MNI INTERVIEW: Alberta Pipeline Dream Hurt By Separation Talk

Alberta’s talk of separating from Canada endangers planned new energy pipelines, a former deputy prime minister who represented that province told MNI, adding that potential investors in the province are already backing away.

“This discussion is singularly unhelpful and for both the province of Alberta and for the country," said Anne McLellan, who has also served as Canada's natural resources minister. "The last thing you want to do is put in play issues that could potentially stand in the way of attracting foreign investment.”

She said CEOs in the province “are already starting to hear from potential Asian investors that they are stepping back, because they do not see this discussion around separation in Alberta as helpful to any investment decision they would make.”

While McLellan, co-chair of the bipartisan Coalition for a Better Future, did not specify the areas in which the Asian investors were interested, Alberta Premier Danielle Smith is pushing to revive the Northern Gateway pipeline, an CAD8 billion project which was shelved in 2016 following objections from indigenous and environmental groups. Hopes for the project, which would run through British Columbia to the Pacific coast, are rising as Canada’s energy minister has said projects of national significance will be fast-tracked for approval decisions within two years.

Several other LNG projects are in various stages of approval, and Canada LNG, a consortium of Shell, PETRONAS, PetroChina, Mitsubishi Corporation and KOGAS, says it is on track to begin shipments around the middle of this year from a facility in Kitimat, British Columbia, using gas from that province.  

But McLellan said Alberta's move towards a referendum on secession as soon as next year is already scaring away investors.

INVESTORS WANT CERTAINTY

"Be very careful when you start throwing around words like separation, because markets desire one thing, other than profitability. It's certainty, and it is from the certainty the profitability flows," said McLellan, who was a cabinet minister during Quebec’s second razor-thin vote on secession in 1995. During the rise of Quebec's separatist movement major banks moved headquarters to Toronto from Montreal while Canada's dollar and bonds were rattled. 

Canada needs investment to lift an economy hobbled by red tape and cautious firms that became too reliant on U.S. exports, according to McLellan. Private investment has fallen to the lowest share of GDP since World War II and per capita incomes have grown just 1% over the last decade, according to Coalition for a Better Future’s annual report. (See: MNI: Canada Will Struggle To Wean Off U.S. Trade Dependence)

Smith accuses the federal government of landlocking Alberta's oil and gas. McLellan said the Pacific route made sense for a new pipeline.

“You're going to see expansion, in whatever form it takes, on the West Coast, in relation to LNG, I think that's where probably your market, Asia, will buy,” she said.

Others have argued for an "Energy East" pipeline because the main lateral artery today runs partly through the U.S. The federal energy minister last week said Canada must ensure its eastern provinces are never cut off from western energy by U.S. actions. 

“When you think about an oil pipeline going east, that's arguably the national security issue as much as anything else," McLellan said. 

The recent election brought newfound unity on advancing big projects under Prime Minister Mark Carney and his Liberals, even in Quebec, where separatists lost a third of their seats, said McLellan. (See: MNI INTERVIEW: Carney Quebec Gain Boosts Pipeline Odds- Surkes)

"There's also, I think, a high degree of agreement around at least the main actions and policy changes that need to take place to propel economic growth and greater productivity and diversification of markets,” she said.