In Stephen Harper’s time as Prime Minister, four major pipeline projects were approved and built totalling over 1 million barrels per day of capacity (original Keystone, Line 9B Reversal, Trans Mountain Anchor Loop, and Alberta Clipper). All of these pipelines were approved and built without a carbon tax and with conservative governments provincially and federally.
We also had Keystone XL approved within Canada and blocked only due to an anti-oil administration in the US. That project now looks likely to proceed because the administration in the US is changing, and not because the Alberta carbon tax changed anyone’s mind. And we had the Northern Gateway approved and then delayed by court challenges from multiple opposition groups in BC, and those groups still oppose that project today despite the carbon tax in Alberta.
What do those 6 projects have in common? The carbon tax or lack thereof had no impact on whether or not they got built.
Regardless of what Justin Trudeau and Rachel Notley said on Tuesday, the same is true of the TMX approval. If we still had conservative governments at each level and no carbon tax the project still would have received NEB and Cabinet approval.
The real challenge to the construction of TMX, as it was with Northern Gateway, will be the inevitable court challenges from environmental groups, native groups and the city of Vancouver. None of the groups that are actually likely to fight this pipeline have backed down in their opposition as a result of the Alberta carbon tax. It will still face the same amount of protests and lawsuits as it would have otherwise.
It is clear that the typical reporting of the carbon tax being intended to gain social license for pipelines has the causality exactly backwards. In fact the pipeline approval is being used to try to get social license for the carbon tax. Buried in the good news pipeline announcement was premier Notley announcing that the Alberta carbon tax will now continue to increase to $50/tonne instead of stopping at $30/tonne. Her own statement says that the increase was contingent on the pipeline approval, and not the other way around. To put this number in perspective, $50/tonne is about 11 cents per litre on gasoline, or about $2.50/GJ of natural gas (essentially a 100% tax on natural gas at recent prices).
The tax, and particularly this surprise increase before it even comes in to effect, is neither a necessary nor sufficient condition to get a pipeline built, yet that is how it is now being sold to Albertans. They expect the pipeline approval to fool Albertans into acquiescing to this tax, when in fact it has not changed anybody’s opinion on pipelines or made it any easier to get pipelines built.
What the tax will do however is make everything more expensive, and it will drastically hurt our industry’s competitiveness relative to the new pro-oil administration in the United States.