The News Rundown

CP Rail to buy Kansas City Southern to create first rail network connecting Canada, the United States and Mexico

There was a big piece of news for Canada's economy that got virtually unreported by the mainstream media. Canadian Pacific Railway Ltd. agreed to buy Kansas City Southern for $25 billion, looking to create a 20,000-mile rail network linking the USA, Mexico and Canada.
The transaction gives CP Rail access to the Kansas City, Missouri-based company’s sprawling Midwestern rail network that connects farms in Kansas and Missouri to ports along the Gulf of Mexico. It would also give it reach to Mexico, which made up almost half of Kansas City Southern’s revenue last year, and create the only network that cuts through all three North American countries.
CP President and Chief Executive Officer Keith Creel said the “transaction will be transformative for North America”. Creel will be CEO of the new company, to be based in Calgary as CP Rail was already, and is expected to remain at the helm until at least early 2026, according to a separate statement. The combined entity, to be called Canadian Pacific Kansas City, or CPKC, will have revenue of about US$8.7 billion and almost 20,000 employees. There will be no workforce reductions, Creel said in the interview, and he predicted the merger will actually result in job gains as sales grow.
Creel said: “I’ve had my eye on the KCS for quite some time. We extend our reach for our customers through the U.S. and into Mexico, and at the same time KCS can do the same coming from Mexico up to U.S. destinations and Canada.”
The combination -- the biggest purchase of a U.S. asset by a Canadian company since 2016 -- would provide a transportation solution for manufacturers seeking to bring factories back to North America after the pandemic exposed risks of relying on overseas supply chains, Creel said. The merger has a “compelling and powerful environmental impact” by enticing more truck cargo to rail, which is about four times more fuel efficient, he said.
So, what does this mean for Canada? CP Rail gaining track and greater access to the US as well as opening up the Mexican market means that goods can move back and forth between the 3 countries easier. It also means that because of the July signing of the CUSMA agreement between the 3 countries, trade between the North American market is likely to pick up, which is good news for Canadian businesses hammered hard by the pandemic and self inflicted wounds from the federal government.
The deal comes as trade across the three nations is expected to pick up under the Biden administration. Just days after his inauguration, U.S. President Joe Biden spoke with the leaders of Canada and Mexico, his first calls with foreign counterparts, where issues from trade to climate change were discussed.
Mexico is a crucial supplier of automobiles, electronics and food and a major customer of grain, fuel and consumer goods, and having that market opened to Canada can only be a good thing for the economy. Kansas City’s unique network linking Mexico’s largest industrial cities and ports to the U.S. Midwest would also be positioned to benefit if the pandemic and fraying ties between the U.S. and China prompt companies to move lower-wage manufacturing from Asia to North America.
Meanwhile, it has been reported that U.S. refiners have turned to Russian oil and petroleum products to fill the gap that sanctioned Venezuelan crude and drastically reduced OPEC shipments have left in U.S. imports, despite the energy standoff between the United States and Russia.
In 2020, the U.S. imported more oil and refined products from Russia than from Saudi Arabia, with Russia’s share of American oil exports at a record-high 7%. Russia mostly displaced the market previously held by Venezuela—now unable to sell its heavy oil to U.S. refiners because of the American sanctions on Nicolas Maduro’s regime.
Most of the oil that U.S. refiners buy from Russia is not crude oil, but fuel oil they use to produce gasoline in the absence of Venezuelan heavy oil supply to complement the imports of heavy Canadian crude from the oil sands.
In 2019, Canada was the US's top producer at 49% of imports, followed by Mexico with 7%, Saudi Arabia and Russia at 6%, and Colombia with a 4% share.
So, how are these stories linked? Well, with a unified North American train track between the 3 countries, enterprising Canadian oil companies already probably see the possibilities of greater exports to the rest of the continent. With the US forced to import oil from regimes it would rather not deal with, it's clear that Canada, with the right steps, could displace these entities with Canadian oil instead. With a lack of pipeline construction under Trudeau, by far the safest and most environmentally friendly option of exporting oil, it's clear that rail is the next step on the list, barring a change of government.
The pandemic has shown that Canada's standing on the world stage has been much diminished, and China has in particular been dismissive of our diplomatic efforts. We are also far down the line for critical supplies and vaccines, and increasing our exports to the US will not only boost the Canadian economy, but will also increase our political capital with our southern allies. The time is now to secure our economy and make Canada a more independent country that can stand on its own feet.
Supplemental:

