Montreal (AFP) – Canadian Prime Minister Justin Trudeau is caught in a political crisis over the expansion of an oil pipeline that has shaken investor confidence in the country’s crucial energy sector.
The dispute pits the country’s two westernmost provinces against each other as oil-rich Alberta boycotts trade with British Columbia over its opposition to the pipeline.
Alberta Premier Rachel Notley warned the standoff risked triggering a constitutional crisis, and Trudeau is cutting short an overseas tour to return home and mediate.
With an election due by October 2019, Trudeau needs the support of British Columbia voters to win a second term as leader of the world’s seventh-largest oil producer.
But the hit to the economy if the pipeline isn’t built could have equally devastating effects at the ballot box, and Trudeau needs Alberta aboard to meet his international climate commitments.
Trudeau’s Liberal government in 2016 approved the tripling of the Trans Mountain pipeline’s capacity to move 890,000 barrels of oil per day from landlocked Alberta’s oil sands to the Pacific coast, for shipping to new overseas markets.
But it has faced intense opposition from environmental and indigenous groups concerned about the risk of oil spills along Canada’s pristine west coast affecting tourism and fisheries.
Nearly 200 protestors were arrested in the past month alone.
British Columbia’s new social democratic government joined the fight against the project late last year when it looked all but lost, reviving hopes of killing it and pitting the province against Alberta, Saskatchewan and the federal government, which has deemed it to be in the “national interest.”
Feeling squeezed, Kinder Morgan, the US firm behind the Can$7.4 billion (US$5.9 billion) project, suspended most work on the pipeline this week, saying the row is creating undue risk for investors.
The company gave the parties until May 31 to resolve their differences or it would scrap the project, prompting warnings from business groups that tens of billions of dollars in energy investments could be diverted from Canada if the project fails.
On Sunday, Trudeau will interrupt a trip to Peru, France and Britain to try to mediate the British Columbia-Alberta spat.
Alberta’s Notley has responded to British Columbia Premier John Horgan’s court challenge of the project with a boycott of British Columbia wines and hydro electricity, and threats to cut off gasoline shipments to Vancouver.
– No-win pipeline politics –
About 97 percent of Canada’s oil exports are sold at a discount to the United States. The industry and Ottawa say new oil conduits to the Pacific are needed in order to diversify exports and get better energy prices.
With the recent failures of a proposed new pipeline to the Atlantic coast and another to the Pacific, all eyes are on Trans Mountain as the industry’s last hope to grow.
“The reputation of Canada and British Columbia as stable, predictable jurisdictions for the crucial international investment that fuels so many of our industries is clearly at risk,” the Greater Vancouver Board of Trade said in a statement.
Trudeau has called on Horgan to “stop obstructing” the Trans Mountain project, which the feds approved in a tradeoff with British Columbia to reject another pipeline that would have crossed a temperate rain forest.
While Trudeau needs the Pacific province’s voter support, he also requires Alberta to live up to its commitment to cut greenhouse gas emissions in exchange for new pipeline capacity, in order to meet Canada’s Paris climate obligation to cut CO2 emissions by 30 percent from 2005 levels, by 2030.
The oil sands are Canada’s top single source of CO2 emissions.
Some have called on Trudeau to be heavy-handed with Horgan, including cutting off federal funds, at the risk of alienating some voters.
Horgan has shown no sign of backing down.
He campaigned against the pipeline to get elected and his minority government needs the support of the Green Party — which opposes the pipeline — to stay in power.
Alberta, meanwhile, is considering buying a stake in the project to allay investor fears, and is urging Ottawa to match its investment.
Ottawa could also declare federal jurisdiction over the pipeline to push through its construction, effectively voiding all provincial and municipal laws applicable to it.
But it hasn’t used that power since the late 1800s when it was applied to build a transcontinental railway as a condition of British Columbia’s joining confederation.