Tanker ban may haunt Trudeau

Leaves Ottawa with lim­ited ex­port op­tions

Windsor Star - - NP - JOHN IVI­SON

The Lib­er­als have done it to them­selves. Just as Henry Ford’s cus­tomers could have any colour of Model T car, as long as it was black, so the Lib­er­als can have any pipe­line they want, as long as it’s Trans Mountain.

By re­duc­ing the num­ber of op­tions, they are now en­gaged in the pol­i­tics of last re­sort to push through Kinder Mor­gan’s Trans Mountain project.

But if they hadn’t blocked North­ern Gate­way, raised the reg­u­la­tory bar on En­ergy East to unattain­able lev­els and im­posed an oil tanker mora­to­rium on the west coast, they wouldn’t be faced with the prospect of a need to fund a de facto na­tion­al­iza­tion of Trans Mountain. (The tanker ban is frus­trat­ing the am­bi­tions of First Na­tions-led Ea­gle Spirit Hold­ings to build a north­ern Al­berta-B.C. pipe­line). Fi­nance min­is­ter Bill Morneau said on Wed­nes­day that there are “plenty of in­vestors who would be in­ter­ested in tak­ing on this project.”

Ea­gle Spirit was sug­gested by some ob­servers as one po­ten­tial part­ner — an op­tic that would ob­vi­ously sit well with the Lib­er­als’ rec­on­cil­i­a­tion agenda.

But Calvin Helin, the In­dige­nous en­tre­pre­neur who heads up the com­pany, said it is not in­ter­ested in the Trans Mountain route. Rather it is fo­cused on a le­gal chal­lenge by the Lax Kw’alaams Band, of which he is a mem­ber, to the oil tanker mora­to­rium leg­is­la­tion that is cur­rently be­fore the Se­nate.

Helin said the 1,500-km, $12-bil­lion pipe­line plan be­tween Fort McMur­ray and an ex­port ter­mi­nal site at Grassy Point, near Prince Ru­pert, has won sup­port from 35 First Na­tions along the route.

Ea­gle Spirit’s pipe­line would carry up to two mil­lion bar­rels a day of medium to heavy crude, not the di­luted bi­tu­men that was planned for the North­ern Gate­way route.

This was cru­cial to win­ning the sup­port of chiefs along the route be­cause crude is eas­ier to clean up af­ter a spill. The down­side is it needs a re­fin­ery in Al­berta to turn the bi­tu­men into crude, adding to the cost. There re­main di­vi­sions with First Na­tions who say they have not given their con­sent. The project is still in its in­fancy when it comes to ar­rang­ing fi­nanc­ing and hir­ing ex­pe­ri­enced en­gi­neers.

But Helin’s ap­proach was to get First Na­tions sup­port first and a more so­phis­ti­cated busi­ness plan later. “Our view was that if we didn’t get First Na­tions on­side, we didn’t have a project.”

Oil pro­duc­ers like Cen­ovus En­ergy and Sun­cor have ex­pressed in­ter­est in the project and Al­ta­Corp Cap­i­tal is try­ing to raise cap­i­tal. Helin said that if the only hur­dle re­mains the tanker ban, Ea­gle Spirit will re-lo­cate its ex­port ter­mi­nal from the big nat­u­ral har­bour at Grassy Point to Hy­der, Alaska. The state of Alaska, un­like the prov­ince of Bri­tish Columbia has al­ready said it would wel­come the project. “It’s ridicu­lous — we’d be putting a large piece of in­fra­struc­ture worth $1 bil­lion and be­tween 500-1000 per­ma­nent jobs into the hands of the Amer­i­cans,” said Helin.

The Ea­gle Spirit pipe­line is a long way from be­ing a vi­able op­tion. But, thanks to the var­i­ous pol­icy de­ci­sions made by the Lib­eral gov­ern­ment, Canada is run­ning out of more work­able choices. The Prime Min­is­ter re­peated again on Thurs­day that lack of pipe­line ca­pac­ity is cost­ing this coun­try $15 bil­lion a year. Trudeau has put his per­sonal cred­i­bil­ity on the line to get Trans Mountain built. But the triple whammy of po­lit­i­cal, le­gal and civil op­po­si­tion has made Kinder Mor­gan think twice and per­suaded it to set a dead­line of May 31 to de­cide whether to pro­ceed.

The fed­eral gov­ern­ment could buy the project but Kinder Mor­gan will make it pay over the odds. Even at that stage, it’s not im­me­di­ately clear who would op­er­ate the pipe­line, or whether the reg­u­la­tory per­mits would be eas­ily trans­fer­able. Per­rin Beatty, pres­i­dent and chief ex­ec­u­tive of the Cana­dian Cham­ber of Com­merce, said a fi­nan­cial back­stop wouldn’t be his first choice and any eq­uity in­vest­ment should be a short-term in­ter­ven­tion.

“But I don’t think we can be ide­o­log­i­cal about it,” he said. “It’s good that they’re en­gag­ing and re-as­sert­ing fed­eral author­ity. It’s good that the Min­is­ter of Fi­nance was pre­pared to put the blame squarely on the Premier of Bri­tish Columbia and make clear he may be cost­ing Cana­dian tax­pay­ers hun­dreds of mil­lions of dol­lar. But we need to ad­dress a reg­u­la­tory sys­tem that is clearly dys­func­tional.” Den­nis Mc­Conaghy, a for­mer Tran­sCanada Corp. ex­ec­u­tive, said the value of Trans Mountain is that cash­flow back to Canada would be sig­nif­i­cant, re­gard­less of whether the oil is trans­ported to Asia or to re­finer­ies on the Gulf Coast.

But he said that all de­pends on a meet­ing of minds be­tween the Cana­dian gov­ern­ment and Kinder Mor­gan on what he called a “con­scionable in­dem­nity”. Morneau said that the gov­ern­ment would in­sure the project against fi­nan­cial losses de­rived from “po­lit­i­cally mo­ti­vated” de­lays. To Mc­Conaghy, that means com­pen­sa­tion is only given for in­cre­men­tal spend­ing de­lays caused by the Cana­dian po­lit­i­cal and ju­di­cial sys­tem, not money al­ready spent, or prof­its not yet earned. “The big­gest risk is a per­verse ju­di­cial re-set,” he said. Mc­Conaghy does not be­lieve it is re­al­is­tic to think a third party is go­ing to get in­volved, given it would face many of the same risks, in­clud­ing the prospect of hav­ing a full do-over of the reg­u­la­tory process. “The only thing peo­ple should be fo­cused on is a deal with Kinder. Let’s not get dis­tracted by third party en­ti­ties,” he said. But the Lib­er­als can’t af­ford to fix­ate ex­clu­sively on a deal with Kinder Mor­gan. It will be in­ter­est­ing to see if Trudeau is as com­mit­ted to the west coast oil tanker mora­to­rium, which has al­ready passed through the House of Com­mons, if Kinder Mor­gan walks away from the Trans Mountain pipe­line and no­body else is keen to take it on.

At that point, Ea­gle Spirit’s project might start to look highly at­trac­tive. “This project pro­vides an off-ramp for ev­ery­one,” said Helin.

JEREMY HAINSWORTH / THE AS­SO­CI­ATED PRESS

A Kirke­hol­men oil tanker sits an­chored out­side Kinder Mor­gan’s Westridge Ma­rine Ter­mi­nal in Burn­aby, B.C.

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