Trans Mountain cries for help but Alberta's bailout won't save it

On Sunday night, the infrastructure company Kinder Morgan announced that it is mothballing the planned expansion of its Trans Mountain pipeline and will cancel the project unless it has an agreement among “stakeholders” before May 31. Kinder Morgan’s press release goes on to describe what such an “agreement” means: the government of British Columbia has to promise to stop farting around.

The company says it had been hoping for legal “clarity” on whether it was going to be allowed to expand Trans Mountain, but with every regulatory box it checks and every court case it wins, the threats from B.C.’s government just keep getting louder and less specific. The pipeline expansion, KM says, “is now facing unquantifiable risk”.

Now that’s an interesting phrase. The implication is that “unquantifiable risk” is something the shareholders of a publicly traded company will not tolerate. The response of the premier of Alberta, whose revenues depend on the ability to export oil in as many directions as possible, was to suggest that the province might seek an equity stake in the pipeline. Jason Kenney, the leader of Alberta’s United Conservative opposition, quickly endorsed this idea — while continuing to castigate the Alberta and federal governments for failing to invoke whatever magic would have gotten the pipe laid down in B.C. over the objections of its government and some of its coast-dwelling citizens.

As an Albertan I have an overall economic interest in seeing pipelines built: every extra penny that oil exports bring into the province is one less that payers of individual taxes have to supply. And I believe, most conveniently under the circumstances, that it should be possible for Canada to undertake large economic megaprojects in a manner consistent with the rule of law.

So I could use a little help with the whole public-investment part of this. Kinder Morgan really is facing “unquantifiable risk” in expanding Trans Mountain: we don’t have to take them at their word about that. Surely it is true no matter what conciliatory noises the B.C. government may be forced, somehow, to make. The unquantifiable threat to the pipeline is not necessarily from B.C.’s government, but from construction delays created by protest tactics and possibly activist sabotage.

As much as many Albertans would like to see pipeline protesters handled by means of flamethrowers and Dirty War tactics, and as much as they desire a federal government that is willing to ignore the international backlash that would result … well, this seems a vain hope, and it would be equally vain if different parties were in power all around. The “rule of law,” as it applies to large infrastructure licensed by a federal government that lives very far from its footprint, simply does not enjoy sufficient moral standing.

What is bizarre is that the Alberta government’s proposed solution to the problem — buying part of the pipeline in order to relieve Kinder Morgan of the short-term debt required to fund its expansion — seems to concede this. On hearing from KM that the company faces intolerable risk, and being confronted with a conjured deadline, the harmonious joint response from premier Rachel Notley and opposition leader Kenney is: oh, your shareholders don’t like risk? Hell, that’s no problem! We’re a government! (Or a government-in-waiting.) Our shareholders don’t mind unquantifiable risk: we’ll take it right off your hands. How much ya got?

The logic of how oil is sold in this country makes a public stake in pipeline construction a reasonable thing, economically. The treasury of Alberta is the legal owner of exported oil, and would benefit from the option value of having better and more manifold access to tidewater. But what Alberta is being asked to pay for here is merely a postponement of a drop-dead date for the project.

It is hard to see how Alberta public co-ownership of the pipeline would reduce the “unquantifiable risk” inherent in building a pipeline on the doorstep of a population of motivated ecological radicals. If it goes ahead, the coastal saboteurs who despise Alberta will accuse it — perhaps not without justice — of having given a Texas pipeline giant a “bailout.”

Such a bailout may be worthwhile, but it introduces the prospect of an economic negotiation strictly between Alberta and Kinder Morgan: surely we are going to want the best terms in bargaining with KM over equity, just as we want the best sale price for our oil. Is adding another negotiation to the pile of litigation and political struggle supposed to help make the pile smaller somehow? And is this negotiation going to take place on Kinder Morgan’s schedule? Unless a deal for an equity share in the pipeline has already been made behind the scenes, it would seem that Notley and Kenney, those great allies, have already revealed our hole cards.