Happy Friday everyone, I hope you are having a decent day because the week has been anything but fun, with the continued roller coaster ride, which often feels a bit broken, taking everyone’s breath away while scaring the living daylights out of us all.

 

While I have many thoughts on current events, I have learned long ago that wading too deep into the swamp that is the political arena does not lead to anything resembling a satisfactory result. Rather it is just a path to further rage and acrimony, more polarization and the propagation of more of the same incendiary actions that may have prompted the desire to comment in the first place.

 

I know this next comment will be viewed by some as a cop-out, but let me make this statement for the record.

 

In a liberal democracy, acts of political violence against individuals, no matter what their beliefs, are acts of violence against everyone across the entire political spectrum and serve no purpose except to deepen the divides, ruin the discourse and tear apart families and relationships. No matter how hard the chattering class or the demagogues on either side try to justify or explain or assign blame or seek revenge, all that happens is further inflammation and the enabling of a further spiral of violence until it either overwhelms or runs out of fuel.

 

And that’s all I’ve got on that, because I need to move on to lighter subjects.

 

Speaking of light, Prime Minister Mark Carney (can I just call you Mark, since we have met) came out on Thursday* with the much vaunted “List of Major Projects” which, in any type of review, is… decidedly light.

 

*Note to my dear readers, I wrote this on Thursday, so I know there have been some developments since including a rumour the emissions cap may get tossed overboard (yay!), but until I see it in writing on Mark’s letterhead, my position remains the same.

 

Look, I know it’s preliminary, but this is the least offensive and easily executable list of projects around. All of the projects are basically approved and some are already in progress and have been for a while, which begs the question – What exactly is the Federal Government going to do to advance said project?

 

Let’s take just one for example, since it is close to my fossil fuel promoting heart. The expansion of LNG Canada via Phase 2. This is something that has been discussed for a while and is currently being assessed by the project owners who at some point will issue an FID. As far as I know, there are no current roadblocks to that expansion. The pipeline is already there. The plant is already there. The plans are presumably drawn up and the support of the BC government exists so presumably, this would be a pretty easy win – for the proponent. Is the government, or Mark personally, planning to visit the Board of LNG Canada and casting a vote in favour of a positive FID? Is the government going to step up and take an active role in Phase 2? Like with money? It is all so unclear. My guess, for the record, is no.

 

After that, there is some nuclear stuff, a port expansion in Montreal (pretty sure this one will get money) and a bunch of mines.

 

BORING!

 

You know what was missing from this whole thing? A pipeline. Specifically an oil pipeline. Preferably one travelling West, although many would settle for one travelling East and some (ahem me) believe the bestest option is one travelling south (KXL anyone?).

 

Why is that?

 

Well if you listen to the punditry it is one of two reasons:

 

• Oil pipelines are not economically viable, the oil industry is dead and there is no business case so no one wants to build one and Danielle Smith is the devil
• Mark Carney and the Liberals hate Alberta, oil and want us all to be impoverished slaves to Central and Eastern Canada

 

The real answer of course is somewhere in the middle.

 

Many people point to the fact that there are no current proposals on the table for an oil export pipeline as evidence that there is no private sector interest in a pipeline. This of course overlooks the existence of pipeline companies. Which are companies that build and manage pipelines, and do so profitably, all around the world but especially in North America and Canada, including, unironically, or maybe ironically, the TransMountain pipeline system, recently expanded, that is owned by none other than the Federal Government.

 

Amazing isn’t it? Such a profitable industry, operating right under our noses.

 

Pipeline companies want to build, but they need three basic conditions to actually do the work. First, there needs to be availability of product at one end of the pipe to fill said pipe. Second, there needs to be someone at the other end of the pipeline to collect the product and ship it to willing customers who don’t have access to the product. Third, they need permission from whoever is in charge or affected at each stage of the process to go ahead and build. (OK, fourth condition is they need to get paid to ship, but that’s pretty obvious and, ahem, a federally regulated return).

 

The naysayers are postulating that since there are no projects the market environment must not meet points 1 and 2, while the realists are saying that the proponents aren’t going to waste their time and money unless they know that they have a reasonable chance of getting approval under point 3.

 

Who’s right?

 

In my world, the realists are right. Let’s look at the conditions first

 

Is there product to ship? Absolutely. Alberta has the second, third or fourth largest oil reserves in the world (depending on how and what day of the week you count). There is ample supply of oil and well-capitalized industry leading companies to develop and fill any pipeline that would be built.

