The News Rundown

Trans Mountain defeat threatens Justin Trudeau’s re-election story

On Thursday, there was a critical Federal Court of Appeal ruling on the Trans Mountain Pipeline Expansion, brought about by court challenges by some First Nations in BC. The Federal Court of Appeal quashed approval of the $9.3-billion Trans Mountain oil pipeline expansion on two grounds. First, the court found Canada had inadequate consultation with First Nations at the final stage, concluding Ottawa “failed to engage dialogue meaningfully and grapple with the real concerns of the Indigenous applicants so as to explore possible accommodation of those concerns.” Second, the scope of the review “unjustifiably” did not include project-related tanker traffic, even though the National Energy Board was “legally obligated” to consider environmental effects. “The unjustified exclusion of project-related marine shipping from the definition of the project rendered the board’s report impermissibly flawed,” the court ruled.
So basically it came down to lack of FN consultation, despite many bands along the route supporting construction and the jobs and revenue that would come with it, as well as a lack of review of increased tanker traffic, which most would expect the government would include. The decision and the federal government's failure is now leaving construction workers, Alberta oilpatch workers, refineries, and Canadian taxpayers as a whole in the lurch.
The federal government was confident they had done enough to secure the win in the legal battle, but that was clearly not the case. Less than 48 hours before a monumental legal decision on the Trans Mountain pipeline, federal Natural Resources Minister Amarjeet Sohi sat back in a chair at a Calgary coffee shop, feeling confident. He was self-assured Ottawa had done adequate work communicating with Indigenous communities about a project the federal government deemed was in the national interest — one it formally bought Thursday for $4.5 billion.
“We are very confident that we have done extensive consultation. We went beyond what the NEB has done. We took six months extra to consult with Indigenous communities and affected communities on the route. I think that puts us in a very strong position.” Sohi said Tuesday.
However, In a surprising decision, the Federal Court of Appeal nullified the permit for the $7.4-billion project on two grounds: inadequate consultation with Indigenous communities and improper consideration of oil tanker traffic tied to the pipeline’s expansion. On Friday, the National Energy Board ordered construction work on the development to stop in the wake of the landmark ruling. It’s not just that the minister was wrong that’s noteworthy — many others were as well — but it’s the broader question of what comes next for Canada’s energy industry?
Workers and companies who were set to be employed on the Trans Mountain pipeline expansion have been left wondering where they stand as construction on the project begins to shut down.
Ryan Bruce, director of government and public relations for the union CLAC, said some of the workers were sent home after the Federal Court of Appeal ruling quashed Ottawa's approval of the pipeline expansion on Thursday. The workers will come back for a meeting with their employers early next week to talk about next steps as the situation unfolds, he said. Construction on parts of the western end of the pipeline began three days ago, he added. But it was stopped after the ruling was handed down.
"Official layoff notices have not been issued yet but we're waiting to hear what happens next week. Our members were happy to be working. They were expecting long-term employment on the project and to wake up Thursday morning and hear the news on the radio -- that the decision came down the way it did was a surprise to all of us." Bruce said.
When the federal government added an extra process onto the project’s regulatory review, designed specifically to increase Indigenous engagement, many onlookers thought that would meet the consultation litmus test. It didn’t. And while the issue of marine safety was discussed within the National Energy Board’s report on Trans Mountain, the process wasn’t deemed to be proper, creating a “critical error” that rendered the report fatally flawed, according to the court.
Chris Bloomer, CEO of the Canadian Energy Pipeline Association was dismayed by the decision: “We are sitting here thinking, what more needs to be done here? But this points out a really big problem — it’s another kick in the pants for the industry and Canada’s competitiveness. The government now — because they both own the project and own the process — they need to look at how they’re going to address the issue.”
As in the Northern Gateway court decision, it’s worth pointing out the fatal mistakes here weren’t made by the companies or the affected communities on either side of the pipeline divide. The fault lies squarely in the hands of federal governments, which have made the regulatory process so excessively complicated and cumbersome that no one — including the government itself — is apparently able to get a project in the national interest across the finish line.
BC Premier John Horgan, who for a long time has opposed the TMP, applauded the court's decision. Speaking at a short press conference in Victoria, Horgan said the case has always been about First Nations rights and the assertion by the Tsleil-Waututh “that the [National Energy Board] process was flawed and did not take into consideration their rights and title.”
Horgan said BC “entered this appeal late in the day, after being sworn in last summer and we did so to support the Tsleil-Waututh, but also, when you’re an intervenor, of course you have to add to the argument.”
Horgan said his government put forth the arguments in good faith, and though “they were not supported today by the Supreme Court, but the substance of the case was.”
What that means for BC, he furthered, “is that our coast is considered to be an integral part of the decision-making process and that marine traffic was not adequately assessed by the NEB, or by the ordering council to proceed with Kinder Morgan.”
Horgan said today’s decision is a great day for the Tsleil-Waututh and that “those in BC who have been saying for many years now that the National Energy Board process was flawed and that the consequences of a spill were significant, have been vindicated.”
Asked if the project was dead in his mind, Horgan responded that “certainly it’s something that will no longer be top of mind for British Columbians. We’ll be able to focus on the things that our citizens want us to focus on – housing, affordability, and making sure that we’re creating jobs and skilled training positions for the next generation of workers.”
As for B.C.’s relations with neighbouring Alberta, which boiled over into a mini trade war last spring — in large part due to B.C.’s threat to try and restrict bitumen flows — Horgan said he believes Alberta will acknowledge the court ruling, and is within its rights to appeal. He added that he’s sensitive to Albertans’ feelings about the project, but that his focus remains west of the Rockies. Horgan said: “Certainly I understand that this is going to be a devastating decision for many in Alberta, and I respect that. But my responsibility is to the people of British Columbia. And our position is that the marine environment is part and parcel of our vibrant economy and it wasn’t considered by the previous federal government and it wasn’t given due consideration by the current government.”
In the end, it all comes back on Trudeau and the federal government. In 2015, Trudeau promised Canadians he would have the environmental back of the communities that host new pipeline developments. He also vowed to establish a real partnership with First Nations. The Federal Court of Appeal found that in the Trans Mountain case — the only interprovincial pipeline project the Liberal government has steered — it had fallen short on both counts. It is not just Trudeau’s political capital with the First Nations that took another hit this week. His capacity to advance his environmental agenda also took a beating. The federal climate-change framework now hangs by a thread that could be cut in next year’s election.
One can’t help but think that Trudeau is at least fortunate in that he will be facing rookie New Democrat and Conservative leaders in Jagmeet Singh and Andrew Scheer next year rather than the battle-tested Thomas Mulcair and Stephen Harper. However, it will still be a tough fight. And that's all down to the federal government's failure on building pipelines.
Supplementals:

