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What you need to know about the Trudeau government's decision to buy Trans Mountain
Canada is buying the Trans Mountain pipeline expansion project from Kinder Morgan for $4.5-billion, saying that the extraordinary move is necessary to increase oil pipeline capacity and will “advance Canada as an energy leader.” The decision to buy the project came after Kinder Morgan, the Texas-based energy giant, signalled that it wanted to walk away from the project after facing stiff political opposition from British Columbia. With the purchase, work is set to resume on the expansion project — Kinder Morgan had stopped all non-essential spending in April and given the federal government until May 31 to broker a solution to the political problem. Although the purchase price is listed at $4.5-billion, it does not include the construction costs. Once labour and materials are included, the final price for Canadians will be significantly higher. Previous estimates of a total cost had been pegged at $7.4-billion. Alberta Premier Rachel Notley, who was pleased with the decision, said that her province has been asked to participate in the deal. The province will commit up to $2-billion to an indemnity pool to ensure that the project moves forward.
Kinder Morgan walks away from the deal richer — by one major bank’s calculations, the company will pocket $1.2-billion more than what it has spent on the expansion project. It also rids itself of the major risks that were associated with the project. It is, however, giving up around $200-million in annual earnings before interest, taxes, depreciation and amortization (EBITDA). The real prize, an analyst says, is the $1.1-billion in EBITDA that could come from tariffs that are levied upon oil shippers on the expansion. (for subscribers)
Federal Finance Minister Bill Morneau said the government could end up owning Trans Mountain for the “medium term” but did not clarify what he meant by that. The sale won't be final until August and in the meantime, Kinder Morgan will help Canada find a private buyer. One analyst says that Ottawa has “limited options” among the field of potential buyers. Buyers could be large pension funds and private-equity giants, as well as existing pipeline companies. Alberta could also end up buying the project. (for subscribers)
The purchase is a pivotal moment in Prime Minister Justin Trudeau’s tenure. By nationalizing the pipeline project, Mr. Trudeau is alienating many of the same people and groups that supported him in the 2015 federal election. Now, he has gone from environmental ally to the target of their protest and scorn.
The Trans Mountain pipeline expansion would bring billions in new revenue, but it would also mean an increase in coast-to-port tanker traffic, and with that, a risk of more oil spills. We follow a tanker as it threads the needle from Burnaby to the open ocean.
Even though the federal government has decided it is buying the project, big questions remain about how the Liberals will handle the opposition, and when and how the pipeline will be built. We’ve built a guide that breaks down what it all means.
Gary Mason writes that there’s much work still to come for Mr. Trudeau: “In some respects, buying a pipeline was the easy part. Getting a new one built against formidable opposition is where things get difficult. We’re about to find out if Mr. Trudeau and his government have the stomach for it. ”
Konrad Yakabuski writes that the Prime Minister is all in: “This is not the first time a Liberal government in Ottawa has decided to meddle in the oil patch. But it’s the first time it’s been done in defence of Alberta’s interests and in defiance of its own political base. That tells the world how important it considers the proposed Trans Mountain pipeline to be for Canada.”
Elmira Aliakbari and Ashley Stedman write that Ottawa has no one but itself to blame for this saga: “Clearly, the federal government has failed to address the real issues facing Canada’s energy sector. To make matters worse, it’s now nationalized the Trans Mountain project, setting a troubling precedent. For these major energy missteps by Ottawa, Canadians will ultimately pay.”
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China’s envoy accuses Ottawa of unfair discrimination in rejection of Aecon takeover
Lu Shaye, China’s ambassador to Canada, is accusing the Trudeau Liberals of discrimination in their decision to block the takeover of Aecon, the Canadian construction giant, by China Communications Construction Company, a state-owned enterprise. Mr. Lu’s comments came in a column the envoy wrote in The Globe and Mail where he said “Canada’s rejection of Aecon shows that Chinese enterprises are suffering from unfair treatment – and it’s not the first time.” The federal cabinet cited threats to national security when it rejected CCCC’s $1.5-billion purchase of Aecon. Mr. Lu did not threaten retaliation against Canada but the decision is likely to cause a rift with China while the two countries explore free-trade talks and deeper economic ties. Intelligence officials in both Canada and the U.S. have warned lawmakers about the risks that come with companies that are owned in part, or in full, by the Chinese government. Namely, intelligence agencies have said the companies do not only seek profit; rather, they often pass on information and technology to Beijing.
B.C. government considers buyout of Sahota’s single-room occupancy problem buildings
The government of British Columbia says that all the options are on the table when it comes to improving the living conditions in some of Vancouver’s most run-down rental units. For low-income residents in the province’s biggest city, a different kind of real estate crisis is playing out than what is commonly associated. A Globe and Mail investigation found that residents in the Regent Hotel have struggled with plumbing, mould and vermin-related issues on top of the affordability crunch that comes with housing in Vancouver. B.C. Housing Minister Selina Robinsan says she told her staff “a number of weeks ago” to help the more than 100 low-income residents of the single-room occupancy building.