Bill 1 of the United Conservative government in 2019 was the Carbon Tax Repeal Act that repealed the Notley NDPs carbon tax that was put onto Alberta without consultation or campaigning.
The UCP received the largest number of votes of any elected government in Alberta history.
Upon the repeal of the provincial carbon tax the federal government imposed its carbon tax on the province.
The UCP government has made the commitment to fight the carbon tax in the courts. Last February the Alberta Court of Appeal ruled the carbon tax unconstitutional and this week the Supreme Court of Canada issued its ruling.
The highest court ruled 6-3 that the tax is constitutional.
The majority opinion written by Chief Justice Richard Wagner, the same Chief Justice who is currently acting as Governor General, said there would be “irreversible harm” if the Parliament was constitutionally unable to address greenhouse gas emissions.
This decision means that Alberta, along with Saskatchewan, Ontario, and Manitoba need to decide what happens next.
It’s also worth noting that Quebec stood with these provinces in the lens of ensuring there would not be an unjust intrusion into provincial affairs.
The governments have three choices: take the federal carbon tax, implement their own carbon tax, or come up with another plan that satisfies the federal government.
In responding to the ruling, Premier Kenney did not reveal which way Alberta would go next only saying that the government will consult with Albertans.
He did say that the province “will do everything in our power to minimize costs on Albertans, and on our trade-exposed industries that must compete globally, while ensuring that we continue to responsibly reduce emissions in our province.”
The UCP currently has legislation being put forward that would require any government hold a referendum before introducing a carbon tax in the province.
Saskatchewan is aiming to bring in their own carbon levy following the decision.
Alberta was one of the first provinces almost 20 years ago to bring in a carbon price on industrial emitters. This was strengthened in 2019 to ensure that the Trudeau carbon tax would not have an affect on Alberta’s industry.
With the environmental steps taken by the Alberta government and its push to cut regulations and lower business taxes, Alberta has already become a hub for alternative energy investment without pushing money from a carbon tax to stimulate these sectors.
It goes to show that all that’s needed is support from the province or jurisdiction in question and it doesn’t even need to be in the form of a virtue signalling carbon tax.
Following the decision federally, the Conservatives reiterated their commitment to repealing the carbon tax but maintaining their commitment to fight climate change.
In taking questions on the ruling the Premier was asked if it was time to move on and just accept that carbon pricing was part of the future.
He was also asked if Albertans should be concerned about the 1 million or so the province has spent on fighting the tax. Anyone who’s familiar with corporate law will know that $1m really isn’t that much for a corporate lawsuit.
Most of the media coverage this week of course has focused on the tax itself and what this means for green initiatives going forward.
What wasn’t covered though was two very key points.
First the Quebec cap and trade system is roughly equivalent to a $20/tonne carbon tax. The federal tax is set to go up to $40/tonne next week and will eventually rise to $160/tonne by 2030.
The question from Alberta is that if Quebec’s plan is adequate, shouldn’t a similar plan, if Alberta copied it, work here? We’ll have to wait and see on this what the feds have to say if Alberta decides to adopt a cap and trade program.
More concerning though was the dissenting opinion highlighted by Supreme Court Justices Russell Brown and Malcolm Rowe.
They argued that the law’s subject matter “falls squarely within provincial jurisdiction.”
“This is a model of federalism that rejects our Constitution and rewrites the rules of Confederation. Its implications go far beyond the (carbon tax law), opening the door to federal intrusion — by way of the imposition of national standards — into all areas of provincial jurisdiction, including intra-provincial trade and commerce, health, and the management of natural resources. It is bound to lead to serious tensions in the federation.”
The Trudeau’s of course have a reputation for heavy handed federalism but that wasn’t at all covered this week.
There’s also a provision of the carbon tax that lets carbon pricing be set exclusively by cabinet, meaning the Prime Minister or Environment Minister in Ottawa.
This Supreme Court decision means that a handful of people can at their whims control pricing of a tax that affects millions.
It also means that future laws could be passed by a government (any government) that would allow the cabinet to act arbitrarily and set policy for the provinces.
Justice Suzanne Côté was skeptical of this very aspect of the carbon tax legislation saying, “I am of the view that certain parts of the Act are so inconsistent with our system of democracy that they are independently unconstitutional.”
Where have we heard about national standards being set recently? Long-term care homes. This is another area where the federal government could set its own regulations and, using the precedent of the carbon tax, intrude into matters of provincial jurisdiction.
There’s of course one thing that the Liberals and supporters of a federal carbon tax may not have thought of though: would you be happy with a Prime Minister Erin O’Toole acting in such a way?
The answer is probably no and this question wasn’t asked this week.
With everything this court ruling brings forward we need to be aware of just how much this ruling has the potential to change our country and federation.
It’s for that reason that Canadians should be deeply concerned and this court ruling should give any Canadian concerned about government overreach the drive to examine our federal system of government.
Supplementals:

