kilometer of pipe was laid by private capital over many decades.

Yet today, it appears the only way a major pipeline project in Canada can get built is if the federal government buys the project, as it did this week when it spent $4.5 billion Canadian ($3.5 billion U.S.) to buy the Trans Mountain project, which aims to triple the capacity of former owner Kinder Morgan’s existing pipeline bringing oil from Alberta to the Port of Vancouver. Even then, the outcome is uncertain.

How did it come to this? The answer is that this was the entirely foreseeable outcome of a policy of appeasement toward pipeline opponents and environmental activists pursued by the governing Liberals. Winston Churchill once famously described an appeaser as one who feeds a crocodile, hoping it will eat him last. Having devoured all, the crocodile is now ravenously eyeing Prime Minister Justin Trudeau as the prime minister nervously tries to shoo the beast away with billions of dollars of taxpayer cash.

The roots of this story reach back to the years just prior to the 2015 federal election. The previous Conservative government had tried to position Canada as a “world energy superpower,” as Alberta oilsands production rose precipitously and existing pipeline capacity neared its limits.

Four major pipeline proposals were all forging ahead. Two went to the west coast (Trans Mountain and Northern Gateway), one to the Atlantic (Energy East), and the fourth (Keystone XL) to the U.S. Gulf Coast. Every one of them sought the Canadian energy holy grail: access to tidewater. Without such access, the existing pipeline network only reaches U.S. domestic markets. Due to fracking, U.S. markets are already awash in oil, such that the Western Canadian Select oil blend fetches a discounted price. But if it can sail, then Canadian oil fetches the world price in Europe and Asia, currently roughly $20 a barrel higher than what American refiners will pay.

In the Conservatives’ love affair with Canadian energy exports, the Liberals saw a potential political advantage. If the Tories could be portrayed as callous money-grubbers, indifferent to the environmental cost of energy development, the Liberals stood to benefit, since Canadians believe strongly in high environmental standards.

Standing in their way was the regulatory and legal framework developed over many years by successive governments. Canada in fact already had some of the toughest environmental and constructions standards in the world. The workings of the National Energy Board were widely admired, and people came from all over the world to study how Canada managed oil and gas so successfully.

The Liberals’ political strategy therefore required them to throw in their lot with the hardline environmental movement. While claiming to favor responsible pipelines, they made it clear that they would not ride roughshod over pipeline opponents, but would toughen standards even further and win over opponents by demonstrating their commitment to environmentally-sound economic growth. To do that, they had to make clear that the existing standards were not just inadequate, but dangerously so, bad enough to justify political and civil disobedience.

As Trudeau said when his party was still in the parliamentary minority, governments may issue permits, but only local communities can give permission for projects that affect them. The stage was set for legitimizing direct challenges to democracy and the rule of law in the name of a higher environmental ethic.

The Liberals duly won the election and, thinking they had a deal with the environmentalists, set out making good on their end of the bargain. They are toughening regulatory requirements, replacing the NEB, introducing a carbon tax, banning oil tankers on the northern west coast and, in concert with the government of Alberta, introducing tough measures to limit the growth of the oilsands, including a greenhouse gas emissions cap.

This moving of the goalposts mid-game caused the collapse of two of the four pipeline proposals (Energy East and Northern Gateway), despite billions of dollars spent in good faith by the proponents to meet the rules as they existed at the time. Only one project remains that can break Canada’s dependence on the U.S. market and add billions to Canada’s GDP: Trans Mountain. Trudeau says he’s all-in despite the opposition of the government of British Columbia.

But whereas Trudeau was proposing a rational trade-off (tougher standards for pipeline approval), his erstwhile allies were simply opposed to pipelines, full stop. In an effort to win them over, he whittled his options down to one. It was weakness that drove him to purchase the pipeline at taxpayer expense.

Having helped legitimize opposition to all pipelines, he now finds he is the one being demonized by his former friends for agreeing to one. Tzeporah Berman, one of leaders of the pipeline opposition, wrote this week, “After a decade of the [Conservative] Harper government I thought [Trudeau] was a dream come true. Now it’s a nightmare.”

Expect a campaign of civil disobedience involving politicians, international celebrities, Aboriginal groups, and environmental activists, with the tacit backing of the far-left British Columbia government, to reach a crescendo over the next year, as they test what they believe is the weak resolve of Ottawa to haul hundreds of people off in paddy wagons.

Expect to see a few hungry crocodiles on the picket line.

Brian Lee Crowley is the Managing Director of the Macdonald-Laurier Institute, a think-tank based in Ottawa, Canada.

Washington Examiner · by Brian Lee Crowley · June 10, 2018

Categories: right

Tagged in: