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The stunning reversal of fortunes for Liberal Premier Christy Clark changes the script on the future of oil sands pipelines through British Columbia – from outright opposition of the provincial government if the NDP's Adrian Dix had taken power, to a definite maybe under a surprisingly-re-elected Ms. Clark.
The Harper government now has an opportunity to win the B.C. government's support for two proposed oil-sands export projects, Enbridge Inc.'s Northern Gateway with a terminus in Kitimat, and Kinder Morgan's TransMountain expansion that ends in Vancouver harbour.
But the route to agreement is tricky. Ottawa will have to manoeuvre as skillfully as the pilot of an ultra large crude carrier navigating the narrow Douglas Channel heading to Kitimat's port.
And this isn't a government known for its deft touch. To date its approach on energy and pipeline controversies appears to have been borrowed from George W. Bush's stance after 9-11: "You're either with us or against us."
Ms. Clark has been remarkably consistent on the pipeline controversy, at least since last summer when she laid down five conditions that proponents would need to meet to win her government's endorsement.
(That contrasts with Mr. Dix who late in the campaign flip-flopped on the TransMountain proposal, rejecting it outright after initially saying it needed to be reviewed.)
The conditions include a recommendation from the National Energy Board joint review panel to proceed; addressing First Nations' consultation and treaty rights; implementing world-leading environmental standards for both the tanker traffic and the pipeline, and last but far from least, receiving a "fair share" of the economic benefits.
On the surface, Ms. Clark would appear persuadable. She campaigned on an "economy-first" platform and ridiculed Mr. Dix's interventionist, environmentalist positions that she said would bring the provincial economy to a halt. But while oil-sands expansion and market diversification is a prominent part of Prime Minister Stephen Harper's "economy first" approach, the Liberal premier sees little benefit to her province from the pipelines. And there is some risk to the existing economic base on the northerly coast, where First Nations have developed fisheries and other sustainable industries.
Still, her five conditions lay out a pathway to agreement.
The Northern Gateway joint review panel is scheduled to report to cabinet by the end of the year and, may well give the project a qualified approval, but with a long list of conditions. The federal cabinet – which gave itself final authority over the decision – will have to take those conditions seriously to meet Ms. Clark's first condition.
On marine and land-based spill prevention and response, Ottawa has already taken some action to strengthen standards, though critics argue that cuts to federal departments will mean a lack of enforcement. It raised the number of inspections that foreign vessels would be subject to; required local piloting in treacherous waters; increased penalties for marine and pipeline violations and created a Tanker Safety Expert Panel to recommend further measures. The Northern Gateway review panel will doubtless have other recommendations, if it approve the project.
Ms. Clark has condemned a federal move to close a Coast Guard station near Vancouver, and vowed there would be no provincial support for the TransMountain expansion unless Ottawa reverses the decision. It remains to be seen what exactly it will take to satisfy the Premier on her environmental issues, but some appeasement on the financial issues could go a long way in winning her endorsement of Ottawa's safety regime.
The really tough conditions involve progress on First Nations' concerns, and the economic benefits.
The Harper government has appointed a special envoy, veteran B.C. lawyer Doug Eyford, to recommend ways Ottawa and the industry can assuage aboriginal concerns about resource development, and the pipelines specifically. And while opposition to the Gateway line has been noisy and apparently solid, it may be possible to provide enough concessions to enough communities to claim success.
That leaves Ms. Clark's demand for a "fair share." It's hard to see how that can be addressed – Alberta Premier Alison Redford has ruled out any revenue sharing on royalties, and Mr. Harper shown no interest in a special financial deal. B.C. says the pipeline will generate $81-billion in addition provincial and federal tax revenues over 30 years, and the province would receive only 8.2 per cent of that.
Both Ottawa and Alberta are loath to set a precedent to providing economic benefits to provinces to allow pipelines to cross their territory – especially given the new proposals to ship western crude through Saskatchewan, Manitoba, Ontario, Quebec and New Brunswick to Atlantic basin markets.
B.C. has already pledged to raise tax on liquified natural gas production and exports, and Ms. Clark may find ways to boost property taxes or other revenues from the pipeline and loading terminals.
But at the end of the day, it is not even clear the federal government needs British Columbia's agreement to approve Northern Gateway and TransMountain projects. In the absence of Ms. Clark's endorsement, Mr. Harper may simply choose the high-political-risk strategy: proceed unilaterally and damn the torpedoes.
Shawn McCarthy covers energy in the Ottawa bureau.