Delays plague 'inconsistent and incomplete' $188B infrastructure program: auditor general

Auditor General Karen Hogan will not be a household name among public servants for many in Canada quite like the Ethics Commissioner Mario Dion, but she should be, as her report on Thursday gave our biggest insight into just how much the Trudeau government has spent, and just how effective the astronomical level of spending will be once the dust settles.
Hogan released one of the most thorough reports to date on the progress of the Investing in Canada Plan, which found that “funds were not being spent as quickly as planned,” and that “objectives might not be met” after the full 12-year life of the program. Her report shows that the Liberal government’s $188-billion infrastructure spending plans continue to lag behind schedule, with government departments failing to provide adequate public reporting on the sprawling program.
As much as one-fifth of planned spending in the first three years of the IICP, or roughly $9 billion, had to be delayed, according to the report. In fiscal year 2019-20 alone, around $3 billion in funding was pushed back to later years. Of the 34 departments and agencies responsible for allocating funds under the program, eleven failed to spend a single dollar in the first year in 2016-17, the report said.
The auditor general also found “incomplete and inconsistent” reporting by federal departments, which meant that Infrastructure Canada was “unable to provide meaningful public reporting on the plan’s overall progress toward its expected results.”
Prime Minister Justin Trudeau first announced plans for a bulked-up infrastructure program during his 2015 election campaign, saying a Liberal government would funnel billions of dollars into public transit, telecoms, ports, water treatment plants and other critical infrastructure as a way to reinvigorate Canada’s moribund economy.
Those spending plans were partly responsible for Trudeau’s promise to run a $10-billion deficit in his first year as prime minister, which he said at the time would be returned to surplus by 2019. He quickly abandoned those plans, running deficits well higher than $10 billion every year, or as what former prime minister Stephen Harper joked were just "teeny tiny modest deficits". It's too bad that the Canadian public did not listen, as those modest deficits have now grown to over a trillion dollars in debt.
The auditor general also took a look at the CERB program. Hogan said while she applauds the government’s efforts to get money out the door quickly to Canadians who had been impacted financially by the COVID-19 pandemic, less rigorous eligibility screening did lead to cases of abuse.
In a report released Thursday, Karen Hogan said that approximately $500 million of Canada Emergency Response Benefit (CERB) payments were made to recipients who had applied for support under both the Canada Revenue Agency (CRA) and Employment and Social Development Canada (ESDC).
Hogan also said a pre-payment screening measure could have been applied at launch to identify and weed out “suspicious” applications.
In May, following reports of fraudulent applications and of the government’s instruction of bureaucrats to ignore warnings or red flags, Prime Minister Justin Trudeau said Ottawa’s priority was getting support off “rapidly and efficiently,” adding that the government would “clean up” the mess later. Shortly thereafter, the CRA announced it had opened a snitch line so Canadians could report suspected abuse of the system.
While the auditor general attempts to hold the government to task for missing investment money, Canada also finds itself at the top of the list of 31 countries where the ultra rich can invest and shelter from COVID-19.
People right now want a place to live and work where they can earn a paycheck and keep their families healthy. Lots of people don't have any choice in the matter at the moment. But those with enough discretionary funds can buy a second citizenship to both get around travel restrictions and to seek refuge in a country that has handled COVID-19 effectively.
The super-rich are buying the ultimate insurance policy to make sure they will be able to travel to whatever virus-free, sunny bolt-hole they choose, if a second spike in COVID-19 infections triggers another global lockdown. The world's wealthiest are snapping up multiple citizenships in countries around the world.
A new report lists the top 10 of 31 countries worldwide that offer these residency- or citizenship-by-investment programs. Buying a passport can cost from US$100,000 to more than US$7 million. Deep Knowledge Analytics and Henley & Partners, a London-based citizenship broker, put together the Investment Migration Programs Health Risk Assessment, ranking the participating countries by how effectively they’ve handled the COVID-19 pandemic.
In the report, Greg Lindsay, director of Applied Research at NewCities, wrote that “it’s no coincidence the first nation to pre-emptively close its border with the U.S. a year ago tops the Investment Migration Programs Health Risk Assessment.”
Though its citizenship-by-investment program doesn’t particularly stand out, Lindsay said, “true to form, Canada’s quiet competency, deference to authority, and historical ‘garrison mentality’ — as seen in (the Atlantic) provinces walling themselves off from the rest of the country to great success — culminated in the best overall score.”
Canadians “simply persevered, with a death rate that’s middling globally but is less than half of that of its larger neighbour,” Lindsay said, adding that the government has shamed anti-maskers and mostly succeeded in uniting its citizens behind its pandemic response.
But, the report notes, given the catchphrase of politics is “what have you done for me lately?”, Trudeau's positioning at the start of the pandemic will be forgotten if it cannot rescue its flailing vaccination program.
With housing still skyrocketing, it's clear that the Canadian economy is headed for a breaking point under Trudeau. What he is doing, what he is investing in is clearly not working.
Supplementals:

Firing Line

I'm in charge': O'Toole brushes off Conservative grassroots vote on climate change

“I’m in charge” the words that should have ended it all but the discussion continues.
Last weekend the Conservatives held their last policy conference before what is likely to be an election this year.
54% of grassroots voting members voted down a policy saying, “we recognize that climate change is real. The Conservative Party is willing to act.”
This same resolution also called on there to be binding targets for all the world’s major emitters including China and the US. The resolution also called for the establishment of a program with tax credits to promote environmental solutions.
The policy was voted down 54% to 46%. Every province's delegates east of Ontario voted yes and every province including Ontario and west voted no.
This became the story out of the convention this week. Headline after headline in every media outlet ran with the headline stating that the Conservatives voted against saying that “climate change is real”
This spurred leader Erin O’Toole to speak up and say, “I’m in charge”
He has reiterated time after time this week that the party will have a plan to address climate change ahead of the next election.
There always seems to be a disconnect when media reports on the actions of Canada’s grassroots political parties.
Grassroots democracy means people who are party members (which can be anyone) get a say in the general direction the party goes.
Going back to the resolution text, it outright called for the party to embrace a carbon tax. This is in all likelihood the reason the resolution was voted down, but most stories just quoted the passage including the words “climate change is real.”
Recall that the provinces of Alberta, Saskatchewan, Manitoba, Ontario, Quebec, and New Brunswick were all standing with one another this week as the Supreme Court of Canada rendered its ruling on the federal carbon tax.
And in case the media missed the boat, these provinces were standing with Alberta, Saskatchewan, and others against the federal tax!
Following this logic, a federal party representing the entire country voting down a resolution that binds them to a carbon tax really isn’t that much of a shock.
Does the party need to address the idea of climate change? Yes.
Have they done an adequate job of doing so already? No.
Have they picked up their pants after this week's media debacle? No.
This story once again represents a fundamental misunderstanding in the way the Conservative Party of Canada governs itself and what policy resolutions mean.
At the end of the day, it’s the leader and his team of advisors that put together the party platform. They can take inspiration from policy conventions if they want but it’s nowhere required or mandated that they do.
This is similar to the debate that happened in the Alberta 2019 election when the United Conservatives in policy did not support school’s gay straight alliances but Jason Kenney running to become Premier pledged that the Gay Straight Alliance legislation would not be touched.
The party hasn’t touched it in almost 2 years of governing.
For Erin O’Toole’s part he’s fairly nuanced on the issue of climate change, saying, “We've now fought and lost two elections against a carbon tax because voters did not think we were serious about addressing climate change. And I will not allow 338 candidates to defend against the lie from the Liberals that we are a party of climate change deniers. We will have a plan to address climate change.”
