Brian Lee Crowley

A primer on Canada’s pipeline mess for Canadians and others

On the topic of pipelines in general and Trans Mountain in particular, there has of course been much action in recent weeks, including most notably Ottawa’s acquisition of the TM project from Kinder Morgan for $4.5 billion. Here are two examples of my commentary on the issue:

30 May 2018 I published an op-ed in the Financial Post arguing that the Liberals are chiefly the authors of their own misfortune on TM, through their ill-advised political alliance with the hard-line environmental movement. I predict that they will reap the social licence whirlwind when their erstwhile allies really get serious about civil disobedience.

Then on June 12th I sought to explain to an international audience the issues surrounding TM and pipelines in general in the context of Ottawa’s sudden ownership of TM. The Washington Examiner was kind enough to publish my piece. I also did a video version of the op-ed which is available at the top of the MLI page.

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Water, water all around — unless you’re landlocked like Alberta

Being landlocked is a bad place to be generally speaking on the international stage. Coastal states are guaranteed freedom of the seas, but landlocked states may not be able to reach the seas and their commercial bounty without having to bribe neighbouring coastal states. Ottawa was created in 1867 to prevent such extortionary behaviour by Canadian provinces. So what gives when BC is yet again threatening to close off Alberta’s access to tidewater? My views on the issue were laid out in my 12th May column for the Globe and Mail’s ROB. You can read the unedited text below or here online.

Geography distributes its bounty capriciously and the results can be extremely painful for those who end up penalised by their place on the map.  The outcome of the recent BC election may be about the deliver an object lesson in this principle to this country’s only two landlocked provinces: Alberta and Saskatchewan.

Internationally, being landlocked is a very uncomfortable place to be. Unless you are a Botswana exporting diamonds (small, light and high value products that can be shipped by, say, plane) you likely need to put your exports on a ship to get them to world markets, thereby realising their highest value.

Because ocean shipping is so vital to economic success, the world’s nations agree that ships engaged in bona fide commerce will not be obstructed. Nations can’t target the shipping of other countries and demand ransom to let it reach its destination. That’s piracy.

The main exception is when military or diplomatic conflict causes countries to throw up embargoes against offending countries’ goods, or to prevent them from receiving shipments of things like arms or nuclear materials. Such exceptions are exceedingly rare when seen against the volume of ocean-borne trade.

But landlocked states face a completely different obstacle: their goods must cross another country’s territory to get to port. International law is of little help, and the 45 such landlocked states must negotiate access with neighbours who may have conflicting economic interests, historical enmities or simply little interest in helping.

What the neighbours universally have, however, is the whip hand in the negotiations. They tend to use that to extort benefits far in excess of the actual economic value of the infrastructure and services needed to get their landlocked brethren’s goods to port. And having to get their products through a “transit country” makes companies reluctant to invest in the landlocked. It injects a level of political risk that is difficult and costly to manage.

Landlocked countries thus tend to be poorer than their economic fundamentals justify. All because of accidents of geography and the political leverage they create.

Before 1867, the various colonies that were to become Canada suffered from the ability of each to impose tariffs on the products of the other as they crossed their territory. A key benefit of Confederation was explicitly to tear down these barriers, turning Nova Scotian or Quebec products into Canadian products that could move freely across the national territory, including to ports for export to world markets.

But as we’re discovering, the thirst of transit provinces for bounty to allow neighbouring provinces to move their products has never gone away.

Our only Pacific province has lately been the most egregious offender, preying on the vulnerability of landlocked Alberta and Saskatchewan in their efforts to get their resources to world markets.

Take the Kinder-Morgan pipeline, intended to bring Alberta petroleum to Asia via the port of Vancouver. Before the just-concluded BC election, the Liberal premier, Christy Clarke, had already shaken down the pipeline company for $1-billion to “allow” the pipeline expansion to be built. The province has no jurisdiction, pipelines being a federal matter, but the province could threaten enough obstructive behaviour that the company could see that peace with the province might be worth a hefty price tag. This is nothing but Third World corruption carried out at the expense of Canadian resources, a corruption only made possible by the arbitrary fact of Alberta’s landlocked geography and Ottawa’s complaisance.

Now BC has doubled down on transit province bounty-seeking, this time targeting thermal coal. The province has threatened a thermal coal export tax, ostensibly to punish the Americans for their softwood lumber machinations, but the result will be to sideswipe Alberta, which might lose as much as $300-million in sales of such coal now going through the west coast. Saskatchewan hasn’t been targeted yet, but they understand all too well that they are no less landlocked, and therefore vulnerable, than Alberta.

Assuming recounts and other factors don’t change the BC election result, the situation will only worsen. With the Green Party, unalterably opposed to Kinder-Morgan, holding the balance of power count on all the parties to vie to outdo each other in environmental virtue and the chauvinistic promotion of BC interests, as if they can be separated from the national interest of all Canadians. Kinder-Morgan is sure to be a flashpoint. This behaviour is a dagger aimed at the beating heart of federalism.

