Pipeline ruling a blow Ottawa must recover from

The judges who halted the Trans Mountain pipeline expansion this week delivered not just a shock to Canada’s oil industry but a devastating blow to the nation.

By quashing the approval Prime Minister Justin Trudeau previously granted the project, the Federal Court of Appeal has either killed it or left it clinging to life support.

And no matter what happens next, significant damage to the economy, national unity and yes, the environment, has been done.

To be sure, we respect the judges’ decision, which is based on their reading of law and not the potential consequences of their ruling.

But the economic hit from their decision will be quickly felt because this multi-billion-dollar project to carry more Alberta crude to the Pacific was already underway. Stopping construction will result in huge layoffs.

Far more significantly, the ruling means much of the oil Canada produces will continue to be sold at a steep discount — below the global price.

This is a fresh setback to Alberta, one of Canada’s presumed economic engines. The ruling will also deprive, for a time at least, the federal and Alberta governments of revenue for vital programs, such as health care and education.

Meanwhile, investment in the oil industry, which was already declining, will plunge further. Following the collapse of the Northern Gateway and Energy East pipeline projects, this new roadblock to Trans Mountain could convince the international business community that resource-rich Canada simply can’t get its oil to market.

And if the economy doesn’t worry you, consider how the court’s decision has torn new holes in the fabric of national unity. Alberta feels betrayed and isolated. The chances of its New Democrat government winning next spring’s election are lower than ever and the most obvious successor, the right-wing United Conservative Party, would clash even more with Ottawa. Get set for Western Alienation, Part 2.

As for the environment, British Columbia’s Green Party should hold its applause for the appeal court. Alberta is cancelling its carbon-tax deal with Ottawa. Trudeau’s carefully calibrated compromise of building an oil pipeline while pricing carbon emissions to fight climate change is collapsing. Alberta now joins Ontario and Saskatchewan in opposing the federal carbon-tax regime.

Expect even more oil to be shipped by rail, hardly a risk-free alternative for the environment. Meanwhile, foreign demand for oil, in expanding economies such as China and India, will continue to grow and more oil will be consumed. It just won’t be Canadian.

The appeal court says the pipeline expansion can proceed — if Ottawa does a better job consulting the relevant Indigenous communities and protecting B.C.’s coastal environment. But this could take a year or years to happen. Even if it does, the project could face further delays from new court challenges.

Given such uncertainty, some observers might feel Trudeau’s decision to buy this pipeline for $4.5 billion is proving a lifesaver. Kinder Morgan surely would have cancelled the project if it still owned it. Just as likely, many Canadians will be furious their tax dollars have purchased a pipeline that may never be built.

Could the Liberals have done better on this project? Perhaps. But at this point, Ottawa should look forward, forgo a time-consuming Supreme Court challenge and do its best to salvage Trans Mountain — ASAP. Encouraging First Nations communities to become business partners in the endeavour might help.

But the federal Liberals can’t let this project die. Too much is at stake in a country desperate to dodge a crippling trade war with Donald Trump’s America.