By Colleen Collins and Patrick Smith
Published in the Financial Post
February 6, 2020
Federal Environment Minister Jonathan Wilkinson recently linked the approval of Teck Resources’ Frontier oilsands mine to Alberta’s withdrawal of its court challenge of the federal carbon tax — essentially holding the project hostage to political negotiation.
The federal cabinet probably should not have power of approval over a project that is wholly within Alberta and subject to Alberta’s climate policy, which includes both limits on oilsands emissions and a carbon price for large emitters. But, given that it is, approval should be granted or not on its merits as assessed by the expert regulatory review, not as part of a strategy to strong-arm a province to fall in line with federal policy demands in an area of shared jurisdiction.
Linking a project’s approval to policy negotiations with the government of Alberta sends two signals the federal government may wish to rethink.
First, other provinces get the message that if they challenge federal intrusion into provincial jurisdiction, they will be punished, too. Whether or not that’s a message Ottawa intends, it will create a chill in federal-provincial relations across the country that even Intergovernmental Affairs minister Chrystia Freeland can’t thaw.
Second, for potential investors the message is: Even if you go through a predetermined regulatory process, your project can still be tossed around like a political football over the hot topic of the day. Investors expect governments to play by the rules and they don’t want to become props in political shenanigans after 10 years of themselves following the rules. Who would want to invest in this country given that kind of political uncertainty? The answer is: Almost no one. According to OECD statistics, in 2018 smaller countries like Finland, Luxembourg and Ireland beat the pants off Canada for net direct investment. And Statistics Canada data show that capital investment Canada-wide (not just in Alberta) remains basically flat after falling off a cliff in 2015.
Today’s political football is climate policy. Environmental policy is a shared responsibility between the federal and provincial governments. Alberta, together with Saskatchewan, Manitoba, Ontario and Quebec believe federal imposition of carbon taxes tips the scale too far. That’s why they are in court. That’s how our system works.
Jurisdictional challenges between federal and provincial governments aren’t new. B.C. and Quebec had their day in court over pipelines recently. It’s the role of the courts to adjudicate provincial and federal separation of powers. It is not the role of the federal government to withhold the approval of a private resource development project conditional on the withdrawal of legal challenges. Alberta has the right to challenge a policy or a tax with which it takes issue and to do so without political hostage-taking.
It is clear that all this has less to do with the decision over the Frontier project itself and more to do with the federal government asserting its authority over Alberta. The project fits under Alberta’s 100-megaton emissions cap for oilsands development and conforms to the province’s carbon-pricing regime for large emitters. Teck has committed to operate at half the GHG emissions intensity per barrel of best-in-class practice and has received support from all directly affected Indigenous communities. But now it’s left with little recourse but to sit and wait as both uncertainty and regulatory costs rise. Make no mistake, however: Although the final go/no go decision on this particular investment rests with Teck (not Minister Wilkinson or the federal cabinet), political game-playing of this sort can destroy the viability of any company’s project anywhere in the country.
It is hardly unreasonable for private industry to propose a major project that would provide benefits to Canadians and mitigate local and global harms, to follow a clear approval process run by expert and independent regulators applying well-defined criteria, and then to receive an informed decision. But add high-stakes political gamesmanship to the mix and investors from all over the world who might be considering their Canadian options may well conclude their chances would be better at the blackjack table.
Colleen Collins is vice-president and acting CEO at the Canada West Foundation, where Patrick Smith is a policy analyst.