It is a Kinder Surprise. Taxpayers have bought an expensive version of the chocolate egg. We can only guess what’s inside and what it will create.
No matter your position on the Trans Mountain pipeline twinning, Tuesday (May 29) is an extraordinary day in Canadian history. Financial folly, perhaps. Political bluff, possibly. Federal assertiveness, certainly.
The Justin Trudeau government’s decision buys the Trans Mountain project assets of Kinder Morgan Canada for $4.5 billion now, at least $7.4 billion if it remains owner to complete the pipeline, and some unspecified indemnity for some unspecified entity at some unspecified time to take the project back.
It is a lock, stock and barrel move. Lock, meaning securing and proceeding with construction the much-protested project. Stock, meaning a premium for Kinder Morgan shareholders. Barrel, meaning the eventual means to transport diluted bitumen to saltwater and the eventual world market.
That this day would come was clear many weeks ago when Kinder Morgan decided enough was enough. It wanted a certain path to construction of a federal approved project. Ottawa could not do so—only the courts appear to hold that power, and even then are bound to be defied by protest—so Ottawa used our dollars to make the company whole.
But it was not a day Trudeau would have wanted weeks, months or years ago. This is not the issue upon which he wants to pin the future of his government—it is not a winner anywhere and it is a loser in places—yet for the time being it is the signature move upon which he will be judged in 2019.
The prime minister had little other choice when he declared in late 2016 that the project would proceed, even though he was revamping the process by which it had been approved.
He needed a climate change action plan with Alberta’s support. He needed the economic bounty of the oil sands. And once the BC NDP government was elected, he needed to assure investors and provinces that a federally approved project could not be thwarted.
He threw a curve ball to the plate Tuesday in B.C.’s court action. B.C. now has to assert some authority over a Crown corporation, not merely a federal project. Lawyers must sense opportunity to deal with questions of paramouncy.
B.C. Premier John Horgan sounded serene initially. He feels better that the new project owner is, like him, accountable to the public—better, at least, than a company mainly accountable to shareholders. He can keep pushing the federal government to improve marine safety improvements to mitigate what would be catastrophe for all involved if there were a spill or a serious environmental impact. And he can suggest the UN Declaration on the Rights of Indigenous Peoples is not recognized with a pipeline insufficiently consented.
Horgan seems willing to keep letting the permits for the project and letting the courts do their work, come what may and when. He can walk softly now, knowing he can let others carry the big stick.
If Trudeau has a broad political concern, it is not with a pipeline opponent like the federal NDP but with a Conservative Party that has critiqued his temerity on the project. That concern doesn’t hold any longer. But his B.C. seats, particularly his Metro Vancouver seats, hold jeopardy that was made no less so Tuesday. No wonder NDP leader Jagmeet Singh is eyeing the byelection in Burnaby to secure a Commons seat.
But Alberta Premier Rachel Notley is in the toughest spot of all, with an election looming and a formidable new foe in Jason Kenney. Even the federal rescue of the pipeline may not be enough to rescue her government.
Still, all the political uncertainty is nothing next to the financial uncertainty of Tuesday’s sweeping gesture.
The Trudeau government has nationalized, at least temporarily, a project that ought to be a private enterprise. It is, for the time being, the Trudeau Mountain project. It will be a test to see if federal oversight is as rigorous as corporate oversight on project costs, and how the government keeps all the talent pool in place in a Crown corporation bound to be less generous than a publicly traded company.
It is foolhardy, in the face of court challenges that might scupper the project, for Finance Minister Bill Morneau to suggest taxpayers will not foot some sort of bill. Only if a third party enters the fray—and there is obviously no lineup today, or the announcement would have been different—might the Canadian public be amply compensated. Along the way there are bound to be asks and asks of the treasury.
We will have the foil-wrapped Kinder Surprise whole and in relative safe keeping in the meantime. It will be some time before we find out what’s inside, presumably before the chocolate melts or goes stale.
Kirk LaPointe is editor-in-chief of Business in Vancouver Media Group and vice-president of Glacier Media.