 

Are there ready and willing customers for the product? Absolutely. Notwithstanding breathless claims that the oil and gas industry and the use of fossil fuels is going to fall off a cliff, all available evidence suggests that these claims are overblown. With 2/3 of the world still trying to climb out of energy poverty, the market for oil will exist long after any of us are gone from this bowling ball. That is irrefutable. And Alberta is a stable supplier with massive reserves.

 

What about permission? Well folks, this is where we trip over ourselves. And is the reason that the major project group exists in the first place – because Canada has a hard time granting permission for pretty much anything. This is especially the case for the oil gas sector where there are INDUSTRY SPECIFIC rules that stand specifically in the way of any project.

 

Which ones are those? Well we all know what they are.

 

First one is the emissions cap, which is also sometimes described as a production cap. Basically the proposed emissions cap is specific to the oil and gas industry – oilsands really, let’s be real about this and it specifies that total emissions from that sector are to be capped. Just oil and gas. Not cement. Not mining. Just oil and gas. So you can see how this might impact the ability to “produce enough product to fill the pipeline”. I know the math says it’s feasible with Carbon Capture blah bah blah. But a government that singles out an industry with specific restrictions once will surely have the propensity to do it again.

 

The second regulatory hurdle in the way of developing a pipeline exists on the back end of any proposed West coast pipeline, which is the most logical destination for an export tube. And that is the tanker ban which specifically says that no tankers are allowed to transport bitumen – hmm there’s those pesky Alberta oil sands again – along the Northern BC coast which basically precludes shipping said heavy oil anywhere for export except through the port of Vancouver or Alaska. So yeah, this basically eliminates part of the second condition for building a pipeline.

 

Now we get to the fun and disingenuous part. Since prospective proponents have correctly identified that the first two conditions for a pipeline are being effectively stymied by oil-specific regulations they have elected to not propose anything, because, let’s be honest, what’s the point? If the regulations say no, why would you do it. Would a gold-mining company start a remote mine if the government said you can’t bring trucks there? Is someone going to build a power plant (nuclear, renewable, whatever) if the government said you weren’t going to be able to tie into the grid?

 

Absolutely not! So why should the pipeline sector be any different.

 

Some people suggest that pipeline companies should call the government’s bluff and propose a project that they will only build if the rules get changed. I guess. I mean when they proposed projects before, the rules never changed in the opposite direction, right? Ha!

 

No, the pipeline proponents, having been burned multiple times aren’t going to lift a finger unless the government admits their own stupid regulations are what is preventing these projects from being proposed.

 

Does no one understand that developing a proposal like this costs an enormous amount of money? All you need to do is go back to the Federal government’s purchase of TransMountain and the TMX project from Kinder Morgan.. When the government made that purchase the company had already spent up to a billion dollars on prep work and not a single shovel had yet been allowed to disturb a migratory toad.

 

There are real costs associated with any proposal or project of this nature and no company, CEO, project manager or Board of Directors is ready to greenlight the vaporization of shareholder capital without regulatory certainty. It doesn’t matter how many soothing words and vague promises are made. That is how people lose their jobs, their companies and their credibility in the market.

 

Pipeline companies know how to build and make money off pipelines, especially ones that have a prescribed rate of return. But they are also risk averse and the biggest risk in Canada has and will be until things change, regulation and obtaining approval.

 

You will note I didn’t bring up the Impact Assessment Act. That’s because it’s a know commodity and changes are already being implemented to make things clearer for that process, plus the government recently passed the “we can ignore the Impact Assessment Act for Projects we like” Act. We are good there.

 

Here’s a proposal for my pal Mark.

 

Get up in front of the country and say:

 

“We need to add additional oil export egress. It can be a pipeline, a dirigible or crude by rail – I really don’t care which. To facilitate that we are going to eliminate the emissions cap and the Tanker Ban and we are going to invite the private sector – pipeline companies, rail companies, private equity, sovereign wealth funds, Brookfield – to submit their proposals to build this export capacity. Any border, any coast. The project that is in the best interests of Canada will be selected to proceed. You have until December 31 2025 to make your submission. May the best nation-builder win. Thank you for your attention to this matter. Mark signing out.”

 

Works for me.