Alberta bid to recover $1.3-billion loss from KXL shutdown is politically motivated and unlikely to succeed

Alberta Politics | 10 February 2022

Alberta bid to recover $1.3-billion loss from KXL shutdown is politically motivated and unlikely to succeed

by David Climenhaga

A brief statement by Energy Minister Sonya Savage yesterday says Alberta’s United Conservative Party Government intends to use a legacy provision of the now-kaput North American Free Trade Agreement to recover the government’s “investment” in the cancelled Keystone XL Pipeline project.

The minister’s statement – heavy with nearly incomprehensible business-bureaucratic jargon despite its economical use of only 170 words of text – is technically accurate, but misleading.

“The Government of Alberta – through the Alberta Petroleum Marketing Commission – has taken formal steps to initiate a legacy North American Free Trade Agreement claim under the Canada-United States-Mexico Agreement over the cancellation of the presidential permit for the Keystone XL pipeline border crossing,” the statement begins.

“After examining all available options, we have determined a legacy claim is the best avenue to recover the government’s investment in the Keystone XL project,” it continues.

This is probably true, although that doesn’t mean it offers a very good chance of recovering the $1.3-billion bet – not an investment – that the Kenney Government gave away in 2020 to TC Energy, the Calgary-based pipeline company previously known as TransCanada Pipelines.

The gift was made in the expectation that Republican Donald Trump would be re-elected as president of the United States in November 2020 and that he would allow the controversial project to be completed.

Instead, as everyone over the age of four now understands, Joseph Biden, a Democrat who had promised to cancel the project, was elected. Literally his first act as president was to cancel the project. This is pretty hard to portray as a betrayal by a democratically elected politician, although to give Alberta Premier Jason Kenney his due, he tried.

Moreover, the chance of the Alberta NAFTA action succeeding is quite small.

There is every possibility that the Alberta claim will lose, Kyla Tienhaara, the Canada Research Chair in Economy and Environment at Queen’s University, wrote in December last year – “leaving Alberta’s taxpayers worse off considering the high cost of (investor-state dispute settlement) proceedings.”

So why bother? Clearly it’s because the Kenney Government looks exceedingly foolish for its bad bet, which immediately cost Alberta taxpayers $1.3 billion and may still leave them on the hook for up to another $6 billion in loan guarantees for TC Energy.

But while the claim is unlikely to succeed, it will not be resolved before the next Alberta general election, giving Mr. Kenney and the UCP time to leave the impression the government is aggressively pursuing the lost dough and intends to recover it.

In reality, of course, they will be throwing good money after bad in an effort to fool Alberta voters.

Dr. Tienhaara’s December 2021 commentary – published soon after TC Energy launched its own legacy NAFTA ISDS claim, which she assessed as having a much better chance of success – is very accessible to lay readers. I will just summarize a few of her key points here.

There were many obstacles to the Keystone XL project, even if Mr. Trump had been elected, the outcome Mr. Kenney gambled our money on. Permits were outstanding. Challengers were in the U.S. courts. “The very fact that KXL needed a substantial injection of public funds to proceed indicates that it was viewed by the private sector as an extremely risky investment.”

Alberta hoped to piggyback on TC Energy’s more promising case, but the benefactor of the UCP’s largesse wanted nothing to do with that plan, presumably because the province’s case could only weaken the company’s.

Alberta could only use the NAFTA provision, which under the terms of the Canada-U.S.-Mexico Agreement expires next year, because the Alberta Petroleum Marketing Commission is a Crown-owned corporation.

“Presumably there is no provision in the “exit agreement” between Crown corporation APMC and TC Energy that would have Alberta recouping its investment if TC Energy wins its NAFTA case.” Dr. Tienhaara wrote. “If there was, there would be no need for a separate arbitration.” (Emphasis added.)

This point does nothing to increase confidence in the business or legal acumen of the UCP government.

Much of the rest of Dr. Tienhaara’s short essay, published by the Canadian Centre for Policy Alternatives, deals with the environmental problems created and made worse by the ISDS process, which was eliminated for Canada negotiations with the Trump Administration for the CUSMA in the summer of 2020.

Nevertheless, it is important to remember, similar provisions that allow corporations to sue for fancifully calculated future losses resulting from the imposition of environmental laws and regulations remain in many trade agreements to which Canada is a party, and continue to be sought by Canada in negotiations with other countries.

Ms. Savage’s statement continued with a paragraph of folderol about Alberta’s responsible and reliable energy sector and its importance to the North American economy.

“Alberta’s government will continue to fiercely advocate for our energy sector and the workers whose livelihoods depend on it,” she then concluded.

Meanwhile, while Ms. Savage was spending her time on this political Hail Mary pass, she was doing very little in her temporary additional role as justice minister to do anything at all to open the border crossing as Coutts, which is illegally blockaded by a far-right “Freedom Convoy” that is trying to topple Canada’s democratically elected federal government.

Despite a timid statement on the Coutts blockade yesterday, at last report the Royal Canadian Mounted Police had still not made any moves to enforce the law.

The cost of that blockade, estimated at $44 million a day, has already soared to well over half a billion dollars, close to half of Alberta’s initial and probably unrecoverable loss on the UCP’s gift to TC Energy.

Workers whose livelihoods depend on goods passing through the border at Coutts are apparently not as much of a concern to Ms. Savage and her colleagues in the UCP.