In the wake of the federal government’s decision to buy the Trans Mountain pipeline from Kinder Morgan, industry analysts and climate groups agree on at least one thing: The political battle over the expansion of the contentious pipeline is not over.
“We see the potential for further complications stemming from the decision,” analysts at Desjardins wrote in a client note Tuesday.
“We believe that federal ownership could further galvanize opposition to the project from special interest groups while complicating the federal government’s ability to provide protection over project construction in (British Columbia’s) Lower Mainland,” analysts Justin Bouchard, Kristopher Zack and Chris MacCulloch wrote in the note.
Building the pipeline in the face of aggressive opposition in British Columbia “could ultimately require significant resources from the Royal Canadian Mounted Police,” they noted, and the federal Liberals may be “highly reluctant to use force” ahead of next year’s federal election, the analysts suggested.
Watch: Opposition party leaders react to Liberals’ purchase of the Trans-Mountain pipeline (story continues below)
For their part, climate groups made it clear they don’t intend to stop fighting the project, and they harshly criticized Prime Minister Justin Trudeau, arguing the federal leader has damaged his reputation on the climate file with the decision.
“Canada’s purchase of a tar sands pipeline and expansion project eviscerates any claim it has to climate leadership at a key moment — doubling down on the world’s dirtiest oil, rather than closing the gap on the country’s Paris climate commitments,” said Anthony Swift, the Canada program director for the U.S.-based Natural Resources Defense Council, in a statement.
Trudeau’s government “has just signed up to captain the Titanic of tar sands oil pipelines,” said Mike Hudema, a climate and energy campaigner with Greenpeace Canada, who added that the purchase puts the federal government on a “collision course” with its commitments to Indigenous groups.
He argued Trudeau is “gambling billions of Canadian taxpayer dollars on an oil project that will never be built — a project that Kinder Morgan itself has indicated is ‘untenable’ and that faces more than a dozen lawsuits, crumbling economics, and a growing resistance movement that is spreading around the world.”
Recent polling suggests support for the pipeline among Canadians has strengthened somewhat since pipeline builder Kinder Morgan announced last month it was suspending all non-essential work on the Trans-Mountain expansion, and would make a decision on whether to abandon the project by the end of May. A slim majority of Canadians, 54 per cent, backed the project in an April poll from Angus Reid.
The federal government responded to Kinder Morgan’s ultimatum by announcing Tuesday it had come to an agreement to buy the pipeline, as well as the project to expand it, for $4.5 billion. The sale is expected to be finalized later this year, but the government plans to get construction moving shortly.
Finance Minister Bill Morneau says the government doesn’t plan on holding on to ownership of the pipeline, and is looking to sell it to investors at some point in the future. The government said Tuesday it will offer future buyers “indemnity” from any losses incurred by “politically motivated unnecessary delays” — in other words, Canadian taxpayers could still be on the hook after the project is sold on, if opposition to the project continues to slow it down.
The industry group representing pipeline operators said it is “pleased” the project is moving forward, but seemed worried about the implications of a government buyout of a private pipeline project.
The Canadian Energy Pipeline Association “is deeply concerned that the government needed to purchase the project for it to be built and to assert federal jurisdiction,” the group’s president and CEO, Chris Bloomer, said in a statement.
He said the group was “concerned about the implications of the government’s financial intervention for future transmission pipeline projects. We do not believe that this outcome will instill investor confidence in Canada.”
The Desjardins analysts suggested that, even if the pipeline were to be built, it would not provide enough capacity for Canadian oil exports going forward. They said more oil-by-rail shipments would be necessary.
That stands in contrast to forecasts from climate groups, which predict that demand for Canadian oil will diminish in coming years as countries move towards their Paris accord commitments to reduce carbon emissions, and the Trans-Mountain pipeline could prove to be a waste of resources.