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Kinder Morgan’s Bailout Blunder

As published in the Victoria Standard: July 3, 2018

The Trans Mountain pipeline intended to ship Alberta bitumen to the Pacific may be yet built using a familiar model: private profit at public risk. Beyond the financial hazard of the Kinder Morgan bailout, I am equally concerned about the project’s potential impact on the environmental, First Nations and Canadian resource sovereignty.

If no private investor appears by this August, the Trudeau government plans to invest 4.5 billion public dollars in the Kinder Morgan pipeline extension project, treating this asset purchase as a crown corporation. Since the company has estimated the full cost of the project at $7.4 billion, fears of cost overruns are reasonable. Naturally, Kinder Morgan has offered glowing predictions of future public revenues and Finance Minister Morneau has dismissed the financial risk.

Public subsidy for the energy sector has long been standard policy for Canadian governments so the proposed Kinder Morgan bailout was predictable. Aside from a sketchy financial history and Enron connections, there is nothing stopping Kinder Morgan from seeking commercial funding and following the rules of the so-called free market. I have seen no mainstream commentary on Kinder Morgan’s apparent unwillingness to support Canada’s banking sector, ironic since at least one outlet, Post Media, is majority-owned by TD Canada Trust.

Federal bureaucrats and pipeline executives seem unaffected by Kinder Morgan’s recent admission that late May’s Kamloops spill actually involved 4800 litres of crude oil, not the mere 100 litres originally reported. This timely leak may remind people of 2015, when 2,700 litres of crude oil seeped from a tanker into Vancouver’s English Bay. The City of Vancouver has yet to receive federal clean-up funding, a disturbing and irresponsible delay under any circumstances. As well, the recent spill may trigger memories of past disasters in Alberta. The worst spill was the April, 2011 leak of 4.5 million litres of crude oil that contaminated lakes and rivers near the First Nations community of Little Buffalo.

It’s instructive to compare the proposed Kinder Morgan bailout with another subsidy deal. In October, 2011 Royal Dutch Shell announced that the governments (citizens) of Alberta and Canada had agreed to contribute $865 million toward the cost of “a carbon capture and storage facility…” It seems Trudeau is as willing as Stephen Harper was to subsidize foreign corporations who routinely downsize and/or ship jobs overseas when convenient.

Less well-known is the possibility that Trudeau is funding Kinder Morgan to avoid a costly trade dispute with China according to the terms of the 2014 FIPA (foreign investment promotion and protection agreement) deal. This concerns Petro China’s 2009 acquisition of a 60 percent stake in two Alberta oil sands projects and the 2013 purchase of Nexen, Canada’s third-largest petroleum company, by a state-owned Chinese company. The terms of FIPA oblige Canada to protect Chinese business assets and to ensure that they receive the same treatment as domestic companies. Critics of these deals consider them a danger to Canada’s environmental and economic sovereignty.

Prime Minister Trudeau may also be manipulating the Kinder Morgan deal for future political advantage at public expense. While such behaviour cannot be ignored if we desire more than naked ambition from our elected officials. Trudeau recently pledged to introduce legislation emphasizing the federal government’s right to protect interprovincial matters like trade and pipelines. Such legislation poses a political hazard for a Liberal government with 18 vital British Columbia seats compared to three apparently less vital Alberta seats.

Since both the BC government and many citizen groups opposes the Trans Mountain deal, the legislation would likely face a divisive court challenge and harm Liberal prospects in BC. On the other hand, delaying federal legislation while offering a public subsidy to Kinder Morgan cleverly keeps the company involved, appeases BC and might reduce anti-pipeline protests.

I imagine Stephen Harper might grudgingly admire Trudeau’s attempts to temporarily please almost every player in the pipeline game while buying time for his government to finesse the next election. Therefore, it is likely that Trudeau will advise Finance Minister Bill Morneau to continue secretive negotiations with U.S. - owned Kinder Morgan. The Minister made a point of stating that the discussions will be private, unlike the financing, an irony obviously lost on this wealthy man.