Alberta leaving federal climate plan over Trans Mountain decision

Alberta is leaving the federal climate plan until the “federal government gets its act together”
“The time for Canadian niceties is over”
“without Alberta, that plan isn’t worth the paper it’s written on”
Emergency session of parliament to fix the NEB consultation process
Notley wants construction to still begin in 2019 if quick steps are taken
Jason Kenney called the news “devastating” for workers and to “withdraw the carbon tax that would supposedly get pipelines built”
"Our government remains committed to ensuring the project proceeds in a manner that protects the public interest," Morneau said in Toronto.
Good! We own it!
Will the federal government appeal this?
What does pulling out of the federal climate plan mean?
Investment in Canada
Supplementals:

The BC government delivered surprising news on Tuesday last week, in the form of another budget surplus for the 2017/18 fiscal year ending March 31. Finance Minister Carole James announced the $301 million surplus in the year-end financial figures on a $51.7 billion budget. When you factor in the extra $3B spent on government and social programs, as well as costs for the devastating 2017 wildfires, there was expected to not be a surplus, but it appears that through creative accounting, the NDP have managed it.
Most of what made up the expected shortfall was an increase in revenue from the real estate market, and the lucrative property taxes that go along with it, though it may be the last time the housing sector delivers such a surprise cash windfall to the provincial treasury. The property transfer tax accounted for more than $2.1 billion in revenue, which is $266 million more than government was expecting. It also includes extra revenue generated after Feb. 21 when government expanded the foreign buyer tax to 20 per cent and increased property transfer taxes on homes valued at more than $3 million.
However, it's known that this unexpected revenue source won't last. New figures on the slowdown will be released in September as part of the quarterly update to the current year’s 2018/19 budget. Home sales in Metro Vancouver in July were at their lowest level in 18 years, and some realtors believe a significant decline in prices is quietly occurring in the market.
Jock Finlayson, executive vice-president for the Business Council of B.C. preaches caution: “Obviously we’re coming off the boil from the housing real estate boom. That’s clearly an area where the slowdown is very much in evidence in the Lower Mainland, and to some extent in the province, in sales activity. It’s going to pinch the government’s revenues for sure. Some of that I think they factored in their budget in February. The question is whether what’s happening now is a bigger downtown than what was predicted in the budget.”
The year-end financial figures showed a $1.3-billion loss by the Insurance Corp. of B.C., which the NDP has attempted to plug by instituting a cap on pain and suffering claims for minor injuries and an overhaul of insurance penalties for bad drivers.
James said the government also made a $950-million “adjustment” to its finances to address concerns independent Auditor General Carol Bellringer made about B.C. Hydro’s use of deferral accounts that push off expenses into future years. Hydro has $4.5 billion in deferral accounts remaining even after the change. The dispute with the auditor over Hydro’s finances delayed the release of public accounts by more than a month. James acknowledged, “Normally I would have been standing here in July. But our ministry needed the extra time to work with the office of the auditor general because of some of the challenges with B.C. Hydro’s deferral accounts.
Debt was measured at just under 16 per cent as a share of gross domestic product and 83 per cent as a share of annual government revenues. Both measures were good enough to maintain the vaunted triple A credit rating inherited from the B.C. Liberals.
However, the New Democrats may be challenged to live up to these results going forward. The first read on the current financial year is due in a couple of weeks and may well show some discouraging developments on the spending side (wildfires again) as well as from the housing and real estate sector. When revenues inevitably decrease, it will be up to the government to show prudence, to allow us to stay within a balanced budget.
Supplementals:

The Firing Line

Trump announces U.S.-Mexico trade deal to replace NAFTA, and says 'we will see' if Canada can join

On Monday a story broke where the headline said, “Trump announces U.S.-Mexico trade deal to replace NAFTA”
The next question: What about Canada?
At the time foreign affairs minister Chrystia Freeland was in Ukraine. She rushed home.
In a joint telephone press conference with the Mexican President, President Trump said, “We will see” when asked if Canada could be apart of the deal.
Following this it was said that Prime Minister Trudeau had a “constructive conversation” with Donald Trump on Monday afternoon.
A Friday deadline to sign the deal was put in place. The deadline came and went with intention to continue negotiations after the weekend is up.
The threat of auto tariffs has been looming over the deal, President Trump saying that it would just be easier to apply auto tariffs than working out an agreement.
The Chevy Impala
There had been no trilateral negotiations with the US and Mexico for weeks.
It was only when rumblings were heard through the press that Chrystia Freeland and Justin Trudeau’s prime advisor, Gerald Butts headed to Washington.
The initial issue as thought during the G7 meeting earlier this summer pertaining to the sunset clause has been fixed. All countries have agreed to a 16 year term for the deal with a review phase after 6 years to consider whether the deal should be renewed for another 16 years.
Other areas that are holding up the negotiation are rumoured to be the chapter 19 dispute mechanism.
Chapter 19 allows companies that feel their products have been unfairly hit with anti-dumping or countervailing duties to request arbitration.
The US wants to see this section scrapped, Canada is very reluctant.
The US also still wants the supply management system to change, but as an olive branch on this, the Canadians have offered more access to the Canadian dairy sector without compromising supply management.
It may not be enough because while access can be granted, it won’t be tariff free and it won’t provide the total and open access the US has requested.
A summary of what we have: a deal that Canada should by all means sign on to if it can be made fair (though given how long it’s taken to get to this point, that’s not even certain), the deal was largely negotiated bilaterally by the US and Mexico, Canada must now come in and negotiate after the fact the sections that are specific to Canada. It certainly feels as though we no longer have a competitive edge in these negotiations.
We are left to fix the sticking out points for Canada and it is at our peril to attempt to get what’s best for our country out of these negotiations that an arbitrary time limitation has been put into place.
The US administration served notice to congress that they will be bringing a trade deal forward to be ratified. In the United States, any trade deal or treaty must go through congress (which is similar to our House of Commons).
This is largely because the US wants to get the deal done before the midterm elections and before the current Mexican President leaves office on December 1.
As of Friday, Canada has made no concessions on dairy access. These were the headlines of Friday afternoon and speak volumes going into these final rounds of negotiations.
If no concessions are to be made then it is highly unlikely we will make a good deal because what else does Canada have to offer at this time?
Andrew Scheer spoke bluntly on the issue after being criticized by Maxime Bernier and others on the right saying, “At this critical time in the NAFTA negotiations, it has become clear that Mexico and the U.S. have come to major agreements while Canada was not even at the table. It is unacceptable that Canada has been presented with a take-it or leave-it deal on major aspects of this deal. Canadians I’ve spoken to are frustrated that Mexico and the U.S. struck this deal behind Trudeau’s back. They want to know why Canada is on the outside looking in, while major sectors of the economy and millions of jobs hang in the balance. As always, Conservatives are ready and willing to assist the government. Over one in five jobs depend on trade with the U.S. and Conservative MPs will do everything we can to ensure that our trading relationship with our NAFTA partners is protected.”
On Friday it was published in the Toronto Star that Donald Trump issued a series of scathing remarks regarding the current trade negotiations.
Trump reportedly told Bloomberg that he would not be making any concessions with Canada but could not say this publicly because “it’s going to be so insulting they’re not going to be able to make a deal.”
Trump confirmed these words saying, “Wow, I made OFF THE RECORD COMMENTS to Bloomberg concerning Canada, and this powerful understanding was BLATANTLY VIOLATED. Oh well, just more dishonest reporting. I am used to it. At least Canada knows where I stand!”
The Canadian media jumped up and covered this story with such rigour that initially it appeared quite suspicious. Here’s our thought on the matter:
1. Trump told Bloomberg this knowing full well it would be leaked.
2. This furthers Trump’s case of dishonest media in the United States.
3. The media here in Canada jumped on this because they are so eager for a Trump/Trudeau fight going into 2019 on any matter that they will do anything to advance it.
Media ratings
In the meantime, NAFTA hangs in the balance.
Supplementals:

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Freebie - Something given free of charge, a gift or handout.

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Show Data

Episode Title: No Freebies in Trade

Teaser: The Federal Court of Appeal quashes the Trans Mountain Pipeline, what does this mean for Alberta, BC, and the Canadian economy? BC also projects a surprising surplus due to the housing sector, and we go over the current state of NAFTA negotiations.

Recorded Date: September 1, 2018

Release Date: September 2, 2018

Duration: 57:28

Edit Notes: None

Podcast Summary Notes

Duration: XX:XX