National Post (National Edition)
LIBERALS TOOK THE ONLY WAY OUT.
Government has bet its own future on the strategy
It was always clear the Trans Mountain pipeline expansion would be an important test of the Trudeau government. It now looks as if it may well decide its fate.
The latest federal strategy — nationalization if necessary, but not necessarily nationalization — will at least put to rest the notion, common in conservative circles, that the Liberals secretly want the project to fail. That is impossible to maintain now: the government has bet its own future, along with several billion dollars of public funds, on its successful completion.
At the same time, it also rather throws into doubt the government’s recent declarations that the expansion could be constructed at no cost to the taxpayer — that Kinder Morgan, the pipeline’s existing owners, would be satisfied with federal “insurance” against any costs imposed by British Columbia’s efforts to stall or impede its progress.
Doubt, but not impossibility: it is not inconceivable things could still work out that way. If the government is successful in finding a buyer for Trans Mountain by August, then the feds will be off the hook, not only for the $4.5 billion they have agreed to pay for the existing line, but also the much higher expense of building the expansion — at least $7.4 billion, and probably more.
If not, they — and we — will be on the hook for both. At the moment, that looks much the greater likelihood. The political risks that appear to have soured Kinder Morgan on the project — not only the B.C. government’s dilatory tactics, but the mounting physical resistance of protesters on site, not to say the still-unresolved legal claims of First Nations opposed to the project — would still face any other buyer; if the government’s promise of indemnity was insufficient to reassure Kinder Morgan, it is unclear why another owner would be more impressed.
Once the expansion is completed, however — if it is — much of this risk presumably disappears. The $4.5-billion offer for the existing line appears to reflect its fair market value, to judge by the muted impact on Kinder Morgan’s share price. The expansion, likewise, once in operation, would be a relatively safe asset, offering a predictable stream of revenues to its owners, whether private or public. So a buyer for both could probably be found in time.
This is not simply money out the door, in other words. Even if the government were to end up paying the costs of construction, it would be obtaining a valuable asset in return. It would be doing so, what is more, with far more justification than in previous cases, to which this is being compared.
This is not like the 2009 auto bailout, in which General Motors and Chrysler were rescued, largely from their own mistakes, at an eventual cost of nearly $4 billion (on an initial outlay of $14 billion).
Neither is it like the Mulroney government’s “investment” in the Hibernia megaproject, in which Ottawa assumed an economic risk that was clearly better left to private capital.
Rather, the risks in the present case are almost entirely political, the product of jurisdictional squabbles and opponents who feel themselves morally exempt from obedience to the rule of law and other norms of democratic conduct. To accept as fact the increasingly widespread perception that pipelines are “too big to succeed” would be enormously damaging to the country’s prospects, not only in the immediate sense that Alberta’s oil would be prevented from reaching overseas markets, but in the longer term reputation of Canada as a place to invest and do business.
That it would also put at risk such minor matters as national unity and the governability of the country adds to the sense that this is a special case, justifying interventions that would otherwise be out of bounds.
Is buying a pipeline ordinarily the highest and best use of public funds? No. Is the government at most times the best choice to build one? Of course not. But in the extraordinary circumstances in which we now find ourselves, it may be the only course left.
Still, this is a solution to a problem largely of the Liberals’ own making. Had they not been so cavalier about delegitimizing lawful means of deciding these questions — and legitimizing extra-legal means — in the past, they might not be facing quite such a hornet’s nest of opposition now. Had they not allowed, by commission or omission, the available pipeline options to dwindle to one, and had they not been so quick to advertise their readiness to pay to get this one built, they would not be in such a weak bargaining position. Had they been more willing to risk political capital in defence of federal jurisdiction and the rule of law, they might not have had to put financial capital at risk.
And there remains significant risk. I said a private buyer could probably be found in time. The question is whether the Liberals will be willing to wait that long: having declared that any federal investment in the project would be short-lived, they will be under much self-imposed pressure to sell before the next election. Prospective purchasers will not fail to pick up the scent of desperation, much as Kinder Morgan did.
And of course there remains what must be a daunting prospect for any elected government, let alone this one, of being directly responsible — no longer merely as overseers, but now as owners and builders — for forcing through a pipeline over the objections and probably the bodies of hundreds of telegenic protesters: a nervousness that, again, protesters cannot fail to detect, and be further emboldened by. In that case the government will not merely have transferred political risk from Kinder Morgan to the taxpayer, but increased it.
The Liberals will no doubt claim to have struck a balance, attacked as much from the left as the right. But, the truth is, it needn’t have come to this, and now that it has there is little to do but hope the Trans Mountain does not turn into a quagmire.