Martha Hall Findlay is president and CEO of the Canada West Foundation.
The Kinder Morgan issue now drawing serious attention from the Prime Minister’s office is about far more than a pipeline. The implications of the potential cancellation of the Trans Mountain expansion project (TMX) are far larger and more far-reaching than for one pipe, for the company Kinder Morgan or for the province of British Columbia or the province of Alberta. The implications are enormous for the country.
The cumulative effect of major project failures – Northern Gateway, Energy East, Petronas’s cancellation of the Pacific NorthWest LNG megaproject – after billions of dollars spent, huge time and human resources wasted, is, as many commentators are now stressing, terrible for Canada’s investment climate. That many of these failures are seen as being due to political whims, and rules that change every time a government changes, is devastating. For a country dependent on investment, failure of TMX on top of these other failures would send a disastrous message about how competitive or attractive a place for investment Canada is.
However, a promise of financial support from federal government is not the answer.
Sure, it might help keep Kinder Morgan building for now – which is important because we need the pipeline capacity and access to the ocean. Our oil sector, after all, provides jobs and economic prosperity for all Canadians. But what does it do for the larger foreign-investment problem? It only reinforces everyone’s worry; it’s an acknowledgment that we can’t get anything built here. The Canadian government denied Northern Gateway – after years of time and money spent and concerted efforts to meet the many conditions imposed on the project to address Indigenous and environmental issues. The Canadian government encouraged the cancellation of the TransCanada Energy East project by moving the regulatory goalposts midstream – the last straw of many regulatory hurdles – again, after significant investment in time and money.
Offering financial help to Kinder Morgan will not calm the fears of other potential investors. Such reactive behaviour, under political pressure, will only show Canada to be a place where we don’t know what we’re doing. The shareholders of Kinder Morgan are justifiably worried about their money because this project has already taken far more time and treasure that anyone anticipated. But of Kinder Morgan’s two requirements to be met before May 31, the first is that they be assured that the project will be built. This is key. Only the second is “protection” for their shareholders. If the first part of the ultimatum is met – assurance that the project will be built – then the shareholders will be kept whole, solving the second requirement. So why are we also offering Canadian taxpayer funding, or potential funding by loan guarantees? We didn’t give the proponents compensation when Canada denied the previously approved Northern Gateway. We didn’t offer financial help to get Energy East built. And where was the Canadian government when Petronas decided to pull out of their LNG project? Money to “help” Kinder Morgan’s shareholders is a short-term Band-Aid answer to a much more fundamental problem that we are not addressing.
Key, either way, is assurance that TMX will happen. The big question is: How?
Some argue that the federal declaratory power under Section 92(10)(c) of the Constitution is redundant, because TMX crosses provinces and is already recognized as a federal undertaking. But B.C. Premier John Horgan isn’t letting that stop him. Some issues have shared constitutional jurisdiction, such as the environment, which is where Mr. Horgan is now hanging his hat (after a legal opinion reinforcing that he didn’t have the constitutional jurisdiction to stop the project outright).
But we do have a precedent that may be useful: The federal government’s declaratory power was enshrined in the Atomic Energy Control Act (now the Nuclear Safety and Control Act), and was upheld by the Supreme Court of Canada in 1993. The clause (as it was at the time) said that “All works and undertakings constructed (a) for the production, use and application of nuclear energy; (b) for research or investigation with respect to nuclear energy; and (c) for the production, refining or treatment of nuclear substances are, and each of them is declared to be, works or a work for the general advantage of Canada.” The Supreme Court held that this meant that federal, not Ontario provincial labour rules would apply to the project in question.
Labour relations can be just as sensitive a federal/provincial subject as education, health care and, yes, the environment. Armed with that Supreme Court decision, a majority government and Opposition Conservatives who want this pipeline built, here is an idea: Propose rush legislation – say, the “Energy Transportation Act,” which enshrines that the transportation of energy across provinces is “for the general advantage of Canada.” Make clear that where there may be overlapping jurisdictions on some issues (such as the environment, labour relations), federal jurisdiction governs.
This may not prevent Mr. Horgan from threatening continued blockages, but those threats would be much less effective with a clearer legal landscape.