The Competition Bureau launched a challenge to the Keyera purchase, but stopped short of asking for an injunction.BECQ - BPI
Two years ago, the federal government handed the Competition Bureau the tools it had long requested to help in its campaigns to block takeovers the agency deems to be bad for the country.
Last month, the federal competition watchdog had its first opportunity to wield its newly forged hammer. In early May, the bureau announced it planned to challenge Calgary-based Keyera Corp.’s $5.3-billion purchase of a massive domestic natural gas liquids (NGL) business owned by Plains All American Pipeline LP, which is headquartered in Houston.
The bureau could have used powers it gained in 2024 – after four years of persistent, persuasive lobbying by Matthew Boswell, who stepped down as competition commissioner in December, and his colleagues – to get an injunction to stop Keyera from closing the deal.
Lawyers expected the agency to do just that, as the takeover would mean Keyera and one competitor, Pembina Pipeline Corp., would dominate the NGL sector in Fort Saskatchewan, Alta., a key energy hub.
Instead, the government agency, now in the midst of a succession search, launched a challenge to the Keyera purchase, but stopped short of asking for an injunction. The bureau allowed the deal to close in mid May.
Plains got its money and exited Canada. Keyera gets to run the combined operations while hearings with the bureau play out, a process that could take years.
“We believe the market should act as if Keyera keeps 100 per cent of the assets,” Robert Hope, a Bank of Nova Scotia analyst, said in a recent report.
Competition lawyers are struggling to understand the government agency’s tactics. By letting the Keyera purchase close, lawyer Michael Kilby, head of the competition and foreign investment group at Stikeman Elliott LP, said in a report: “The Bureau is now in the position of having allowed precisely what its advocacy said the law must prevent.”
The bureau hasn’t explained why it chose to leave its shiny new takeover-blocking tool in its toolbox.
The federal government’s push for Canadian champions and the bureau’s internal succession dynamics clearly shaped the decision to let Keyera grab control of a key domestic energy industry from a U.S. peer.
Prime Minister Mark Carney and key ministers such as Mélanie Joly, with industry, and Tim Hodgson, with energy and natural resources, have made it clear that Canada needs more Keyeras – companies with the ambition to scale up.
Alberta Premier Danielle Smith also endorsed the Keyera takeover. The federal and provincial governments want to ensure decisions in sectors such as energy are made in Calgary, rather than Houston.
At a press conference in early May, when the bureau announced its opposition to the Keyera takeover, reporters asked acting senior deputy commissioner Anthony Durocher why the bureau chose to oppose the government’s industrial agenda.
Mr. Durocher responded by saying the bureau’s only focus is on competition issues.
However, the decision to stop short of blocking the Keyera takeover with an injunction shows Mr. Durocher and his colleagues are paying attention to the political winds.
The bureau’s lawyers also made the decision on how to play the Keyera transaction against the backdrop of succession, as the federal government searches for a new competition commissioner.
There are at least two internal candidates for the job, Mr. Durocher and the bureau’s interim commissioner, Jeanne Pratt, according to four sources involved in the succession process. In the past, the bureau has tended to promote from within. The Globe is not naming the sources because they are not authorized to comment publicly on the process.
There are also at least two strong external candidates, in the form of experienced, bilingual competition lawyers from major firms in Montreal and Toronto who are pitching for a career-defining stint running the bureau.
The ideal candidate would be a leader who can balance the need to stoke competition in a Canadian economy dominated by oligopolies in key sectors with an urgent demand to create more domestic champions with global ambitions.
It’s a balancing act that requires compromise, the sort of approach shown in the decision to let Keyera move forward with a deal that stifled competition in a corner of the natural gas market.