Bill Morneau's Kinder Morgan surprise comes with huge price tag, lots of political risk: Chris Hall
Ottawa says buying the company's Trans Mountain pipeline is the only way to ensure the expansion gets built
Bill Morneau handed out his version of a Kinder Morgan surprise on Tuesday, announcing the federal government will buy out the company's Trans Mountain pipeline in its entirety in order to ensure the proposed expansion of the line goes ahead.
Nationalizing an oil pipeline — even temporarily — was never the first option for the finance minister. But it became apparent during Morneau's negotiations with Kinder Morgan that it was the only one that would allow the Liberals to deliver on their promise to get the work done.
"The Trans Mountain project is of vital interest to Canada and Canadians," Morneau said on Tuesday. "Getting (it) built will preserve thousands of good, well-paying jobs."
But getting it done, and keeping that promise, comes with a steep price tag.
Taxpayers will foot the $4.5 billion purchase price. That sum doesn't include what could be billions of dollars in construction costs, or the costs of cleaning up a spill — although Morneau said Alberta's government will share the cost of any unexpected or emergency cost overruns.
And there are no guarantees that the pipeline will return the investment when (and if) a buyer can be found sometime in the future — that selling the line will fetch an asking price that realizes the full value of the public money being invested.
Morneau said many private sector investors expressed interest in the project, though he failed to explain why none of them were prepared to take the same risk with shareholders' money he's taking with taxpayers' money, given the staunch public opposition and ongoing protests against the project at the pipeline's terminus in Burnaby, B.C.
He talked a good deal about how buying the project counters the political uncertainty created by British Columbia's NDP government. B.C. Premier John Horgan remains steadfast in his opposition to the project and has asked the province's highest court to rule on whether it has the constitutional right to impose environmental restrictions.
Big price tag, bigger political risk
Others will dissect the business case behind the federal government's decision, but the political calculations are just as important.
For Morneau and Prime Minister Justin Trudeau, the decision to spend billions of dollars carries considerable risk now and into the future.
There's the prospect of continued protests. There's the possibility, however remote, of a court ruling that sides with the Horgan government.
British Columbia will be a key battleground province in next year's election — a province where all three major political parties are competitive, the home base for Green Party Leader Elizabeth May.
May and New Democrat MPs oppose the project, insisting it is inconsistent with Canada's commitment to reducing climate-changing emissions and that it poses an unacceptable spill hazard to the B.C. coastline.
The Conservatives support the expansion, but insist the Liberals' handling of the file has been so inept that the only option left to the government — after rejecting the proposed Northern Gateway pipeline and seeing Trans-Canada abandon its planned Energy East line — was to build this expanded pipeline with taxpayers' money.
"He has chased away the investment on two other major pipelines … and now he's asking taxpayers to pay for the third," Conservative Leader Andrew Scheer said Tuesday.
The Liberals, befitting their position as the centrist party, come down the middle. Trudeau went into Tuesday's cabinet meeting repeating the government's mantra that "we're going to get that pipeline built."
He and his minister maintained that tripling Trans-Mountain's capacity from 300,000 to 890,000 barrels a day is in the national interest.
Putting a price on the national interest
The Liberals can — and likely will — argue that this decision also takes control of a vital piece of energy infrastructure away from a U.S.-based company.
"We've been saying for many, many months that the pipeline is good for the country not only for the many thousands of jobs it creates, but getting a better price for our crude internationally," Natural Resources Minister Jim Carr told the Commons on Monday.
This isn't the first time a federal government has nationalized a project, or spent billions of dollars of taxpayers' money on a private company. It's not the first time Ottawa put a price tag on the national interest.
Trudeau's father created Petro-Canada in the 1970s to counter the overwhelming U.S. dominance of the country's oil and gas sector.
Ottawa continues to hold an 8.5 per cent share in Hibernia — making it the fourth largest stakeholder behind oil giants Exxon, Chevron and Suncor. The project, which began production in 1997, is a commercial success.
But taxpayers came up roughly $3.5 billion short in the 2009 bailouts of Chrysler and General Motors, even though the Conservative government of Stephen Harper insisted the investment saved the auto sector and thousands of jobs in this country.
It's too early to say whether buying this pipeline will be a money maker or loser for taxpayers, whether the court case started by the B.C. government will drag on for months or even years, or whether the Liberals will get political credit for the decision when they go to the polls next year.
Add it all up, and Bill Morneau's bold decision to spend billions on a controversial pipeline may yield another, very different Kinder Morgan surprise next year.