Opinion: The no-more-pipelines MOU

Last month's agreement between Ottawa and Alberta removes very few, if any, barriers to pipeline development while creating new chokepointsYou can save this article by registering for free here. Or sign-in if you have an account.On Nov. 27 Alberta Premier Danielle Smith and Prime Minister Mark Carney smiled happily, celebrating their new Memorandum of Understanding (MOU) about a possible bitumen pipeline to a West Coast port. It was mere optics. The MOU is not an agreement to build a pipeline, and its content won’t be useful for that purpose.Subscribe now to read the latest news in your city and across Canada.Subscribe now to read the latest news in your city and across Canada.Create an account or sign in to continue with your reading experience.Create an account or sign in to continue with your reading experience.The MOU contains several cleverly worded provisions that are pipeline-investment killers. The single most effective one is about the West Coast tanker ban. The MOU says that if the pipeline is ultimately approved, then an export provision will be enabled; but only “if necessary” and “through an appropriate adjustment” to the tanker ban law. Anyone spending tens of millions of dollars just to gain approval to start construction will want certainty before making any investment that it will be legal to transport the product to markets, and that enough tanker capacity will be authorized to match the pipeline’s capacity.The MOU’s backward sequencing is clearly an investment killer. What if Ottawa decides no change is “necessary?” And whose opinion determines what’s “appropriate?” Everything is totally discretionary. The required private-sector investor has no way of knowing whether there will be sufficient tanker capacity to justify an investment. So why bother trying to get one approved?Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Another killer is Indigenous co-ownership, which Danielle Smith said could be up to 50 per cent, which means an Indigenous partner with an effective veto. A private investor would have to spend billions to own only a half interest, with rights to only half the dividends and half of any share value increase. Why would any private-sector investor do that?The MOU also bows to the B.C. government’s strong objection to any new pipeline going through the province, even though interprovincial pipelines are entirely within federal jurisdiction. The MOU requires Canada and Alberta to immediately “engage” with B.C. in a trilateral discussion. What happens if the trilateral discussion doesn’t produce an agreement because B.C. refuses to agree? Or agrees only on terms unacceptable to Alberta?To get Ottawa to sign this very weak MOU, Alberta had to agree to an industrial carbon pricing system whose exact details will be provided in a future agreement, although it must ramp up to $130/tonne next year. This future agreement will cover, not just oil, but also Alberta’s gas and electricity sectors. One can only guess at the energy price increases this will trigger for Alberta consumers and businesses.The MOU says that on or before next April 1 the Pathways Alliance consortium of the largest Canadian oilsands producers will have to enter into a trilateral MOU with Alberta and Ottawa to reduce emissions intensity. Again, that’s a precondition to starting the pipeline, assuming it is approved. So this bilateral MOU requires a non-party to it to agree to a future trilateral MOU that will create the world’s largest carbon capture, utilization and storage (CCUS) project, estimated to cost $16-24 billion. CCUS technology does exist and has been used, though nowhere on this scale. Maybe the reason this will be the world’s largest CCUS project is that no other country has compelled such a risky upscaling of a costly and complex technology.The media may not understand how these killer mechanisms work, but private investors certainly do. Any sophisticated reader of the MOU will recognize the pitfalls:Pipeline construction is contingent on Pathways CCUS approvals and vice versa — a circular dependency that dramatically increases risk.Amendment of the tanker ban law is at Ottawa’s discretion; federal impact assessments must still be passed; Indigenous co-ownership is obligatory; and carbon pricing equivalency negotiations remain unresolved.Our competitors don’t impose carbon pricing or CCUS, which means delivered oilsands prices will be uncompetitive.Earlier this month, Smith wrote in these pages that the MOU provides “a clear path to the construction of a one-million-plus barrel-per-day bitumen pipeline, with Indigenous co-ownership …” As the MOU is written, that “clear path” is an obstacle course, ending far short of a pipeline. If the pipeline isn’t built the blame will be on Smith and Pathways, not Carney, for failure to comply with the MOU. Even if all these negotiating obstacles are somehow miraculously overcome, a private-sector investor must still obtain permission to construct it. Yes, if pigs can grow wings, they can fly. But winged pigs are quite rare.Andrew Roman is a retired litigation lawyer.Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information.