The federal government announced today that they would spend $4.5 billion to buy the Trans Mountain pipeline project from Kinder Morgan Canada Ltd. The move ends months of uncertainty for the beleaguered oil and gas industry in Alberta. Finance Minister Bill Morneau’s bold move heads off a potential constitutional crisis over the contentious pipeline project.
Interesting Political Calculus by the Liberals
The investment is a bold move by the federal Liberals. The decision will be wildly popular in Alberta. The Liberals are unlikely to improve upon the four seats they won in Alberta in 2015. However, this investment may prevent the Liberals from being wiped off the electoral map in Alberta next year.
The response to the purchase will be much more mixed in British Columbia. Greenpeace’s Mike Hudema has already gone on record about the purchase.
“Trudeau is gambling billions of Canadian taxpayer dollars on an oil project that will never be built — a project that Kinder Morgan itself has indicated is ‘untenable’ and that faces more than a dozen lawsuits, crumbling economics, and a growing resistance movement that is spreading around the world.”
The decision appears to have been influenced by Alberta’s threat to cut off oil shipments to British Columbia. Restricting the flow of oil westward would have led to a massive spike in gas prices, which are already at record highs in North America. Drivers in British Columbia would have faced the possibility of paying more than $2.00 per litre at the pump as a result of any Albertan retaliation.
The Liberals are standing up to the environmentalists because they fear that a huge spike in gas prices could cause a much larger backlash among voters, compared to the backlash they will inevitably face for their purchase of Trans Mountain. All but one of the federal Liberals’ 17 British Columbia seats are in the Lower Mainland and Fraser Valley. The Liberals were shut out in Vancouver Island, where environmentalism is strongest in the province, so perhaps that gives them less to lose.
A Political Win For Rachel Notley
The federal purchase of Trans Mountain is an undeniable win for the Alberta NDP’s Premier Notley. The two most important issues for Alberta voters are pipelines and the economy. The two issues are intertwined in Alberta.
In the most charitable terms, it can be said that Rachel Notley has evolved on pipelines. At the start of her term, Notley was clearly anti-pipeline. Notley appointed Tzeporah Berman to co-chair Notley’s oil sands advisory group. Berman has always been vehemently opposed to pipeline development. Berman’s response to the investment today is evidence of how far Notley has come and the backlash Trudeau will face from the left as a result of the decision.
The federal purchase of Trans Mountain is an undeniably good thing for Albertans. It leads to oil and gas companies ramping up hiring and other investments. Increased activity in the oil patch will have spin-off effects that will bring badly needed jobs back to the province.
The Alberta government’s promise to cover ‘unexpected costs’ is a huge question mark in the deal. How much could the Alberta taxpayer be expected to pay as a result of this guarantee? That question is what fiscal conservatives need to focus on as they question the economics of the deal.