Trudeau backs Notley over Trans Mountain Expansion as BC refuses to back down on possible dilbit regulations

“We’re just going to reiterate that the decision we made was in the national interest and we’re going to move forward with that decision, which means we’re going to get the Trans Mountain pipeline built,” Justin Trudeau told CBC Thursday morning while in Edmonton for a town hall meeting. The question on Rachel Notley’s mind is, What does he mean by “going to move forward”? There are probably only two options.

Alberta Premier Rachel Notley at Wednesdays media event. Source: CBC.

One, the Prime Minister brokers a deal between the feuding NDP governments in Victoria and Edmonton.

This will be tough because concessions would have to come from Premier John Horgan. Kinder Morgan can’t build half a pipeline or delay construction more than the year the Texas-based company has already committed to. The Alberta Premier is already talking tough, threatening both a legal challenge and a trade war if BC doesn’t relent.

Two, Ottawa empowers the National Energy Board to grant all provincial and municipal approvals and permits.

This is the nuclear option and will undoubtedly cost the Liberals more seats than they expected in the 2019 national election. Party strategists have said in the past their calculations showed two to four Metro Vancouver seats going to the NDP, but there are 17 Liberal constituencies in the area and more of them could be in play if Trudeau plays hardball with Horgan.

Trudeau didn’t hint at his strategy in media interviews, but he made it clear he is not backing down.

“We know that getting our oil resources to new markets across the Pacific is absolutely essential,” Trudeau told CBC.

“We can’t continue to be trapped with the price differential we have in the American market. We need this pipeline and we’re going to move forward with it responsibly like I committed to.”

Source: Petroleum Services Association of Canada.

That differential was over $35CDN a barrel on a West Texas Intermediate price of $65 on Wednesday.

Readers can assume the federal finance department knows to the penny how much that costs the Trudeau Government – currently running $30 billion a year deficits – in tax revenue each and every day this dispute drags on.

British Columbians should also not discount Trudeau’s concern about the signal that more delay or a cancellation of Trans Mountain Expansion would send to investors. The Prime Minister has already flagged low capital investment in the Canadian economy as a concern.

And as oil and gas industry types never fail to remind me, institutional and international investors are already expressing concern about the reliability of the Canadian energy regulatory system. Cancellation of another major energy infrastructure project would be more black marks for the national economy than Trudeau is likely willing to tolerate.

The Prime Minister will also have to consider how to handle feisty Notley, who held a press conference Wednesday before an emergency cabinet meeting called to discuss BC’s announcement it will try to stop pipeline transportation of dilbit through Alberta.

BC Premier John Horgan.

“Just because the BC government in coalition with the Green Party [that] doesn’t like the decision gives them absolutely no right to ignore the law, or to put it another way, to change the rules at halftime based on a whim,” she told reporters.

“Friends, this is not how Canada operates, and this is why we have a federal government that sets the rules and make sure that they are enforced. Albertans and Canadians expect no less from Ottawa.”

You can bet Trudeau was paying attention to that last line.

Notley said Alberta is already preparing a legal challenge against BC and she threatened to retaliate against West Coast trade, mentioning electricity specifically.

Horgan and the NDP ran against completing the $8 billion Site C hydro dam, but changed their tune after a review of the project by the BC Utilities Commission. Since there probably won’t be full utilization of Site C’s output for 20 years – or never, if you believe critics – Alberta was a logical destination for some of that power as the province weans itself off coal.

“To retaliate in energy trade, she could create a new system to deny permits for transport of oil and petroleum products to BC, or refuse to transport gas from BC, or cut off import of BC electricity,” said James Coleman, constitutional scholar with the Dedman School of Law, in an email.

“All three steps could damage industry in both BC and Alberta. All three would be subject to court challenges that would raise the same issues presented by the BC governments action.”

While the Premier didn’t provide details, Horgan no doubt heard the implied threat loud and clear.

Does Alberta’s new found push back help or hurt Trudeau’s efforts to defuse this brewing battle between heavyweights of the Canadian economy?

Hard to say.

BC Environment Minister George Heyman, a former BC Sierra Club executive, was unfazed by the threats.

“We just agree to disagree with Alberta,” said Heyman. “We believe we have authority under the environmental management act to protect our coastline, to protect our environment.”

Coleman says neither side is eager to test the issue in the Supreme Court of Canada.

Alberta – and Canada, for that matter – are relying upon Sect. 92 of the Canadian Constitution Act, 1982 which gives exclusive jurisdiction over “inter-provincial works” (read, pipelines) to Ottawa. That power has been affirmed in many legal precedents going back to 1954, says Coleman, and backed up by the principle of paramountcy, meaning the federal government authority trumps provincial in jurisdictional disputes.

But the courts have been more amenable in recent years to the principle of “co-operative federalism,” which states that where federal and provincial governments have overlapping authority, they should always strive to get along and share power. This is the BC position.

But a Supreme Court decision is unpredictable and no one wants to be on the losing end of the judgment. Better to play their current hand as best they can and hope for an eventual political solution.

Which is where the now tough talking Prime Minister comes in.

Will Trudeau use the carrot or the stick with British Columbia? Canadians won’t be kept in suspense long because the lid is now officially blown this political pressure cooker.