Analysis

On Trans Mountain, Trudeau prepares to put public money where his mouth is

The Liberal government offered this week to compensate Kinder Morgan for any losses related to political opposition to the Trans Mountain project — but Justin Trudeau effectively bought us a piece of the pipeline five years ago.

It's not a precedent. Federal money has been boosting the oilpatch since the beginning.

Prime Minister Justin Trudeau established his government's duty to get another pipeline to tidewater in a speech to a Calgary business audience in 2013. (Jeff McIntosh/Canadian Press )

The Liberal government offered this week to indemnify Kinder Morgan for any losses related to political opposition to the Trans Mountain project — but Justin Trudeau effectively bought himself a pipeline five years ago.

"It is in keeping with what I believe is a fundamental role of the government of Canada," Trudeau told Calgary's Petroleum Club on Oct. 30, 2013, referring to the Keystone XL pipeline. "To open up markets abroad for Canadian resources, and to help create responsible, sustainable ways to get those resources to those markets."

Finance Minister Bill Morneau places the blame for the delay of the Trans Mountain expansion directly on the shoulders of BC Premier John Horgan, and says the federal government is willing to provide indemnity to ensure the project goes ahead. 2:09

Keystone might actually get built. But in supporting Keystone, Trudeau publicly established his own responsibility for getting a new pipeline to tidewater.

And with Northern Gateway and Energy East now dead, Trans Mountain is the project that will decide whether Trudeau can do that.

Getting Trans Mountain done could now involve an outlay of public funds. But we all bought into the oil business decades ago. Now, we're all just haggling over how to manage that investment.

The oilsands sector that Ottawa (helped) to build

In April, when the possibility of public funding was first raised, Conservative Leader Andrew Scheer went to Calgary and recorded a video in which he claimed that "before Justin Trudeau became prime minister, energy projects didn't need government money to succeed."

It might be argued that — had he acted faster, or differently, on Trans Mountain — Trudeau could have avoided the possibility of spending federal money on this project.

But surely not even the oil executives in Calgary would contend that Canada's energy sector is a miracle of purest private enterprise.

As Chris Turner relates in his book The Patch, the oilsands were first mapped by the Geological Survey of Canada, then surveyed and investigated by Sidney Ells, an engineer from the federal Department of Mines.

In 1904, Wilfrid Laurier's government enacted the Petroleum Bounty Act, which paid out a subsidy for every gallon of oil produced in Canada. In 1956, C.D. Howe extended loan guarantees to get the TransCanada pipeline built. (The ensuing debate in the House of Commons was one of the nastiest on record and contributed to the Liberal government's defeat in 1957.)

Morneau accused the B.C. government of attempting to delay or obstruct the Kinder Morgan project. 0:42

In 1975, Pierre Trudeau's government partnered with Ontario and Alberta to prop up Syncrude. In 1993, Brian Mulroney's government put up $2.6 billion to backstop the Hibernia project off the coast of Newfoundland. And in 1996, Jean Chrétien's government expanded access to the accelerated capital cost allowance — a tax break that allows companies to deduct the cost of capital purchases and expansions — to in situ oilsands projects.

A report published by the International Institute for Sustainable Development in 2010 estimated that the oil industry in Canada received annually $1.4 billion in federal tax breaks and subsidies.

Committing public funds to ensure a pipeline project goes forward might make sense now — if the goal is to make sure we get the best return on our past investments. But if you're one of the many Canadians who wants to see a very speedy end to the oil economy, it could seem like throwing good money after bad.

What about those fossil fuel subsidies?

If anyone in Ontario complains about federal assistance for Kinder Morgan, Trudeau might remind them of the auto industry's bailout in 2008. In Quebec, Trudeau need only say the word "Bombardier" — and rub his thumb and first two fingers together.

But the Liberals might be vulnerable to a charge of hypocrisy.

"The Liberals have casually just broken another key election promise," Green Party Leader Elizabeth May told CBC Radio's The House on Wednesday, "which was that the Liberals, if elected, would not provide subsidies to fossil fuels."

In fairness, the promise was to phase out subsidies over the "medium-term" in keeping with a G20 commitment made in 2009, when the Harper government was in office. Technically, Canada has until 2025 to eliminate all such subsidies.

But offering now to indemnify a private sector pipeline project does complicate that commitment — or at least the principle behind it.

Most things are easier in theory than in practice. Getting a pipeline built is one of those things.

When all else fails

In that 2013 speech, Trudeau talked about social licence and community permission. He laid out all of the ways in which Stephen Harper had failed on Keystone XL, and all of the things required to get a pipeline built in the 21st century: stronger environmental policy, diplomacy, hard work.

It was a nice notion.

This week on The House midweek podcast, we recap Minister Bill Morneau's announcement about what Ottawa is prepared to do to get the Kinder Morgan Trans Mountain pipeline expansion built with Green Party Leader Elizabeth May and CAPP president Tim McMillan. 20:21

Now he finds himself asserting federal jurisdiction, preparing to defend his case in court and thinking about how he can reassure an oil company and its investors.

Conservatives will blame Trudeau for letting things get to this point (though it will be harder for them to now claim that he doesn't really support the oil sector). Liberals can — and do — blame British Columbia Premier John Horgan for being troublesome. Reaching back into history, one could blame any number of individuals and circumstances for the fact that building a pipeline is harder now than maybe it should be.

But Trudeau gave himself the job of getting a pipeline built. He declared Trans Mountain to be in the "national interest." He sold the pipeline as a bridge to a cleaner future.

And that bridge is turning out to be more expensive than previously imagined.

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