As for the much vaunted new free trade agreement between the provinces, it is silent on this issue, proving yet again what a paper tiger it is. Meanwhile Ottawa, created in 1867 in part to be the guarantor of the integrity of Canadians’ freedom to trade, looks on benignly.

Who speaks for Canada? Answer came there none.

Brian Lee Crowley (twitter.com/brianleecrowley) is the Managing Director of the Macdonald-Laurier Institute, an independent non-partisan public policy think tank in Ottawa: www.macdonaldlaurier.ca.

 

 

 

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Why the prime minister still doesn’t understand Ottawa’s role on pipelines

When in early december he announced his decision on several pipelines, approving two and vetoing another, Prime Minister Trudeau clearly thought he was showing how these decisions ought to be reached. Others, like the NEB, hold hearing and then make recommendations but the final decision should rest with the government. He couldn’t be more wrong. As I wrote in my December 9th, 2016 column for the Gobe’s ROB, his job is to be neither cheerleader (what he criticised Stephen Harper for) *nor* referee (the hat that Trudeau donned), but rather impartial rulemaker. Just as parliament makes laws and the hands them over the judges to apply, the government should be setting the tests pipelines must meet to be in the national interest and then handing it over to the NEB and environmental assessment agencies to hold the evidence-based proceedings that determine if those tests have been met. In the long run the last place politicians want to be is holding the bag on these decisions.

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Reconciliation between Canadian Conservatives and Aboriginal Canada

In my latest screed for the Ottawa Citizen and other PostMedia dailies I make the case that the Tories have to change their image, as their UK cousins did, to escape being branded the “nasty party”. My suggested strategy is for them to embrace the rise and aspirations of Aboriginal Canada. Conservatives have a narrative about freedom, opportunity and the future that vibrates with the emerging younger generation of leaders and is a distinctive policy compared to the left’s preoccupation with the past and victimhood. And a side benefit would be that the Tories would be tackling directly and constructively the appalling conditions of many Aboriginal communities, helping to remove a stain on the conscience of Canada. Nor is this mere abstract theorising; the hundreds of deals that Aboriginal communities are striking today to develop natural resources on their lands are proof that Indigenous Canadians want real opportunity, not more empty rhetoric.

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Will tougher rules for approval win over pipeline opponents?

At a time when the federal and several provincial governments have raised the bar on environmental and other standards for the oil patch it is not churlish to ask the question: will these moves, which will add both time and money to already demanding approval processes, win over those people who oppose pipelines and claim that they have no “social licence”. That’s the issue I explore in my column today for the Ottawa Citizen, Calgary Herald and other PostMedia papers. You will be unsurprised to learn that my answer is, “No”. And that means that at some point politicians will have to stop pretending that all that is required is process tweaks, that a better process will win over opponents. It won’t and at some point politicians will have to choose sides. How uncomfortable! Poor things — I almost feel sorry for them. Almost….

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Canada paying price for decades of pipeline complacency

For the longest time Canada’s O&G industry reaped the benefits of having privileged access to the US market, serving regions that found it difficult or costly to bring in oil from other sources. But we assumed these golden conditions would last forever. They didn’t. Now instead of a cosy preferred supplier relationship with the US, the fracking revolution plus inadequate piupeline capacity is forcing us to sell our production at a painful discount to world prices–and the world price is low enough as it is! This is an object lesson in how canada traditionally manages its economic vulnerabilities, but shouldn’t, as I argue in my column for the 26 September edition of the Ottawa Citizen and other Postmedia papers.

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Energy East: the good, the bad and the improbable

Energy East, TransCanada Pipeline’s proposal to bring Alberta crude to the east coast, has a lot to be said for it. Unfortunately, a lot of it is not true! Don’t get me wrong–this is a good proposal that deserves to succeed. It is just that many of its friends are selling it on the basis of improbable claims instead of the good solid business case behind it. Read my latest Globe column for the inside story.

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ILS keynote in Calgary on property rights and natural resources

My friend Matt Bufton of the Institute for Liberal Studies (ILS) is organising a terrific conference on property rights to be held in Calgary 16-17 October. I’ll be the lunchtime speaker on Friday the 17th talking about both property rights issues as they relate to natural resources in Canada in general and more specifically I’ll look at First Nations property claims. Details from Matt at ILS.

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The slippery slope of “sharing the benefits”: My latest column in the Globe’s ROB

As I write in my latest column in the Globe’s Report on Business, the Mowat Centre, a think tank on Ontario issues, thinks that Ontario should only “allow” pipelines carrying Alberta’s oil across its territory if Ontario “shares in the benefits.”  Hmmm. That’s a dangerous argument for Ontario: “the main benefit of a pipeline is what flows through it – the oil that customers want to buy. If, as the Mowat Centre suggests, we’re going to make businesses “share the benefits” of their operations over and above making their products available, why stop at the oil industry? Let’s make eastern-based grocery chains, auto companies and software firms start “sharing the benefits” of their operations with their Alberta customers.”

