This is mostly going to be me processing yesterday's announcements in Alberta and BC. I haven't quite worked out what I think of it all yet, and maybe by the end of this I will have come to some kind of conclusion ... I'm not sure. What follows is going to be, at best, slightly ordered stream of consciousness writing.
So, what was announced? Well, basically, BC got a whole bunch of Federal funding for some major infrastructure projects with a guarantee that the Tanker Ban would remain in place; and Alberta got a commitment to build what amounts to a third line along the TransMountain pipeline route.
But that's far from the whole story here.
The Material Things
In terms of economic development investment, BC comes out of this with major investments in multiple industries central to the BC economy - mining and forestry in particular, but others as well. Infrastructure gets major boosts, including funding for upgrading/replacing the George Massey Tunnel in Greater Vancouver. In many ways, BC makes out very well from the agreement.
Alberta appears to come out of this with a commitment to the creation of a third pipeline along the TransMountain right of way. That's significant in itself. Concerning to me is that the publicly-owned TransMountain corporation has been tapped with responsibility for building this pipeline, and it appears that funding it is going to happen with public dollars. I'll come back to this later.
The Political Things
I think yesterday was much more about the political matters on the table, and a whole lot of it boils down to some very interesting "stick handling" of the issues by the Carney government.
Heading Off A Clash Between BC and Alberta
When the announcement of the agreement with BC came out in the morning, the first thing that I noticed was the guarantee around the tanker ban. At that point, I mused that either a certain Premier in Edmonton was suddenly apoplectic with rage, or something else was going on. When there was silence from the UCP through the early afternoon hours, I suspected there was more to this.
The tanker ban is a major point of friction between Alberta and BC, and there was no question when there was a "leak" of possible routes that Alberta was considering that the intent was to provoke confrontation with both BC and Ottawa. When Carney promised that the tanker ban would remain in place, that had to mean either Carney was going to "head to head" with a resistant Alberta (which would not have been surprising - the tanker ban itself is basically "red meat for the UCP base), or he had a side deal in the works with Alberta that would result in a third line down the TransMountain route. To this point, Carney has seldom been publicly confrontational with any Premier and it would be very out of character for him to engage in that now.
What he appears to have engineered is classic political compromise - BC gets a bunch of funding in return for not making a huge fuss about a new pipeline, and Alberta gets a new pipeline, but doesn't get exactly the route that the UCP has been angling for.
The First Nations Angle
At this point, the First Nations perspective has yet to be discussed meaningfully. Given recent comments from the UCP towards First Nations in Alberta, the chances of getting any kind of agreement with BC First Nations with a route across north-central BC seems very, very remote indeed. That kind of pugilistic attitude is not conducive to negotiation, and it sets a tone that quite rightly would make bands already opposed willing to become outright militant about it.
We have yet to see what the consultation process for the TransMountain route will look like. I expect to see some protests, but whether or not that gets very far is unknown. The degree to which those protests will be effective is mitigated by the fact that they are essentially re-litigating the TMX situation from a decade ago. It may delay things somewhat, I'm not at all convinced that it will stop the pipeline being built.
From this point of view, Carney has taken two major cards off the table - the tanker ban and routing the pipeline through the rain forests of North Central BC both matters which were guaranteed to provoke enormous resistance from BC, both politically as well as on the ground. It may well have also substantially reduced the friction around indigenous consultation and consent as well. First Nations consultation/consent may yet turn out to be the spoiler for this deal - we'll see.
Taking A Card Out Of A Separatist Danielle Smith's Hand
One of the other issues here is Danielle Smith's duplicity when it comes to the separatism card. On one hand, she clearly has taken multiple steps to facilitate the actions of the separatist wing of the UCP, but on the other hand, she also swears up and down that she is a federalist and will be campaigning for Alberta to remain in Canada.
This set of deals makes it very hard for Smith to claim that "federalism doesn't work", and in some ways forces her hand regarding what she says over the summer campaign season leading up to her bag of referendums in October. This puts her personally very much at odds with her own party, which is increasingly separatist.
I don't put it past Smith to simply pivot and start pushing separatism on other grounds (immigration mostly), but she will have a much more difficult time arguing that "Ottawa is trying to block Alberta's ambitions".
Similarly, it makes it more difficult for Smith to attack BC on the same grounds.
Open Issues
There is a stack of open issues here.
TransMountain has been tapped to built the pipeline itself, and Pembina Pipeline Corporation has apparently "sort of committed" to being a partner in the project, taking a 10-20% stake in it if it progresses.
This has a number of dimensions to it. First, it tends to reinforce the broadly expressed opinion that there is little appetite in the O&G industry for this pipeline today. The fact that Pembina's own news release avoids talking about any immediate financial commitment is concerning here. This doesn't look much like a "proponent" so much as a hesitant investor scenario.
TransMountain itself remains owned by the Federal Government through the Canada Development Investment Corporation means that it isn't a private sector proponent itself, and in this case seems to have had the decision made for it through political channels.
Then there is the whole open question of exactly where is the > $30Bn that this is expected to cost going to come from? Right now, the suspicion is that taxpayers are on the hook for it, and that may not play particularly well, regardless of what words Carney and Smith wrap around it.
Closing Thoughts
As I write this, I find myself thinking that yesterday's announcements were more about political stick handling and compromise than anything else. I think Carney moved the way he did specifically to stop what would have been an acrimonious fight between Alberta and BC (a fight which would have inevitably drawn the Federal Government into the fray as well).
Reflexively, I don't like the idea of anything that gives Danielle Smith what she's demanding - I simply do not trust her to be honest about anything, and I expect her to simply twist things and lie later. Giving her a pipeline is unlikely to satisfy either Smith or her separatist base in the long run.
I feel as though she spun the whole story around a pipeline into "you can't get a pipeline built unless public dollars de-risk the project", and either Carney fell for it, or he decided that calling it out wasn't worth the fight it would create.
Will the resulting pipeline ever be profitable? There are questions today as to whether or not the TMX project will ever produce enough profit dollars to recoup the investment by taxpayers. With shifting energy demands in the very regions that this project will sell into, one has to similarly wonder if the $30+ billion can ever be recouped.
While Smith is bragging about how this will facilitate a near doubling of Alberta's oil production over the next decade, I am less convinced. Between the chaos that her nurturing of the separatists in Alberta has caused, and a shifting world energy focus that is moving away from burning fossil fuels, I am increasingly reluctant to say "oh yes, oil projects will continue to expand". Even the most optimistic projects put a "peak oil" demand a mere 25 years away, projects like pipelines and oil sands extraction have profitability horizons longer than that. I can't see smart capital being willing to invest in that domain.
I am personally opposed to building a pipeline for private capital interests when private capital is unwilling to invest in the project up front. I have long been a skeptic of the oil industry, and I think history speaks poorly for the industry's track record. Taxpayer dollars already paid for the construction of TMX after private capital pulled out, I do not see this as a wise investment at this time.
So, was yesterday's announcement anything that makes sense? Outside of momentarily disarming what could become a polarizing fight with BC, it appears to have been driven mostly by political considerations, and its economic value is questionable outside of the commitments that BC was able to garner. BC is the clear winner here, coming away with billions in investment commitments which will help its economy. Alberta's picture is much less clear. I suspect that if the UCP stays in power in Alberta, the decline already underway will accelerate. If Smith continues to feed the separatists, no amount of investment by Ottawa in a pipeline will save the province from itself.
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