The Federal and Alberta Governments Make a Deal

Or more accurately the two governments have settled on a framework that could potentially lead to a new pipeline being built to the BC coast.

When I first read about it I asked the question: WTF is Mark Carney doing? 

Then I read the agreement, or Memorandum of Understanding (MOU) and I have concluded that no pipeline will ever be built. The reason for that conclusion is the MOU specifically states that the funding for such a pipeline has to come from the private sector and that those very same companies will have to come to an agreement with all of the potentially impacted indigenous peoples to build it.

At this time I can confidently state that this is not going to happen. The biggest reason is there is no business case for a new pipeline. There has not been one for over a decade, whether you are talking about one to the Pacific, Churchill or points east. Most oil and gas industry analysts, who do not work for the industry, are indicating that oil and gas demand, and therefore prices, will permanently decrease by the end of this decade. So considering it will take at least that long to have a pipeline approved, even with the new approval process in the Build Canada Act, and built, that the pipeline will never show a profit. No profit, no business case, no pipeline.

The MOU also holds out the possibility of revoking the tanker ban, although the language around the conditions to do so is quite convoluted, but again private interests will make that meaningless. The waters that the tankers would have to go through to pick up the oil are very treacherous and no insurance company would insure a tanker going through them. Without insurance the tanker company would be on the hook for the entirety of the liability for any accident and they will not accept that risk.

So in the end the MOU is virtually meaningless.

Of course, there has been alot of talk about how the MOU has put the ball into Danielle Smith's court, taking away a bone of contention that she could use to fire up her base and hang on to power. I am not going to repeat all of that here, although I will disagree on two points.

The first point is the peace between Ottawa and Alberta will be short lived. The next battle will be Alberta demanding that Ottawa put up a substantial amount of money to build the pipeline. Danielle Smith promised her voters a pipeline, the private sector is not going to step up to build it, which will leave governments to foot the bill. Alberta does not have the financial wherewithal to do it alone so they will eventually get around to demanding Ottawa to kick in, which means most of the cost. 

The second point is this MOU will not help the Liberals in any way with Alberta voters during an election. During the next election the Liberals will most likely lose seats in Alberta instead of gain any. That was true before the MOU was signed and it is still true.

So in the end it is status quo. There will be relative peace between the two governments for a short period but the Alberta government will go back to blaming Ottawa for all of the ills in the province because that is what provincial governments do when they shit the bed. No pipeline will be built, without governments paying for it. The Liberals will lose seats in the next federal election.