There are rare moments when Canada’s federal government must step outside its normal way of doing business for the good of the nation. Now is such a moment.
The Trans Mountain Pipeline Expansion Project is too important to our national interests to allow it to fail due to political posturing by British Columbia’s NDP-Green Government after the project was approved by the appropriate federal regulatory body following an exhaustive review process.
The blow to Canada’s global reputation as a stable place to invest would be devastating.
Businesses will only invest in billion-dollar projects if they have a reasonable level of certainty they can proceed if they follow the rules, do everything right and secure appropriate environmental and regulatory approvals. They will willingly participate in lengthy approvals processes and take on normal business risks – the price of their commodity may fall, or a competitor may beat them in the marketplace with better marketing or more efficient logistics. Fine.
What businesses cannot take on is the wildcard risk of regulatory flip-flops. If they cannot be certain that regulatory approval actually means approval, the uncertainty created is just too great and they will invest somewhere else in the world.
That is exactly the situation the B.C. NDP Government is creating.
I don’t like Ottawa financially supporting the Trans Mountain pipeline. But after Kinder Morgan followed all the rules and did everything it needed to do, it is necessity for the federal government to invest in the project to ensure it has the certainty it needs to proceed. Yes, it could be costly, but it allows Canada to maintain its global reputation and needs to be done.
To do otherwise is to advertise to the world that Canada is just a bad place to invest. It would say that we are so unstable that even once our national government approves a project after exhaustive, multi-year reviews, some other level of government – without federal oversight responsibilities – can still throw up enough delays and challenges that you’ll have no choice but to walk away after sinking a billion plus dollars into planning, R&D, engineering and regulatory compliance.
Federal investment to save critical projects isn’t without precedent. In the 1990s, Canada’s Development Investment Corporation took an 8.5 per cent stake in the Hibernia offshore oil project when Gulf Canada withdrew, allowing that project to proceed. That investment paid off handsomely for Ottawa: It not only got its money back, it then began to earn $100 million a year from the investment.
Canada’s federal government doesn’t have to invest directly and could get creative. The new Canada Infrastructure Bank has been charged with using “federal support to attract private sector and institutional investment to new revenue-generating infrastructure projects that are in the public interest.” This could be a wise investment for that Crown Corporation. Perhaps the Canadian Pension Plan, OMERS, or the Teachers’ Pension Plan could invest in the project, creating certainty while earning dividends for members.
The pipeline expansion is in itself an important project. It will allow more of Canada’s oil to finally get to the open world market rather than being landlocked, forcing our producers to sell to U.S. refineries at a steep discount. That is costing Canada an estimated $30 to $40 million every single day.
Revenues from Canada’s oil exports already help pay for Canada’s social services like healthcare and education and offset trade deficits. In 2016, exports of crude oil alone created a trade surplus of $33.1-billion for Canada. It is by far the biggest money-generating commodity Canada exports – well ahead of metals and minerals in second place.
The pipeline expansion will create thousands of jobs and bring in $46.7-billion in new tax and royalty revenues in its first 20 years. That’s money for healthcare and education and maybe even let us implement the Guaranteed Income without running up higher deficits.
The Trans Mountain pipeline isn’t about a single pipeline project any more. If it fails it will signal to investors that Canada is closed for business. And if Canada allows its reputation to slide down the drain it will lose other projects before they even get started.
Stewart Muir is Executive Director of Resource Works, a non-profit research group focusing on environmental protection and responsible development in B.C.