OTTAWA — As the Nexen sale is to Stephen Harper, so the Northern Gateway pipeline is to Christy Clark. Both proposals come with substantial economic benefits, but also political dangers. Each leader will thus be tempted to attach a pricey list of conditions to their approval, in order to limit their exposure. So far, at least one of them has succumbed to that temptation.
Legally speaking, Gateway does not need the premier of British Columbia’s approval to proceed. Pipelines are federal jurisdiction: the National Energy Board, after it has completed its hearings, will be the one to say yea or nay, albeit subject to cabinet override. It may be that the government of B.C. can prevent it from going ahead in other ways, though whether these could withstand a really determined federal government is another question.
Clark’s real weapon is political: the opposition of much of the B.C. public to the project and the price the federal Tories likely would pay at the polls were they seen to be overriding the government of B.C. on the matter — her own, or that of her likely NDP successor.
The list of demands she has suddenly produced, far behind in the polls with less than a year to go before the provincial election, is an obvious attempt to inoculate herself on the Gateway issue, without actually coming out against it.
That, at any rate, is the charitable interpretation. The demand, in particular, that the government of B.C. be paid an unspecified sum as its “fair share” of the fiscal and economic benefits flowing from the project is so outrageous that it is difficult to believe it was not done for show. Fairness suggests entitlement.
But it’s not immediately evident why the B.C. government should be entitled to any of the Gateway largesse. It doesn’t own the oil and is not laying the pipe. The $6.7 billion in additional tax revenues it is currently projected to receive from it is more or less a windfall.
The government’s answer, that it is entitled to its “fair share” on account of the environmental “risk” it is taking on by allowing Alberta’s heavy oil to be piped across its territory and shipped out of its ports, is hardly enlightening. The principle sounds fine.
But just as it does not specify how much it is due, so it does not explain precisely what risk it is assuming. If it is the cost of preventing and/or cleaning up from a spill, that is belied by the rest of its position paper, in which it is made quite clear it has no intention of paying for any of this.
For example, it proposes a long list of measures to improve the capacity to respond to spills off B.C.’s coastline, all of them to be implemented by the federal government, at federal expense. It calls for raising the limit on liability for damages in the event of a spill, to ensure industry sets aside sufficient funds “to fully cover a major response without requiring public money.” (Emphasis added.) Land-based spill management is likewise to be “industry-funded,” on the principle that “those sectors (i.e. the oil and gas industry) that pose the risk must be responsible for all related mitigation and response costs.” (Emphasis added, again.)
So whatever risks the pipeline poses, they would not appear to be risks to the financial position of the government of B.C. It is demanding its “fair share” — from whom is likewise something of a mystery — not because it is incurring any additional risk, but because it can: because (it believes) the pipeline cannot proceed without it.
Perhaps there are other costs, not covered by “all related mitigation and response costs.” If so, there are better ways of seeking compensation than issuing vague public ransom notes to neighbouring provinces. For example, it could apply to the NEB to add a surcharge to the toll collected by the pipeline’s owners, Enbridge, some portion of which would then be passed back to the oil industry. Better that an impartial third party should assess these things than leave provinces to unilaterally impose tariffs on each other.
In the final paragraph of my last column, I rashly suggested this was a matter that could be left to the two provinces to work out — better that than a “national energy strategy.” But this isn’t about energy. This is about interprovincial trade. What B.C. is attempting here is a provincial version of the “net benefit” test, that mysterious process invoked whenever the owners of a Canadian firm wish to sell their shares to foreigner. It comes with the same pretence of principle, to dress up what is little more than raw opportunism.
If the Harper government would like to deter B.C. from playing silly games over Gateway, it would do well not to indulge in its own.
To be sure, Nexen’s proposed $15 billion sale to the China National Offshore Oil Company raises some legitimate issues — not so much to do with state ownership (I don’t think we’d be too upset if the Norwegian sovereign wealth fund, for example, were the purchaser) as with the nature of the state in question.
Whether Nexen would be managed on a sound commercial basis under its new owners, that is, need not concern us greatly (if not, that’s China’s loss, not ours), but transparency should: for example, with regard to transfer pricing. If we’re to tax and regulate such firms successfully, we need to know who and what we’re dealing with.
What we don’t need are arbitrary demands to maintain head offices here or preserve jobs there or the other riders governments typically impose, the cost of which is usually borne by the sellers, not the buyers.
So fine, let us have a prudent examination of the relevant issues. But let’s leave out the extortion attempts, shall we?
» Andrew Coyne is a columnist for Postmedia News.
Republished from the Brandon Sun print edition July 28, 2012