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Election 2019
Federal Politics

Scheer Folly: Promised Coast-to-Coast Energy Corridor Makes No Sense

Conservatives want to make taxpayers pay for oil and gas industry’s mismanagement. And the bill could be huge.

Andrew Nikiforuk 16 Oct

Andrew Nikiforuk is an award-winning journalist who has been writing about the energy industry for three decades and is a contributing editor to The Tyee. Find his previous stories here.

Guess what? Conservative Leader Andrew Scheer wants to build an energy corridor megaproject from coast to coast and make Canada great again.

Scheer announced the huge project to much fanfare, despite the lack of details or any information on the cost.

He said that the colossal undertaking would “move oil, gas, hydro, telecommunications and accommodate other linear infrastructure.”

The transcontinental corridor would “generate economic and social benefits for the entire country,” Scheer said. “A national energy corridor will provide Quebec with new opportunities to export its hydroelectricity to new markets. It will provide rural communities the opportunity to connect to vital telecommunications infrastructure.”

And get this. “It will provide economic activity for Indigenous communities along the route,” Scheer said.

That’s a bold and bizarre claim, given that the plan is based on pushing the corridor through First Nations’ traditional territories with or without their consent.

Scheer’s election promise contradicts just about every old school conservative principle — if such things still exist in the globe’s crazed new politics.

Scheer still says he believes in small government, but “energy corridors” are big, Soviet-style deals that suck money out of taxpayers’ pockets faster than a hospital parking lot. (China’s Communist party, for example, is very fond of energy corridors, and willing to expropriate land and force hundreds of thousands of people to move to clear the way for them.)

And megaprojects are bad news for taxpayers. Oxford University economist Bent Flyvbjerg has documented the common characteristics of these giant projects. He found they consistently go over budget, fail to meet construction schedules and rarely deliver any benefits.

Why? Because they are inherently risky, complex and, as in Scheer’s case, politically motivated. They start with a big political dream and end up as a costly taxpayer nightmare.

Scheer says Canada needs an energy corridor, because it is time to dream big.

Really? More than a decade ago, Newfoundland’s then premier Danny Williams had a big dream and promised another energy corridor. The Muskrat Falls hydroelectric project would produce power, he said, and undersea transmission lines would connect it to the North American energy grid. The project would provide revenues and let Newfoundland and Labrador “achieve self-reliance by becoming masters of our own house.”

But the energy project is at least a year behind schedule. The original $6.2-billion budget has almost doubled. The project’s $13-billion cost could bankrupt the province unless there is a major federal bailout.

British Columbia is now repeating Newfoundland’s nightmare with the Site C dam.

Despite Scheer’s naive daydreams, energy corridors don’t have a happy history in Canada.

Remember the Mackenzie Valley pipeline, which was supposed to create a natural gas corridor from north to south in the 1970s, and was revived with promises of prosperity in 2011?

Environmentalists and Indigenous people opposed the megaproject. But economics killed it.

The low price of natural gas made it impossible to recoup costs for the $16-billion behemoth, let alone maintain infrastructure built on melting permafrost.

Now Scheer thinks we should have something like a Mackenzie Valley pipeline running across the country.

It’s telling that nobody in Canada is actually sitting in coffee shops and asking for a transnational energy corridor. Unless, of course, it’s a coffee shop favoured by oil and gas industry lobbyists, or CEOs hoping to prop up their struggling industry.

Scheer, of course, promises his energy corridor megaproject will be profitable because it will be vetted by a “blue ribbon panel.”

In modern parlance, that means a bunch of industry lobbyists.

Consider the case of Alberta’s struggling natural gas industry. Companies across North America have flooded the market with fracked gas, which is expensive to produce, and driven down prices. Alberta companies are struggling.

Last year, Alberta’s energy minister invited an expert panel to come up with a solution.

The panel consisted of three pipeline activists: Hal Kvisle, the former CEO of TransCanada Pipelines; Brenda Kenny, the former director of the Canadian Energy Pipeline Association; and Terrance Kutryk, the former CEO of Alliance Pipeline.

The blue-ribbon panel reached a reasonable assessment of the problem.

“Traditional markets for Alberta natural gas are oversupplied,” it reported. “Prices, and therefore industry and government revenues, are crushingly low.”

So, did the panel of pro-pipeline activists recommend a reduction in supply?

No way.

Instead it recommended that governments should intervene in an oversupplied market place and champion new energy export corridors and liquefied natural gas development. The report called for cuts to regulatory oversight and an examination of ways to cut taxes on the companies. All to increase production from cash-burning fracking outfits.

The report ignored some stunning economic realities. The shale gas industry is highly indebted and not making profits. Investors have soured on the sector. Rystad, a Norwegian energy consulting firm, has reported that 40 U.S. shale companies have been struggling with losses for almost a decade and are awash in debt. Nine out of 10 U.S. shale oil companies are losing money because fracking is costly and complex, Rystad reported in May.

Economists at the Institute for Energy Economics and Financial Analysis described the bleak outlook for the sector in an August report.

“Until fracking companies can demonstrate that they can produce cash as well as hydrocarbons, cautious investors would be wise to view the fracking sector as a speculative enterprise with a weak outlook and an unproven business model.”

That’s the industry the Alberta government and Scheer are seeking to champion.

At one time, a good conservative used to understand the law of supply and demand.

But Scheer’s energy corridor is effectively a massive government subsidy for energy companies that can’t attract private investment because their business model is broken.

And it’s a subsidy for a sector facing even greater challenges as a result of volatile oil and gas prices.

Last year the International Energy Agency warned oil-exporting nations that price volatility will continue. Lower prices could cost exporters $7 trillion in revenue over the next decade, the report found.

Those losses, in turn, mean economic disruption, large debts and deep cuts to government spending.

Does Scheer really want to propose an energy megaproject in the face of that kind of economic chaos?

Real conservatives know that energy corridors don’t make jobs or support freedom.

When China built a pipeline to access natural gas in western Burma, there were reports of forced labour, relocated villages and corruption.

Those kinds of things are inherent in energy corridors, which enrich the powerful at the expense of the weak.

The great conservative writer Wendell Berry has noted that corridors reflect the general malaise in global economic thinking.

For too long, globalization has promoted the unaccountable idea that if our own economy isn’t meeting our needs, we can just reach out and tap to somewhere else around the globe.

“This is the most damaging idea that we’ve ever had,” Berry wrote. “It’s still with us, still current, and it still excuses local plunder and theft and enslavement. It’s an extreme fantasy or unreality, the idea that if we don’t have it here, we can get it somewhere else — if we use it up here, we can get it somewhere else. It’s the stuff of fantasy.”

It is also the stuff of Canadian conservative politics.  [Tyee]

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