There is a full court press underway by the federal government in selling the importance of the Trans Mountain investment to Canadians.
The visit of federal Finance Minister Bill Morneau to Calgary on Wednesday, where he spoke to business leaders at a Calgary Chamber of Commerce event, was followed up by Natural Resources Minister Jim Carr speaking to the Edmonton Chamber of Commerce on Thursday.
Carr had spent Wednesday meeting with business leaders in Vancouver.
But unlike Morneau, Carr received a standing ovation when he finished speaking; it might have been a smaller audience, but this is Alberta — and we are talking about a Liberal government led by someone with the last name of Trudeau.
In other words, a tough audience.
Where Morneau concentrated his remarks on the government’s intent to be owners of the Trans Mountain project for a fixed period of time — as a way to de-risk the project, enable it to be built and sell it back to the private sector — Carr was more focused on the reasons why the pipeline is important to the Canadian economy.
“There is no path to prosperity in Canada without a thriving, vibrant energy sector,” he said. “Alberta isn’t just part of our nation. It helps drive it. There is not a hospital, school or road in this country … that hasn’t benefited … from the wealth you generate.”
Carr also tied the project, using the example of the Indigenous Advisory and Monitoring Committee, as an example of reconciliation in action.
But what this project has done is test the concept of federalism.
As one of the Edmonton attendees pointed out, the TMX impasse, largely brought on by the intransigence of B.C. Premier John Horgan and Burnaby Mayor Derek Corrigan, has resulted in a rare opportunity for the government to assert the notion of federalism — and what it means to be part of a confederation.
Carr’s response elicited strong applause:
“There are tensions in the federation in every generation and that most prime ministers have to deal with those tensions … provinces have disagreements all the time. It’s not Rachel Notley or Premier Horgan’s responsibility to speak for Canada. Only the government of Canada can speak for Canada — and that is the important dynamic in this federation and this is one of the most important reasons that we are taking the action we are taking.”
And the federal government may not quite be done.
When asked, following his speech, if the government was still considering passing legislation that would ensure it could assert its constitutional authority, Carr said all options remained on the table.
Also interesting, and important, is the fact the transaction is structured to create a Crown corporation. While some will say that is tantamount to nationalization and therefore bad, the reason for taking this approach has more to do with its ability to assert its jurisdictional authority.
“It takes out some jurisdictional ambiguity … there are some advantages,” said Carr, without going into further detail.
That should allay the skeptics to some degree, but there remain concerns that a perception will persist on the international stage that major projects in Canada are only possible if the government has to take ownership.
Carr said that has not been the tone of conversations he has had with investors outside the country.
The fact LNG Canada arguably moved closer to the final investment decision milestone this week — with Malaysia’s Petronas purchasing 25 per cent of the project — suggests the concerns could be overblown.
In fact, if Kinder Morgan had decided to ice the project, like TransCanada chose to do with Energy East, the message to the international community in terms of investor confidence would have been much worse.
The issue, really, is that there is a generation of Canadians, if not two generations, who have never seen a government take these kinds of measures.
If there was any doubt over the importance of diversifying Canada’s markets for energy production, the need was emphasized in two ways on Thursday.
One was the fact that the pricing differential between Brent Crude and West Texas Intermediate reached US$10 per barrel for the first time since 2015; this means even more money left on the table for Canadian barrels. The second factor was the slapping of tariffs on Canada’s steel and aluminum exports into the U.S. that go into effect June 1.
Still, there is the unanswered question of how a project, which had followed the rules and received all the approvals, could not proceed without the federal government buying it out.
On the one hand, one could argue that the federal government’s decision shows it is willing to backstop controversial but essential projects. On the other hand, it continues to question the validity of process as established by the current set of regulations.
Carr was quite clear that Bill C-69, incorporating the amendments that have been put forth, will introduce certainty for future projects.
The energy players don’t quite see it that way — and there is a high degree of concern within the industry surrounding the impact of the new legislation when it comes to process and timing.
And this is what the government needs to be mindful of: assuming all goes according to plan and TMX is built, it’s but one element to boosting investor confidence in Canada’s oilpatch and improving its competitiveness.
As Imperial Oil chief executive Rich Kruger said on Wednesday following the Morneau event, the pipeline is one piece of the competitiveness puzzle. The industry continues to seek clarity on regulatory processes and timing; Imperial is four years into waiting for an approval of its Aspen project.
To ask companies to risk capital when faced with uncertain timelines is both unrealistic and unacceptable. The federal government has broken through the TMX impasse by taking an extraordinary step — and now the focus must be on ensuring the overall competitiveness of the industry for investment dollars to return. And that’s as much a message to the federal government as it is to the Alberta government. Without that, getting a pipeline to tidewater will wind up being nothing more than a pyrrhic victory.
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