The Trans Mountain Infinity War

Kinder Morgan’s planned expansion of the Trans Mountain Pipeline received the necessary federal and provincial approvals to proceed. The 2017 election in British Columbia brought a narrow defeat for the provincial government of Premier Christy Clark which gave its approval for the project, and the new government, a coalition of NDP and Green Party Members of the Legislative Assembly led by Premier John Horgan, has followed through on campaign promises to use “every tool in the toolbox” to block the project: court challenges, protests, and more if necessary.

“John Horgan, has followed through on campaign promises to use “every tool in the toolbox” to block the project: court challenges, protests, and more if necessary.”

The neighboring province of Alberta, where the Trans Mountain Pipeline and the oil it carries originates, was stunned by British Columbia’s reversal – particularly in the wake of the cancellation of the Enbridge Northern Gateway Pipeline in deference to BC concerns, and the cancellation of TransCanada’s Energy East Pipeline to the East Coast due to objections from other provinces, particularly Quebec.

Responding to the ongoing uncertainty over whether the hard-won project approvals will be enough, as they are from a legal perspective, to allow the expansion to proceed, Kinder Morgan CEO Steve Kean indicated to his shareholders and to the public that unless the uncertainty could be resolved by May 31, 2018, Kinder Morgan would cancel the $7.5 billion project and attempt to mitigate the $1.5 billion it has spent thus far to protect the company and its shareholders from further losses.

Then just two days ahead of the May 31 deadline, the federal government committed $4.5 billion to purchase the Trans Mountain pipeline from Kinder Morgan. Despite this apparent resolution to the dispute, it has raised some existential questions about the energy economy of Canada.

Is there a price for being American? Kinder Morgan is a U.S. company, one that has operated in Canada for years and employs more than a thousand Canadians. It has worked to address concerns throughout the approvals processes at the federal, provincial, and local levels. Still, it has been treated by BC as an outsider, and BC politics has treated Kinder Morgan’s investment as an unwanted invasion. British Columbia supporters of the Horgan government argue that their concern is for the Earth’s environment, and truly global, but the campaign against Trans Mountain has been rather parochial; the interests and concerns of neighbors in Alberta and Washington state (which refines oil it receives via the Trans Mountain pipeline today) have been discounted.

And the dispute over the pipeline was resolved only when Canadian taxpayers bought out its U.S. owners.

Is there a benefit to being Canadian? It would not appear so, since BC’s Alberta and Washington state neighbors and their economic well-being are being threatened equally by Horgan’s threats. The Canadian federal government promised the Trans Mountain Pipeline would be built in the country’s economic national interest. Ottawa had to acquire Kinder Morgan’s interest in the project, but in so doing confirmed federal supremacy and provided clear proof that Canada’s version of federalism still functions. That is good news for all Canadians, including British Columbians, who benefit from a stronger national economy.

Is there a price to being not American? During the Obama years, TransCanada’s Keystone XL pipeline extension provided clear evidence that not being American could leave a company at a disadvantage in the U.S. federal system when the federal government sided with local opponents to tie a project up in court and inconclusive reviews and decision processes. According to numerous polls, the majority of the American public thought the Obama policy was grossly unfair. Obama’s successor President Donald Trump campaigned on an “America First” economic platform but granted swift, unconditional approval of a presidential permit. For now, it seems that not being American is not necessarily a liability for Canadians.

“The Canadian federal government has promised the Trans Mountain Pipeline will be built in the country’s economic national interest.”

Is there a price for being Canadian? Last year Canada celebrated the 150th anniversary of Confederation and yet significant interprovincial trade barriers remain in place. At one point, BC and Alberta got along well-enough to initiate a Trade, Investment, and Labour Market Agreement (TILMA) that was expanded into the New West Partnership once Saskatchewan and Manitoba joined in. Yet national efforts from the Agreement on Internal Trade to the Canada Free Trade Area launched alongside the ratification of the Canada-EU Comprehensive Economic and Trade Agreement (CETA) in 2017.

Now comes the Comeau decision from the Supreme Court of Canada which has upheld the right of provinces to institute trade barriers against their neighbours. Being Canadian appears to come with an increased economic burden imposed on your commerce by your compatriots – while federal economic redistributive policies and equalization payments add to your costs if you are in a wealthier province.

In choosing to resolve this dispute by investing $4.5 billion to buy out Kinder Morgan’s interest in the Trans Mountain pipeline, Ottawa has imposed the price of retaining a national economy on all Canadian taxpayers. For some reason no one ever questions the “social license” for a tax expenditure.

Is there a benefit to being American? For many Americans, the Trump election proved that the answer is yes. When your neighbors impose costs and burdens on you, you can defend yourself by voting for change at the national level and eventually get it. Other Americans clearly intend to use democratic means to fight back in the 2018 midterm elections, and the 2020 presidential elections after that.

Kinder Morgan can now walk away from Trans Mountain Pipeline and expansion, and it will almost certainly shift its capital and attention to projects in the United States. And Canadian firms like Enbridge (with its approved expansion of Line 3 to the United States) and TransCanada (now working through a decision on the Keystone XL project) are seeing the merits of investing in a market that works, albeit in a noisy and litigious way.

Canadian energy companies that have sold into the U.S. market for decades may now look to the potential of American tidewater to bring Canadian resources to global markets. Other Canadian firms may come to see regulatory and tax reforms in the United States creating a more welcoming market for doing business than they find at home in Canada.

Trump’s rude, crude, and often nasty persona is a turn-off for most Canadians. And an “America First” president who threatens to wreck NAFTA is hard to see as a friend to Canada. But the Trans Mountain War and its resolution should have some Canadians asking, “is there anyone around here who will put Canada first?”

“Canadian energy companies that have sold into the U.S. market for decades may now look to the potential of American tidewater to bring Canadian resources to global markets.”

Christopher Sands is Senior Research Professor and Director of the Center for Canadian Studies at the Nitze School of Advanced International Studies (SAIS) and a nonresident Senior Associate at the Center for Strategic and International Studies (CSIS), both in Washington, D.C.