It's certainly progress to see British Columbia and Alberta agree on a framework that would see pipelines transporting Alberta's oil-sands bitumen through B.C. and to key ports, a highly lucrative prospect for both provinces. But unless and until they get producers on board, Tuesday's agreement means little.
The agreement announced Tuesday follows nearly two years of often-testy political wrangling between B.C. Premier Christy Clark and her Alberta counterpart Alison Redford. The tense tone continued right to the end – Ms. Clark on Monday abruptly cancelled a meeting with Ms. Redford that was set for Tuesday in Vancouver, before negotiators on both sides burned the midnight oil to get past the final sticking points.
Alberta has addressed Ms. Clark's famed "Five Conditions" – the five points the B.C. premier has insisted must be satisfied in order to win her government's support for pushing pipelines through the province, providing a gateway to energy-hungry Asian markets. The first four points, dealing with environmental assessments and safeguards and First Nations treaty rights, were never the big bones of contention for either province. (Indeed, Alberta said in Tuesday's announcement that they "mirror" that province's existing legislation covering "responsible energy production.")
The fifth condition – that "British Columbia receives a fair share of the fiscal and economic benefits" from oil pipelines – was the critical one for both provinces. And on that, it would appear Ms. Clark blinked.
All Alberta agreed to was that B.C. is free to negotiate with the energy industry to extract whatever "appropriate economic benefits" it can from allowing pipelines to run through its land and ship from its ports. Both provinces affirmed that the royalties Alberta charges producers for extracting oil and gas "are not on the table for negotiation."
Ms. Redford was never prepared to concede that another province might have a stake in royalties on resources that belong, under Canada's constitution, to Alberta. She has been saying for some time that if B.C. wanted some sort of financial gain from being the transportation route, it would have to get it from the oil producers and pipeline operators. On both points, the framework agreement shows that she won.
Ms. Clark, for her part, had signalled all along that a deal could be done as long as there was a financial trade-off sufficient to compensate for her province's environmental risk. She recognizes that energy transportation posed a once-in-a-generation opportunity to provide both for her province's economic future and for her government's fiscal stability. The trick was figuring out how.
It still is.
Now, Ms. Clark and her government are going to have to come up with some combination of industry commitments and taxation that will produce tangible economic benefits from allowing the pipelines to operate in the province. Anything less will be a failure in the government's pipeline policy. To do so, B.C. will have to walk a very fine line; demand too much, and the industry could balk, driving multi-billion-dollar investments to more accommodating jurisdictions.
For Alberta, its unwillingness to budge on royalties has put the task of winning over the industry almost entirely in B.C.'s court. If Ms. Clark and her colleagues aren't up to the task, Alberta may well be the bigger loser – ultimately costing it access to critical long-term markets for its resources.