Alberta Premier Danielle Smith, left, and Ontario Premier Doug Ford with a map of the Northern Shield pipeline proposal in Calgary on Monday.Jeff McIntosh/The Canadian Press
Suddenly, pipelines are all the rage. Time was when you couldn’t get a pipeline built in this country, for love or money. Three pipeline proposals – Northern Gateway, Energy East and Keystone XL – came and went, dead of political hostility, regulatory obstacles or both.
Governments, some of them anyway, seemed positively eager to discourage them. Federal legislation, Bill C-69, became popularly known as the “No More Pipelines Act” for the long list of factors it mandated regulators to take into account before approving a proposal. Premiers competed to advertise their horror at the very idea of (mercy!) a pipeline from another (ugh!) province invading their virgin soil.
Well, that was then (i.e. about a week ago). Now we’re wading around hip deep in all the oil that will notionally be delivered by notional pipelines, with governments’ enthusiastic support. And by enthusiastic, I mean “taxpayer-funded.”
There is, of course, the famous agreement between the Prime Minister and the Premier of Alberta to allow a “private sector constructed and financed” pipeline to carry heavy oil to the north coast of British Columbia, now revised as an agreement to build an almost entirely government-financed pipeline to the south coast of British Columbia. Cost: an estimated $35.2-billion to $43.7-billion. And by estimated, I mean “probably four times that amount,” when all the bills are paid.
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There’s also the newly minted agreement between the premiers of Alberta and Ontario to build another pipeline, the Northern Shield Energy Corridor from Hardisty, Alta., to Sarnia, Ont., at some indefinite point in the future.
Cost: Who knows, but it, too, will be in the billions, if not the tens of billions. And by billions, I mean, in all probability, “directly out of your pocket.”
There’s even talk of reviving the proposed Energy East pipeline from Alberta to New Brunswick. Not much talk – Quebec is still not on board – but talk.
How did we get here: from governments doing everything they can to stop pipelines from being built, to governments doing everything they can to ensure they are built? Surely policy should aim for the middle ground between these two, neither unduly impeding the construction of pipelines via too-tight regulations, nor subsidizing them, explicitly or implicitly.
A pipeline is ultimately an investment like any other. If its social benefits exceed its social costs, it should happen. If they don’t, it shouldn’t. Usually the private costs and benefits of an investment are a good first approximation of the social. The necessary and sufficient test, as a rule, is whether a project’s customers are willing to pay more to use it than it cost to build and maintain.
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If social and private costs really do diverge in important ways there may be a case for government intervention: That’s the argument for carbon pricing, for example. But the onus should generally be on governments to show what market failure requires them to intervene, or at least nod to it.
There are non-economic arguments for building pipelines, but those are distinct from the merely uneconomic ones. When proponents, for example, wax lyrical about a pipeline’s alleged massive economic benefits – companies can get their oil to market! – they are making a good argument for charging people to use it, not subsidizing people to build it.
Non-economic arguments, everything from national unity to geopolitical strategy, are harder to assess. The geopolitical case is probably the most persuasive: We’re in a kind of wartime economy at the moment, literally and figuratively, with the United States threatening our independence and Russia threatening Europe’s. When your very existence is in question, economic concerns rightly take a backseat.
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But let us not overlook the role played by those two old friends, politics and private gain. It was always apparent, since the signing of the old MOU, that neither the federal Liberals nor the Alberta Conservatives, for different reasons, could tolerate another failed pipeline bid.
Once potential private sponsors figured out that the pipeline must be built, no matter what, they started visibly trying to game the two governments, claiming the terms of the agreement, namely the increased industrial carbon price and Pathways carbon-capture project, made it too costly for them to participate.
Possibly they hoped they would get the subsidy. Instead, the two governments elected to build it themselves, via the federally owned Trans Mountain Corp. – legacy of a previous pipeline bailout – and the Alberta Petroleum Marketing Commission, thus calling both the companies’ bluff and their own at the same time.
So the good news – we’re building pipelines now – is also the bad news. The No More Pipelines Act was one thing, but the Any And All Pipelines (No Matter How Uneconomic) Act is not necessarily an improvement.