Alberta Premier Rachel Notley speaks at a news conference in Edmonton on Thursday August 30, 2018. Notley says she's pulling the province out of the federal climate change plan.JASON FRANSON/The Canadian Press
The decision from the high court 3,500 kilometres away was “crushing.”
Iggy Domagalski, the chief executive of a 175-person Calgary company that makes industrial equipment for the transport of crude oil and natural gas, said employees fell silent and sombre Thursday morning.
The news that the Federal Court of Appeal had nullified Ottawa’s approval of the Trans Mountain pipeline expansion dashed hopes that the firm’s bid to supply products for the construction of the project would go anywhere, any time soon. A five-person team at Tundra Process Solutions Ltd. had been working on the bid for five years – and winning the contract would have meant a boost to company revenues by as much as 20 per cent.
“It’s very real for us,” said Mr. Domagalski of the court’s ruling. “It’s crushing that it happened.”
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The sudden reversal to the fortunes of the Trans Mountain expansion is a major blow to Alberta just as the province’s bruised economy was showing signs of recovery. Oil prices have strengthened, and corporate earnings and consumer spending had improved.
But to many Albertans, those gains now seem fleeting. The federal court ruling – which said Ottawa failed to adequately consult First Nations whose rights are affected by the pipeline expansion, and that the National Energy Board failed to properly consider increased tanker traffic – means yet another major export pipeline is stalled.
Trans Mountain was viewed as a relatively easy win, a project that would nearly triple capacity of an existing pipeline and vastly expand the energy industry’s ability to export to foreign markets beyond its current lone customer, the United States. To many, the expansion project – first undertaken by Kinder Morgan Canada Ltd. and now state owned – was seen as a best and last hope after other options fell by the wayside.
The court’s decision is unlikely to prompt layoffs in downtown Calgary next week – and Ottawa insists the project will still make it through the legal hurdles and go ahead. But the court decision is a key marker in the cumulative feeling in the oil-rich province that no amount of consultation or process will be enough.
“It’s Canadians getting in the way of Canadians. That’s the real rub here – we ourselves can’t get ourselves together,” said Sandip Lalli, president of the Calgary Chamber of Commerce.
Many businesses counting on the pipeline had hoped Ottawa’s $4.5-billion purchase of the existing pipeline and the expansion had “de-risked” the project, Ms. Lalli said. “Every time we trust in the process, the process changes,” she added.
“The business community says, ‘Well, I’m rethinking, should I be employing people in Canada, should I be growing my business in Canada, should I be looking at further automation?’ Investment deals have been stalled.”
Ms. Lalli also said she and other business leaders wonder why there isn’t more of a national conversation over major projects – with their accompanying jobs and economic benefits – being shut down. “Why isn’t there greater uproar outside of Alberta?”
Alberta has already put up new walls as a result of the Court of Appeal decision. United Conservative Party Leader Jason Kenney called the outlook among business leaders on Thursday “bleak,” and said he has never seen feelings of Alberta alienation run so high. Late Thursday, Premier Rachel Notley said building a pipeline to a Canadian coast has become “practically impossible.” She announced her province will abandon its commitment to Ottawa to increase its $30-a-tonne carbon tax to $50 by 2022 – in line with the federal government’s pan-Canadian climate plan.
In its March budget, the government had said the plan to balance the province’s finances depended in part on the Trans Mountain expansion going ahead. Now, Alberta’s NDP government is in the incongruous position of defending the pipeline expansion as a project with major implications for federal finances, while insisting that an indefinite construction delay will have a negligible impact on its own bottom line.
During a first-quarter budget update Friday, Finance Minister Joe Ceci touted a $1-billion reduction in the provincial deficit for the current fiscal year as evidence of prudent financial management.
He said increased revenue from personal income taxes and a recovery in energy royalties has trimmed the shortfall to $7.8-billion. Growth is forecast at 2.7 per cent. But debt levels will stay elevated, at around $53-billion by year-end.
The Finance Minister insists the province is on track to balance the budget early in the next decade, even with Trans Mountain stuck in limbo. But the province will miss out on added revenue from higher carbon taxes after pulling out of the federal climate plan. The outlook also assumes two other contentious pipeline proposals move ahead without major delays.
Both Enbridge Inc.’s Line 3 and TransCanada Corp.’s Keystone XL proposals would relieve transport bottlenecks, but each faces resistance. And only Trans Mountain would expose Alberta oil producers to global buyers.
Speaking to reporters, Mr. Ceci at once played down the impact of Trans Mountain on the province’s financial outlook, while at the same time stressing the importance of diversifying markets beyond the U.S.
“There are three pipelines that are important for this province. Two of them are necessary,” he said. Still, he added that an indefinite delay for Trans Mountain would not be good for Canada, for investment and job growth.
“What we need is the federal government to get back, address this, and set it straight.”
Next year, Alberta is forecasting a modest bump in oil sands spending – the first such increase since 2014, when North American and global oil prices started to slide.
But the industry’s largest companies remain cool to plant expansions and new drilling. Many are using extra cash to pay off debt and repurchase shares on the stock market instead, which benefits investors more than it does plumbers, gas fitters and welders.
“That doesn’t create jobs; that doesn’t drill wells,” said Jim Davidson, deputy chairman at investment bank GMP FirstEnergy in Calgary, and a fundraiser for Mr. Kenney.
“It doesn’t add money into the provincial coffers.”