What B.C.’s “fair share” should mean: an insurance premium

This post is in part a commentary on the ongoing squabble between B.C. Premier Christy Clark and Alberta Premier Alison Redford with respect to revenues from the sale of oil sands bitumen through the proposed Northern Gateway pipeline. It’s also a response to a recent column by National Post columnist and CBC At Issue panelist Andrew Coyne, who contends that Clark’s demands for a “fair share” of the Gateway’s economic benefits are tantamount to extortion. I’ve observed that many commentators on the political right share this view.

Coyne, as a journalist and political commentator, is an expert on Canada’s constitution, history, and contemporary political issues, who offers perspicacious analysis of current events. Despite the fact that he and I often disagree (as is the case on this occasion), I value Coyne’s opinion and read his column regularly. I would encourage you to put some thought into his argument on this matter as well as mine, and reach your own conclusion.

Today marks the final day of the Council of the Federation in Halifax, an annual 3-day summit of Canada’s provincial premiers. It also marks the occasion on which Clark declined to sign a proposed Canadian National Energy Policy, citing the unresolved row with Redford over the proposed Northern Gateway pipeline. Earlier this week, under intense political pressure from opposition leader Adrian Dix and much of the provincial electorate, B.C. Environment Minister Terry Lake announced his government’s fairly amorphous demand for a “fair share” of the revenue from the pipeline, without which he said the province will never acquiesce to the proposal. Redford promptly rebuffed B.C.’s entreaties, describing them as contrary to the Canadian constitution and provincial sovereignty over natural resources. Thus, the stage was set for a standoff in Halifax, which appears to have culminated in a continuing stalemate.

Considering Clark’s predilection to sit on the fence and favour populist positions on many important issues, her behaviour in the case of the Northern Gateway is not surprising. Clark is at the knot of a political tug-of-war: B.C.’s Liberal government is traditionally conservative, and conservatives generally support the Northern Gateway. Her party has also received substantial campaign donations from Enbridge, and with B.C. having voted to extinguish the HST last summer, Clark must exercise caution to avoid roiling Prime Minister Harper, in the hopes that he will cut her a favourable deal on repayment of the $1.6 billion HST implementation bonus – wishful thinking indeed.

On the other hand, opposition to the Northern Gateway is intensifying in B.C., Clark is far behind New Democrat challenger Adrian Dix in the polls, and the urge to throw up a Hail Mary to appease the electorate must be acute. This week’s demands were most likely designed as a ploy to buy time, and avoid condemnation.

However, Clark’s ambivalence toward the project may portend her downfall; as Geddy Lee, lead vocalist of the talismanic Canadian rock band Rush utters in the song “Freewill”: “If you choose not to decide, you still have made a choice.” Many pundits and political opponents alike have criticized Clark’s irresoluteness on the Northern Gateway, and the resultant damage to her credibility as a leader is beyond dispute.

I’ll also note that B.C. has elected to register as an “intervenor” rather than a “government participant” in the Enbridge Northern Gateway Project Joint Review Panel (JRP), although I admit the importance of this distinction is unclear to me. It’s my understanding that those with intervenor status carry a lower profile, and fewer obligations in the JRP process. BC New Democrat leader Dix has exploited this, and the fact that Clark missed the deadline to submit evidence to the JRP, to his political advantage, painting the BC Liberals as irresponsible.

Politics aside, I support the principles of the B.C. government’s argument, though I suspect for vastly different reasons than Clark, who is aiming to score political points without taking a definitive stand, while promoting herself as a steadfast champion of B.C.’s best interests. Of course, as I made clear in my last series of posts, I oppose the Northern Gateway completely. But if Harper’s Conservatives succeed in their environmental assault despite resistance in B.C. and from First Nations, this province ought to be party to a greater proportion of the project’s financial avails – including resource royalties, taxes and tolls – than the measly $6.7 billion we’re projected to receive over the next 30 years. Allow me to elaborate on my reasoning.

Canada’s Constitution Act of 1867, section 92a, is explicit in identifying non-renewable natural resources as pertaining to the province in which they are found. Furthermore, the Act states, all royalties accrued from the sale of these natural commodities should also belong to the province of their origin. As a defender of the rule of law, I agree that we ought to adhere to the dictates of our constitution.

My argument pertains to the definition of natural resources, and the notion of risk. And I draw as a template on the concept of insurance.

Natural capital

Traditionally, non-renewable natural resources are defined as that which may be exported and sold for money, like oil, natural gas, and lumber. However, the constitution does not definitively describe them as such.

I would argue, as the David Suzuki Foundation has, that the land, freshwater and ocean themselves are inherently imbued with value. In fact, using a tool designed in collaboration between the Foundation and Google Maps, one can approximately ascertain the monetary value of any section of land in southern Ontario, based on its natural capital – the oxygen-producing trees, life-supporting ecosystems, potable water, streams with fish spawning activity, and so on. The technology is part of the growing field of natural capital economics.

Barnard Harbour, near B.C.’s Great Bear Rainforest, is just one of many areas that would be threatened by an oil spill. The wealth of natural capital here cannot be overstated. Image c/o Dogwood Initiative/Flickr

Currently, the World Bank estimates the value of the world’s ecosystemic productivity in the neighbourhood of $44 trillion – and if we’re judicious in our use of these resources, they will last as long as the Earth itself. But if we take a cavalier attitude, we can also lose part of this natural capital forever – and experts suggest that the loss of global biodiversity poses at least as great a threat to our well-being as the continuation of climate change.

By the way, based on Enbridge’s record, the Northern Gateway would carry tremendous risk of a bitumen spill on land and at sea, which would be near impossible to clean up. (I suspect there’s a reason the first syllable of “bitumen” is pronounced “bitch”.)

The conclusion – natural capital insurance premiums

Anyway, back to the concept of insurance to which I alluded earlier.

When an individual or organization buys insurance, be it life insurance, car insurance, home insurance, etc., that person pays a premium to a third party, who then assumes financial responsibility for the risk of an accident. Naturally, the more catastrophic the risk, the higher the premium.

In the case of the Northern Gateway project, the risk to natural capital is colossal, to the extent that, in my opinion, the pipeline is an uninsurable asset. And B.C. is currently accepting a disproportionate amount of risk compared to Alberta, meaning that if the project does go through, the insurance premiums B.C. charges Enbridge and our neighbours to the east ought to be EXORBITANT!

In the interest of fairness, this is the only way to proceed with a dangerous and hair-brained project like the Northern Gateway. Alberta deserves sovereignty over the capital generated from the sale of its natural resources. But B.C. deserves equal sway over the tremendous risk to its natural capital. In any case, it’s time to send the message to Alberta’s oil sands industry that the Northern Gateway entails a steep price, in terms that its conservative politicians and pundits are sure to understand.

And lastly, it’s time for Canadians to concentrate our combined efforts and expertise on building the kind of economy we can all take pride in, rather than submitting to the insatiable demands of a wickedly totalitarian regime across the Pacific, and an increasingly authoritarian regime in Ottawa.


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