Feb 2, 2018 | 17:43 GMT

3 mins read

Canada: Provinces Put up a Fight over Pipelines

Forecast Update

Stratfor's recent Canadian trade profile discussed how Canada's diverse provinces wield considerable power on economic issues. A recent quarrel between British Columbia, which has a strong environmental movement, and Alberta, the heart of Canada's oil sector, over a new pipeline highlights Ottawa's continued obligation to address interprovincial dynamics for the good of the country at large.

Two Canadian provinces are engaged in a spat over pipeline politics. In a move tantamount to an attempt to obstruct a $6 billion project to expand Kinder Morgan's Trans Mountain pipeline from Alberta, British Columbia announced potential new oil shipment rules on Jan. 30. In response, Alberta Premier Rachel Notley declared Feb. 1 that her government would put a hold on electricity trade talks with British Columbia. The latter province, which has long imported cheaply priced electricity from Alberta at night to export at higher prices during the day, could lose as much as $500 million annually if the trade relationship is severed for a long period of time. And Notley has said this is just the first of many moves against British Columbia.

British Columbia's potential new regulations would restrict shipments of diluted bitumen in the region, and though they do not explicitly reference the Trans Mountain pipeline expansion, Alberta believes the target is clear. Alberta's growing oil production industry relies primarily on conventional heavy oil and diluted bitumen produced from the province's oil sands, and the expanded pipeline, which would increase capacity to 890,000 barrels per day, is set to carry large amounts of both. Notley called for an emergency Cabinet session on Jan. 30 to discuss possible legal and economic recourse if British Columbia attempts to jeopardize the pipeline expansion, and she also called on Ottawa, which has already approved the project, to step in and defend it. Prime Minister Justin Trudeau has responded, emphasizing the national government's support for the pipeline.

Because the Trans Mountain pipeline is interprovincial, the National Energy Board is supposed to handle its regulatory review, so Alberta is claiming that British Columbia's move to make unilateral regulatory decisions is unconstitutional. On British Columbia's part, the increasing efforts to disrupt Alberta's pipeline projects are likely due to a shift in provincial government control. The former ruling British Columbia Liberal Party had been pragmatically supportive of pipeline projects with Alberta, but 2017 elections gave the more liberal New Democratic Party control of the government as part of a coalition with British Columbia's Green Party. Meanwhile, Notley's threat of suspending electricity sales to British Columbia is likely due to her own upcoming provincial elections in 2019. Alberta's Trans Mountain project has already seen delays and public opposition, and unless Notley, a member of the New Democratic Party, secures some victories in the oil and natural gas industry, she will face stiff conservative competition.

Editor's Note

A previous version of this report misstated the value of the project. The error has been corrected.

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