The federal government’s decision to purchase Kinder Morgan’s leaky tar sands pipeline is a totally reckless use of public money. But the $4.5 billion the government is so willing to sink into a pipeline raises some difficult questions: Why spend so much on a pipeline? And why not spend money on other priorities?
Let’s make this clear first: this is a bad deal. The Kinder Morgan bailout leaves Canadians on the hook for a risky pipeline that lacks a viable business case, can’t find any other buyers, flouts Canada’s commitment to Indigenous rights and reconciliation, and faces intractable legal, political and regulatory obstacles.
The expansion of oil production to fill Kinder Morgan is inconsistent with reaching Canada’s climate targets. And the government’s purchase of a tar sands pipeline is at odds with the longstanding federal commitment to phase out fossil fuel subsidies, which was supposed to be a priority for Canada in its upcoming chairmanship of the G7.
The government says it will pay $4.5 billion to Kinder Morgan, which buys it the existing 65-year-old leaky pipeline, some oil storage facilities, and a marine export terminal. But Finance Minister Bill Morneau refused to say what the final price tag for building the Trans Mountain Expansion would be. Adding the cost of building the expansion project, financial assurances for spill risk, and the Oceans Protection Plan, some economists see the public cost rising as high as $20 billion.
That’s a lot of public dollars going to build a risky, unpopular tar sands pipeline that betrays Canada’s commitments on climate change, fossil fuel subsidies, and Indigenous rights.
Just for a moment, let’s cut the Finance Minister some slack and assume the bailout is only $4.5 billion. What else is $4.5 billion worth to the government? What else can be bought with all that money that’s lining Kinder Morgan’s pockets?
- Health care: $4.5 billion could fund 60,000 hospital beds in Canadian hospitals.
- Education: The Kinder Morgan bailout could put solar panels on the roofs of 18,000 schools.
- Clean water for First Nations: Canada’s Parliamentary Budget Office estimates it would cost $3.2 billion to bring clean water to every First Nation in Canada. So not buying a tar sands pipeline could go a long way toward reconciliation, with $1.3 billion left to spare.
- Climate action: The 2018 federal budget allocates $5.7 billion to fund the pan-Canadian Framework on Clean Growth and Climate Change for 12 years. So $4.5 billion could finance nearly ten years of federal climate action.
The Alberta government seems particularly thrilled about the Kinder Morgan bailout, even offering to set up an “emergency fund” to backstop pipeline construction risks. So what does $4.5 billion mean for Alberta?
5. Federal Health Transfer to Alberta: $4.5 billion is virtually the same amount that the Alberta government expects to receive in health transfers from the federal government in 2018-19. But both governments appear to think sinking public money into a pipeline is more important than shoring up the health care system.
6. Wind Energy: Earlier this year, Alberta procured the cheapest wind power ever in Canada at $37 per megawatt-hour. At that low price, $4.5 billion could build 4,500 MW of wind energy in Alberta, enough to power nearly 2 million homes.
7. Replace Alberta oil and gas royalties: In 2017-18, the Alberta government expects to collect about $4.5 billion in “non-renewable resource revenue”—that means royalties from bitumen, crude oil and natural gas. That’s right. The federal government is spending the same amount to build a 65-year-old pipeline than the Alberta government collected in oil and gas royalties last year.
Canada made a bad decision in bailing out Kinder Morgan. The cost is steep, and the opportunity cost is even steeper. Instead of spending limited public resources on its commitments to improve the lives of Canadians, advance Indigenous reconciliation, and invest in a clean economy, the federal government bought a risky tar sands pipeline that nobody else wants.
Not only should we be angry about the federal government’s broken promises, we should be angry about its misplaced priorities. It’s time to stop funding climate polluters.