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MLI Study in the Vancouver Sun: First Nations support key to future of pipelines

Following the release of MLI’s latest study The Way Out: new thinking about Aboriginal engagement and energy infrastructure to the west coast, part of our ground-breaking series Aboriginal Canada and the Natural Resources Economy, my project co-leader Ken Coates, and I write in the Vancouver Sun that First Nations support will be one of the most important aspects for any energy project in Canada.

First Nations support key to future of pipelines

BY BRIAN LEE CROWLEY AND KEN COATES, VANCOUVER SUN MAY 31, 2013

Just a few weeks ago, proponents of pipelines between the Prairies and the West Coast were preparing for the worst. Adrian Dix, the apparently victory-bound leader of the B.C. NDP, had already declared Enbridge’s Northern Gateway would be dead on his watch and, mid-election, pronounced a similar sentence on Kinder Morgan’s Trans Mountain pipeline expansion plans.

The subsequent Liberal upset victory, which many analysts attribute to the NDP’s fervent opposition to wealth-creating pipelines, has given the Northern Gateway project a partial reprieve. But despite strong federal backing and now a pro-growth provincial government, the project hangs by a thread.

Premier Christy Clark has significant reservations, and knows that proceeding would attract cries of outrage from environmentalists. B.C. has its own problems with Alberta, and the souring of relations between the two western provinces over pipelines has the potential to cause great economic harm to the country. Neither issue, however, is the greatest barrier to the project’s success.

First Nations along the pipeline route hold the hammer on this project. If they remain opposed to the Enbridge proposal or to the idea of energy corridors to the coast, no pipeline will be built. Full stop. First Nations have primary social and cultural standing in this debate. If they cannot be convinced that the pipeline serves their interests and provides adequate environmental protection, the project is not going to proceed.

Equally important, First Nations have growing legal clout, best embodied in the Supreme Court recognition of the government’s duty to consult and accommodate aboriginal interests, which could hold up construction indefinitely. Even with strong federal government support and an approved environmental plan, the Northern Gateway Project likely cannot proceed.

With strong aboriginal support, however, much becomes possible. The most intense environmental activists will oppose Northern Gateway, no matter what. More practical environmentalists and conservationists, including the B.C. public, realize that resource development can be properly and safely managed. First Nations’ support, with its environmental credibility, would likely weigh heavily with them. With aboriginal backing, we think a majority of British Columbians can be brought on board.

The First Nations’ power over development arises out of a complex web of unresolved land claims, legal victories, constitutional recognition of aboriginal rights, and indigenous self-government. Aboriginal Canadians are now indispensable partners in resource development – including major infrastructure – and this reality is not going to change.

Nor is this a bad thing. Most First Nations are supportive of development, provided it proceeds on their terms and with appropriate returns in the form of jobs, revenue and business creation. There are dozens of major projects underway across the country in real partnership with First Nations, bringing substantial benefits to local communities, Canadian business and the national economy.

How will this work for Northern Gateway? Some First Nations along the pipeline route, including the Haisla on whose traditional lands the Kitimat terminus is located, are willing to proceed with properly managed development projects. First Nations along the route will have to agree to participate in Northern Gateway, ideally as equity partners (the Enbridge proposal includes 10-per-cent aboriginal equity ownership). In addition to equity participation, a proper arrangement would involve a commitment to the world’s highest standards for environmental protection along the corridor and on the coast, plus arrangements for aboriginal business development and job training, and sustained revenues for First Nations communities.

Assuming Northern Gateway gets suitable environmental and regulatory approval from the current Joint Review Process, a new approach to First Nations participation will still be needed. That almost certainly means more substantial equity ownership (not least because the equity must be shared among so many First Nations) and aboriginal involvement in environmental and project management and oversight. First Nations must be assured that they will be primary beneficiaries from a project that crosses their lands, bringing opportunity and employment instead of the unregulated socio-economic change and environmental risk they too often experienced in the past.

The way we develop resources in Canada is changing profoundly. Like it or not, Northern Gateway is a symbol for the new order. The project’s current trajectory stokes vigorous aboriginal opposition that alone could be enough to stall or even kill a project that could create vast wealth for Canadians.

A much better outcome is possible, one that meets the objections of most who oppose the project on environmental grounds and that assures aboriginal people of sustained and long-term benefits from the construction and operation of the pipeline. Northern Gateway could, with political will and openness to new arrangements, be transformed from a symbol of the new-found power of aboriginal people to stop vital national projects into a model of the real partnerships that henceforth will be the indispensable key to responsible resource development in Canada.

Brian Lee Crowley is managing director of the Macdonald-Laurier Institute. Ken Coates is the Canada Research Chair in Regional Innovation at the University of Saskatchewan. They are co-authors of The Way Out: New thinking about Aboriginal engagement and energy infrastructure to the West Coast, just released by the institute and available at macdonaldlaurier.ca.

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Brian Lee Crowley