Furthermore, O’Toole sees the climate plan as one where the environment must be protected but it shouldn’t be done “by making the poorest pay more.”
With the Supreme Court ruling that the federal carbon tax is indeed constitutional the party should’ve taken this opportunity to introduce their climate plan this week.
The plan should be bold and eye catching. It should also highlight the broad range of views that exists in the Conservative Party of Canada and begin an era of owning issues that the media and progressive groups have owned for years.
The Conservatives also introduced a 5 point plan to “Secure Canada’s Future”
The plan includes securing jobs, securing accountability, securing mental health, securing the country (PPE/vaccines), and securing our economy.
As with most other conventions the media ignores the rest of the policy resolutions. Some other interesting resolutions include:
The party voted 87% in favour to develop a renewable and non-renewable energy framework including hydrogen, nuclear, renewables, water, and hydroelectric.
The party voted 55% in favour of legislated emission caps on smog causing pollutants such as nitrogen oxide, sulphur dioxide, and volatile organic compounds, ground level ozone and particulate matter. This resolution also supports the adoption of a pan-Canadian low carbon aluminum purchasing policy.
The party voted 60% in favour of creating marine protected areas.
The party voted 83% in favour of creating regulations to create sustainable fisheries.
The party voted 88% in favour of accelerating the timeline to bring safe potable water to all Canadian communities.
And finally, the party voted 77% in favour of promoting nuclear energy through small modular reactors. This resolution also says the party should pursue alternative energy (wind, solar, geothermal), transitional fuels (biodiesel, ethanol, and natural gas), and suggests that the government should enhance tax initiatives for energy efficient measures.
[SMR primer]
So there we have it, from these resolutions, does it look like the Conservatives don’t think climate change is real? Or was it about the carbon tax in the end?
The media won’t tell you and 95% of people who see these headlines won’t do the research to find the context needed to understand what truly happened at the Conservative convention.
What happened and what was reported were two different things entirely.
Supplementals:

Word of the Week

Dissent - the expression or holding of opinions at variance with those previously, commonly, or officially held.

Quote of the Week

“We've now fought and lost two elections against a carbon tax because voters did not think we were serious about addressing climate change. And I will not allow 338 candidates to defend against the lie from the Liberals that we are a party of climate change deniers. We will have a plan to address climate change.” - Conservative Leader Erin O’Toole

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Show Data

Episode Title: Dissenting Opinions

Teaser: CP Rail looks to create a transcontinental rail route, the Supreme Court rules the federal carbon tax to be constitutional, and the auditor general blasts Trudeau’s infrastructure plans. Also, the media calls Conservatives climate deniers.

Recorded Date: March 26, 2021

Release Date: March 28, 2021

Duration: 57:38

Edit Notes: SCC internet cut

Podcast Summary Notes

Duration: XX:XX