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B.C. Premier John Horgan took the call from Prime Minister Justin Trudeau at 6 a.m. Tuesday, “before the coffee had made its way through,” as Horgan told the media four hours later. Horgan had risen at 5:45 a.m. to await significant news about the Kinder Morgan Trans Mountain Pipeline project his government came to power determined to stop.
Trudeau’s big news — that the federal government has arranged to purchase the pipeline outright — places Kinder Morgan Canada on smooth financial seas, Ottawa in the captain’s seat and Canadians on the hook for a $4.5 billion pipeline purchase that many view as a needless subsidy to the fossil fuel industry.
“This decision represents both a colossal failure of the Trudeau government to enforce the law of the land, and a massive, unnecessary financial burden on Canadian taxpayers,” Aaron Wudrick, federal director of the Canadian Taxpayers Federation, said in a statement.
Kinder Morgan, a Texas-based corporation with $80 billion in assets whose Canadian directors earned millions last year, called it a “great day” for the company and Canadians.
But while the celebratory corks might be popping out of the bubbly in the prime minister’s oak-panelled office two days ahead of Kinder Morgan’s controversial deadline for resolving the pipeline impasse, Trudeau will have to answer to his global counterparts when Canada hosts the G7 summit late next week in Charlevoix, Quebec.
At a G7 gathering two years ago this month in Japan, Trudeau and leaders for the first time set a deadline for terminating most fossil fuel subsidies, saying government support for coal, oil and gas should be discontinued by 2025. Canada and other G7 nations encouraged other countries to join them in eliminating what they referred to as “inefficient fossil fuel subsidies.”
“Given the fact that energy production and use account for around two-thirds of global greenhouse gas emissions, we recognise the crucial role that the energy sector has to play in combatting climate change,” the leaders’ declaration said.
Trudeau’s Kinder Morgan announcement is an “embarrassment” for the country in light of that commitment, said Alex Doukas, a spokesperson for Oil Change International, a Washington-based organization focused on exposing the true costs of fossil fuels and facilitating a transition to clean energy.
“Other governments are going to be coming to the table expecting to see leadership from Canada on this file and just days before the summit Canada is plonking down a massive subsidy for the oil industry,” Doukas told The Narwhal.
“And that’s not acceptable. That’s not climate leadership. It would never be a good time for the Canadian government to take on massive risk on the shoulders of Canadian taxpayers, but to do so days before they’re hosting the G7 and trying to wear the mantle of climate leadership is absurd.”
Calling the Kinder Morgan purchase “the great Canadian bailout,” B.C. Green Party leader Andrew Weaver said as a climate scientist he longs for the days when federal Conservative leader Stephen Harper was in power because at least Harper — notorious for his lackadaisical efforts to address global warming — was consistent on climate change policy.
“Today will be remembered as Trudeau’s legacy,” Weaver told reporters.
“He came into office claiming that he was there as an inspiration for the next generation, claiming he was going to deal with climate change, claiming he was going to be there for the future. He betrayed that today.”
Weaver added: “Mr. Trudeau says one thing and does another and frankly should be ashamed of himself today.”
Doukas said while the entire pipeline purchase might not be a subsidy, the fact that Ottawa felt compelled to purchase the project suggests that “they’re taking risks and liabilities that the private sector is not willing to take on” and means that there’s “some degree of subsidy.”
Federal Finance Minister Bill Morneau said Ottawa is willing to provide the same type of indemnification against political risk to a future owner of the project that the federal government offered to Kinder Morgan.
“So they’re still going to indemnify any future potential component of the project against political risk resulting from actions at the provincial level,” Doukas said. “And that’s a form of subsidy. They’ve clearly indicated interest in continuing to provide a government backstop for the project.”
Doukas also pointed out that on the very same day Trudeau announced the pipeline buyout, the Royal Bank of Scotland (RBS) joined other major institutions — including HSBC, ING and BNP Paribas — by announcing it would no longer directly finance oilsands projects. The bank also tightened restrictions on lending to Arctic oil projects, thermal coal mines and coal-fired power stations.
Horgan said he viewed Canada’s G7 commitment as a “difficult target to realize based on today’s decision,” noting that the B.C. government will carry on with its climate action plan currently under development.
“We’re a sub national government that feels obliged to meet the national targets set by the federal government and it’s business as usual on that front as far as I’m concerned.”
“Mr. Morneau will have to answer to taxpayers, federal taxpayers, who also happen to be British Columbians and Newfoundlanders and people from the Yukon, about how he’s disposing of their hard fought tax dollars,” Horgan said.
Werner Antweiler, an associate professor at UBC’s Sauder School of Business, told The Narwhal that subsidies to the oil and gas sector in Canada consist mainly of tax write-offs. One study by four major environmental and policy groups, including the International Institute for Sustainable Development, pegs annual Canadian subsidies to the fossil fuel industry at $3.3 billion.
“The ownership of these [Kinder Morgan] assets itself isn’t really a subsidy,” said Antweiler, chair of the school’s strategy and business economics division. “But politically maybe it’s not the right signal to send that the government is getting into that sector when our long-term trajectory is to depart from fossil fuels and move towards forms of renewable energy. So the optics are certainly less appealing.”
Antweiler said demand exists for the diluted bitumen that will be shipped through the Kinder Morgan pipeline expansion, and that Canadian taxpayers are unlikely to be on the hook for a failed business model or a stranded asset.
“Honestly if these were stranded assets you would see the stock prices of these companies collapse and they’re not. The oil business is still going strong.”
“That is not what environmentalists would like to hear and I consider myself on that side of the spectrum but the reality is we all still continue to use fossil fuels. The demand is there and it won’t go away for the next decades while we are transitioning to other types of fuel,” he said, adding that he would prefer a faster transition to renewable energy.
“That process is a lot slower than we would like it to be and what we can do about it is to put a price on carbon and other emissions related to these fuels so that helps this transition. The pipeline here is a very small piece of the puzzle and it’s not what’s going to decide the outcomes in terms of climate change. That depends on many other policies, in particular whether or not we really price carbon.”
Horgan pointed out that the federal government is now fully responsible for the pipeline “from wellhead to tidewater and beyond,” saying “that’s probably a good thing.”
“That allows me to have candid discussions with the owners of the pipeline that I wouldn’t have been able to when they were shareholders in a Texas-based oil company,” Horgan said.
“So the good news is that the government of Canada needs to be accountable for a protection plan, and if there are gaps in that plan I’ll be able to speak directly to the owners of the pipeline.”
Horgan also said that the B.C. government’s court reference case against the pipeline expansion will continue, reiterating an earlier pledge to do everything possible to avoid “the catastrophic consequences” of a diluted bitumen spill.
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