Prime Minister Mark Carney, right, and Alberta Premier Danielle Smith announce a proposed pipeline from Alberta to the B.C. coast, in Calgary on Thursday.Todd Korol/The Canadian Press
The bill for a decade of overzealous regulation and swirling uncertainty came due last week, with the federal and Alberta governments announcing that tens of billions of taxpayer dollars will be used to build a bitumen pipeline to the Pacific Coast.
That, despite the vow in the 2025 Ottawa-Alberta memorandum of understanding that such a pipeline would be “private sector constructed and financed.”
In an ideal world, a private sector proponent would have able to look past regulatory risks, political opposition from the B.C. government and opposition of (some) Indigenous bands. In an ideal world, a private sector proponent – an option this space vigorously supported – would have been prepared to forget about the unhappy experiences of the Northern Gateway, Energy East pipelines and Trans Mountain expansion pipelines. The first was outright killed by the Trudeau government; the second allowed to expire by shifting regulatory goalposts. And private capital fled the third, leaving it to the federal government to finance and build.
We do not live in that ideal world, however. The financing of the pipeline, with initial cost predictions as high as $43.7-billion, is not a cause for celebration. But the construction of that pipeline certainly is.
The proposed pipeline would terminate at Roberts Bank in the southern Lower Mainland, allowing super-large tankers to load up with Alberta bitumen and sail to Asian markets.
Tony Keller: Should taxpayers build an oil pipeline to the Pacific? Yes
There are the indisputable economic benefits. A pipeline that would bring one million barrels a day to tidewater on the West Coast allows Alberta crude to escape the price pressures of being bottled up inside the North American market. The oil sector’s revenues will be higher, as will royalties and tax income for the provincial and federal governments. (Not to mention the boost from the construction of the pipeline.)
Then there are the knock-on effects in Alberta. New pipeline capacity will favorably tilt decisions on oil-production expansion. The resulting uptick in capital spending would swell Canada’s gross domestic product for years to come.
The Alberta government estimated that the boost from increased oil production would increase national GDP by 0.7 per cent by the 2040s. Based on current GDP, that would roughly equal $23-billion a year. Of course, the economy would have expanded significantly by then, so the dollar amount would be much higher. (By contrast, the economic case is far weaker for the notion of building a 3,500-kilometre pipeline to Sarnia, Ont., in order to avoid shipping oil for eastern Canada through the United States.)
The GDP numbers are impressive, but by themselves, they don’t justify the use of public dollars. Neither does the narrative from Alberta Premier Danielle Smith that the proposed pipeline will turn tidy profits for the province: Taken far enough, that’s an argument for wholesale government ownership of, well, anything and everything.
Taxpayers asked to foot the bill for another pipeline
No, the benefits that justify government intervention are more political than fiscal. The first is a demonstration that a province-spanning complicated megaproject such as a pipeline can indeed be built. Call it a proof of concept that the Carney government is truly breaking with the obstructionist world view of its (Liberal) predecessor.
The momentum toward a pipeline is also a demonstration to Albertans that their country can still work to the benefit of their province. Breaking ground on a pipeline will undermine separatist sentiment, hopefully decisively.
More broadly, a bitumen pipeline to the West Coast is a vital national interest, a critical part of a critical push to reduce this country’s economic dependence on the United States. It will take years to complete – sometime between 2032 and 2034 – even if there are no unforeseen delays. But once it is complete, it will be a big step in reducing Canada’s vulnerability to U.S. protectionism.
Long term, Ottawa and Alberta should aim to sell off their stakes in the pipeline. The MOU already gives the answer: Indigenous ownership. There are as many as 125 Indigenous communities along the proposed route. The new pipeline presents an invaluable opportunity to allow those communities to buy into the project (although Ottawa would assuredly need to provide some kind of financial backstop).
A pipeline to the West Coast, owned in large part by Indigenous bands, supplying Canadian oil to Asia and building up this country’s economic independence: The path may not be ideal, but the terminus justifies the use of taxpayer funds.
Editor’s note: This article has been updated to correct the estimated increase in gross domestic product from the proposed new bitumen pipeline.