Government pipeline purchase won't solve Trans Mountain stalemate, say analysts

Financially backing or buying the Trans Mountain pipeline expansion would be a bad investment for the Alberta government, say political and industry watchers.

'It really doesn't deal with the main issue, and the main issue is political uncertainty'

An investment by the Alberta government would do nothing to quell the unwavering political opposition that has stalled construction of the Trans Mountain pipeline expansion, some experts say. (Trans Mountain)

Financially backing or buying the Trans Mountain pipeline expansion would be a bad investment for the Alberta government, say political and industry watchers.

The NDP government would be taking an enormous financial risk in bankrolling the Kinder Morgan project — and the investment would do nothing to quell the unwavering political opposition that has stalled its construction.

"The primary risk is monetary, for the same reason that private investors are pulling out, or are thinking of pulling out," said James Coleman, a professor of law at Southern Methodist University in Dallas.

The company has already spent more than $1 billion seeking approval for the beleaguered project, said Coleman, an expert in energy law who focuses on the regulatory environment faced by energy firms.

"It may take a while to get this pipeline built, maybe you would never have it built, and the process of developing these pipelines is expensive."

Proposal comes after company deadline

Facing stubborn opposition from the B.C. government and an ultimatum from Kinder Morgan, Alberta Premier Rachel Notley has vowed to salvage the project, considered vital to carry Alberta's diluted bitumen to coastal waters and foreign markets.

Earlier this week, Notley said the province is willing to shoulder some or all of the financial risk, and is considering investing in the pipeline project. Notley said the federal government should think about doing the same.

Alberta began negotiations with Kinder Morgan this week after the company halted all unnecessary spending on the Trans Mountain and gave the federal government until May 31 to deliver concrete assurances the line will get built.
First Nations and anti-pipeline groups ralled in March in downtown Vancouver to protest the Kinder Morgan Trans Mountain. (Jonathan Hayward/Canadian Press)

Notley has said government investment would calm spooked investors, but Coleman is skeptical that Alberta alone can break the stalemate.

The political climate in B.C. will remain hostile, and Ottawa has all of the political capital, he said. 

"I think it would make a bigger difference if it were the federal government," said Coleman, who formerly taught at the University of Calgary.

"There is no question that Alberta will continue to do its best to push forward the pipeline.There is more concern about whether the federal government is ready to do what it takes. Private investors aren't going to wait forever."

Uncertainty wouldn't change

Prime Minister Justin Trudeau said on Thursday he would interrupt his nine-day foreign trip to meet with Notley and B.C. Premier John Horgan in Ottawa on Sunday.

While Alberta is urging Ottawa to join forces with them in backing the pipeline expansion, Trans Mountain is an unattractive investment for the federal government, Coleman said.
Alberta Premier Rachel Notley has said her government is considering buying a stake in the Trans Mountain pipeline to help ensure it will get built. (CBC)

"The federal government is trying to make a point that it's possible to attract private investment for national infrastructure in Canada," he said.

"If the only way that happens is by the government buying it out, it weakens the federal government's credibility."

Laurie Adkin, a political science professor at the University of Alberta, notes that being part owner of a pipeline does not solve the Constitutional questions that B.C. is raising about its right to protect the environment within its borders.

The scenario would also open up new questions about its Constitutional responsibilities.

"I don't think the government owning the pipeline will get it out of its Constitutional responsibility, and it's going to make it even more difficult for the government to be seen as a neutral player in respecting Indigenous rights."

What would be the value of the project given this uncertainty?- Jack Mintz

Several First Nations in B.C.'s lower mainland are strongly opposed to the pipeline project.

A full buyout by Alberta would be too risky, said Jack Mintz, the president's fellow at the University of Calgary's School of Public Policy.

The only thing a partial investment would buy Alberta would be more time to fight its political battles.

"I don't think it's a good idea at all," Mintz said "It really doesn't deal with the main issue. And the main issue is political uncertainty. What would be the value of the project given this uncertainty?"

Positions entrenched on all sides

At this point, the governments of B.C., Alberta, and Canada all appear entrenched in their positions, as do First Nations opponents in B.C.'s lower mainland, which have also spent years opposing the project.

"They're leading the charge," said Markham Hislop, a B.C.-based energy reporter. "They're organizing it.

"It's their elders who are out front, lending their moral gravity to the protest. And that's been the core around which local residents are gathering.

"The problem is, everyone is now entrenched in their positions. The Trans Mountain expansion has emerged as a proxy for the integrity of the Canadian natural resources regulatory regime," he said.

Horgan's B.C. government relies on an alliance with the provincial Green Party; Notley built a Climate Leadership Plan that was partially intended to smooth the way for a pipeline to the coast; Trudeau's government needs to show it will assert its federal authority; and First Nations groups have been in opposition to the pipeline for years.

Changing ownership of the line wouldn't seem to affect any of those positions.

"It's hard to imagine with all of these moving parts how anyone could negotiate some kind of a resolution that doesn't end with an explosion of some sort," Hislop said.