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IN CASE YOU MISSED IT
Brazilians are pushing back against sexual harassment – but an office culture littered with ‘kisses’ makes it tricky
Although #MeToo began with the accusations against entertainment mogul Harvey Weinstein, it quickly spilled over from its Hollywood origins to become a worldwide movement. When it reached Brazil, women spoke out about sexual harassment and sexual assault within their culture. But as #MeToo moved forward, the backlash grew fierce over what it meant for the country’s warm and affectionate way of life.
MORNING MARKETS
Stocks mixed
Italy’s political crisis and renewed trade war fears sent global stocks lower for the sixth day in a row, though hopes that Italy could avoid a new election helped European markets stage a mini-bounce from one of their worst selloffs in years. Tokyo’s Nikkei lost 1.5 per cent, Hong Kong’s Hang Seng 1.4 per cent, and the Shanghai composite 2.5 per cent. In Europe, London’s FTSE 100 and Germany’s DAX were up by between 0.1 and 0.4 per cent by about 5:25 a.m. ET, with the Paris CAC 40 down 0.6 per cent. New York futures were up. The Canadian dollar was at just about 77 US cents in the run-up to the Bank of Canada decision.
WHAT EVERYONE’S TALKING ABOUT
Roseanne reboot was always going to end in bitterness and fury
“The revival of Roseanne was never about television nostalgia. The reboot was never really connected, in anything more than the most superficial way, with the revived Gilmore Girls and rejuvenated Will & Grace. It always hinged on the raw unpredictability of Roseanne Barr herself. And it was always likely to end in bitterness and tears of fury or regret. Roseanne Barr was going to ruin Roseanne, the show, just as she did before. It was only a matter of time. The show itself was not the trainwreck that many people predicted — but its ending is.” – John Doyle
Italian debt crisis places Merkel in the hot seat once again
“Will she or won’t she? That’s the question that anyone who cares about the future of Europe is asking as the Italian debt crisis threatens to return with a vengeance, if it has not returned already. Will German Chancellor Angela Merkel, the protector-in-chief of the euro zone and the effective boss of Europe, find a way to defuse the Italian crisis? If she doesn’t, the chances of Italy crashing out of the euro zone, which were essentially zero before the March election when two anti-establishment, Euroskeptic parties stole the show, can only rise. It’s impossible to say what those chances are today, but they are certainly somewhat north of zero.” – Eric Reguly (for subscribers)
What the NHL shows us about the labour market
“Just as millennials have changed the game of hockey, they are also changing the game in the larger work force, albeit more slowly. Although millennials are now the largest generation in the Canadian work force, they are not the only generation in it, and they tend to report to Gen Xers and boomers. As well, the first wave of millennials hit the worst of the recession when they entered the work force, dulling their potential influence. Now, the wave of millennials in their 20s is working at a time when baby-boomer retirements are happening in droves (the youngest boomers are now in their mid-50s) and the unemployment rate is at its lowest level in decades. Unlike the earlier wave of millennials that were not able to make much of an impact on work-force values, this group is in a better place to do so. With athletes, it is easy to pick a metric such as speed or ice time and evaluate how things have changed because of millennials; for non-athletes it is somewhat harder. However, to listen to reports from employers in industries that need talent, millennials are starting to impose their values.” – Linda Nazareth (for subscribers)
LIVING BETTER
Have you ever wanted to swim outside of the pool but were worried about how to go about it? Leaving the secure confines of the swimming pool for a lake or an ocean to open-water swim can be a daunting prospect. The most important thing you can do is remain calm. Next, build your comfort level up by venturing out 10 to 20 feet at first and swimming parallel to the shore to better orient yourself. Once you feel ready to venture further, choose a fixed object in the water and focus on that while swimming.
MOMENT IN TIME
New York mayor tries to ban sales of big sugary drinks
May 30, 2012: In May, 2012, New York Mayor Michael Bloomberg announced that the Big Apple planned to tackle obesity by banning sales of “super-sized sugary drinks.” In a city where everything is larger-than-life, the move sparked a fierce public debate, pitting public-health advocates against the soft drink industry in a high-stakes battle. In the end, the tax was never imposed; after a long legal battle, the courts ruled that New York’s Board of Health had exceeded the scope of its regulatory authority. But Bloomberg, a billionaire entrepreneur and philanthropist with a passion for public health, has not given up the battle; if anything, he has doubled-down. Many big cities – Philadelphia, Chicago, San Francisco and Seattle among them – adopted soda taxes that were much more sweeping than what New York had proposed and most have managed to fend off campaigning and legal challenges from Big Soda, often with Bloomberg’s help. In Canada, consumer health groups such as the Heart and Stroke Foundation of Canada, Diabetes Canada and the Canadian Cancer Society have also lobbied the federal government for a sugary drink tax as part of a range of measures to decrease children’s consumption of unhealthy foods, but Ottawa has not committed to the idea. – André Picard
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