CHELSEA, QUE.—What a colossal mistake Justin Trudeau has made in buying the Kinder Morgan pipeline.
He not only imperils his re-election chances in 2019, he risks squandering the small, progressive steps his government has taken over the last few years: reform of the criminal justice system, the beginning of practical remedies for struggling Indigenous communities, artful handling of the difficult trade file, the push for gender parity, and almost-forgotten efforts to shore up the Canadian Pension Plan and reform the Child Benefit.
He also risks the future of talented cabinet ministers and Liberal MPs, some of whom must harbour private doubts about the multi-billion dollar bailout. He gives the struggling New Democrats a potentially winning issue and opens the door to a return to Conservative rule. He is not only betraying the promise he once represented, but the progress his government has made in other areas.
That said, the election is still months away and Trudeau’s future isn’t the most important factor at play. What matters more is the clear incentive the prime minister is offering the oil industry to extend, and possibly expand, production in the oil sands at a moment when evidence of devastating climate change is undeniable.
If the Kinder Morgan expansion is built, either by the Liberal government or by private investors, it will carry three times more bitumen to the Vancouver harbour from Alberta and further dim any faint hope of meeting our Paris targets. No amount of green rhetoric, and no timid, tentative, federal carbon tax can disguise the stark truth that greenhouse gas emissions will continue, even accelerate, their upward trajectory.
And for what?
For a government that believes in “evidence-based” policy making, precious little proof has been advanced to back up dramatic claims made for the pipeline expansion. We are told repeatedly by Trudeau and his ministers, and by Alberta Premier Rachel Notley, that the $7.4-billion project will create 15,000 thousand good-paying jobs in Alberta, and, by extension, elsewhere in Canada. It will reassure foreign investors that Canada not only welcomes them, but is ready to help out when their business plans go sour. It will flood government coffers with royalty revenues and corporate taxes to pay for schools, hospitals, and soccer fields. It will stimulate so much goodwill in Western Canada everyone will willingly sign on to an ambitious climate change program.
There hasn’t been a scintilla of credible proof advanced for any of these claims—no cost-benefit analysis, no risk assessments, nothing but warmed-over submissions from the oil sector, or the big banks. But there is a growing body of critical analysis from independent economists, non-partisan research institutes, academics and alternative media, especially the National Observer and The Tyee, based in Vancouver. And their reporting paints a very different picture (although they are rarely invited to share their insights on network television panels).
Justin Trudeau also risks the future of talented cabinet ministers and Liberal MPs, some of whom must harbour private doubts about the multi-billion dollar bailout. The Hill Times photograph by Andrew Meade
Earth scientist David Hughes, who spent three decades with the Geographical Survey of Canada and is an expert in the nation’s energy sector, has written columns and studies arguing that job predictions for the pipeline are inflated. In an exhaustive recent report—an attempt, he has said, to establish some basic facts—he reports that 52 per cent of jobs created in the oil and gas sector overall are short term construction jobs. Further, employment in the industry has flatlined since 2006, partly because of the declining activity and partly because of automation.
According to Kinder Morgan’s own submissions to the National Energy Board, the pipeline twinning will create 40 permanent jobs in Alberta, 50 in British Columbia and some 2,500 short-term construction jobs. And while the pipeline could save corporate jobs in Calgary’s emptying office towers, oil and gas workers now make up only 2.2 per cent of the national work force, and seven per cent in Alberta. Spending $4.5-billion to purchase a 65-year-old pipeline—with the prospect of $8-billion to $15-billion more to complete the expansion—sounds like the country’s most expensive job-creation scheme ever.
The prime minister also repeated in the Commons last week that Canada must get its oil to tidewater, and from there to Asian markets, because it is “losing $15-billion a year” by having only one customer—those heavy oil refineries in the Texas Gulf. But Hughes, writing in Maclean’s, has challenged that figure, which was drawn from a February report by Scotiabank. At that time, “exceptional circumstances” and supply disruptions drove the discount up to $32-per-barrel. But the so-called “light-heavy discount” is volatile and normally sits at $13-per-barrel to compensate for the higher cost of refining and transporting the sticky Alberta product.
The true explanation for the fake urgency created by Justin Trudeau and Rachel Notley, pictured, is political: both leaders need a pipeline more desperately than anyone, even the oil industry, writes Susan Riley. The Hill Times photograph by Andrew Meade
In fact, the Scotiabank report noted (but the pipeline’s defenders ignore) that Canada normally loses $7-billion annually because of the discount. Even this will strike some as too much, but, as Vancouver economist and former senior private sector executive, Robyn Allan, writes in the National Observer, the discount could be even higher if Alberta bitumen ever gets to Asia, owing to the high cost of shipping overseas.
Allan accuses Trudeau, Notley, and other pipeline boosters of a “betrayal of public trust” for distorting the findings of the Scotiabank report and, apparently, of doing no independent research. Nor has there been any serious discussion of creating more upgrading capacity within Canada, both to keep jobs here and to mitigate environmental risks of exporting toxic and unpredictable diluted bitumen.
As for the payback to provincial and federal coffers in corporate tax and royalties, that figure has dropped significantly over the years as oil prices and profits skyrocketed and slumped. Hughes reports that royalty revenues have declined 63 per cent since 2000 in Alberta, noting “dramatic and sustained revenue shrinkage” even in the boom years
The only unambiguous winner, so far, is Kinder Morgan which valued its existing pipeline at $550-million in 2007. It is going home to Texas with billions of Canadian taxpayer dollars, a golden parachute out of a project it long ago determined was too risky.
The true explanation for the fake urgency created by Trudeau and Notley is political: both leaders need a pipeline more desperately than anyone, even the oil industry. (Two other pipelines, Keystone XL and Enbridge 3 have been officially approved and construction could begin within months.)
Notley’s already wobbly chances of re-election would disappear had she not secured this pipeline and Trudeau’s vaunted carbon tax—modelled on Alberta’s and one of his signature policies—would implode and probably will anyway. This panic has, perhaps, made them incurious about thoughtful and persuasive counter-narratives.
Whatever the explanation, they have clearly convinced themselves—and been convinced by an embedded and well-financed oil lobby—that the Kinder Morgan expansion is in the “national interest.” They have yet to convince the nation.
Susan Riley is a veteran political columnist who writes regularly for The Hill Times.
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