Natural Resources Minister Jim Carr, responding to TransCanada Corp.'s decision to drop plans for the Energy East pipeline, said: "This was a business decision." That's true. But it's not the whole story.
This was a business decision taken by an industry that's been forced to swim in a sea of politics. The business case that gave birth to Energy East and then killed it was built on the economics of Canadian oil. Those economics are partly about oil prices, which are low. They are also about political and regulatory uncertainty, which is high.
Let's start with TransCanada's business case for killing Energy East. It's compelling. It's about depressed oil prices, leading to Western oil production that isn't rising as sharply as once expected, leading to less demand for new pipelines.
But the business decisions, to first pursue Energy East and then drop it, were also shaped by politics.
Four years ago, Western oil sands producers were preparing to dramatically expand production. All of that new oil would have to be moved somehow, and the cheapest and safest way to do so is by pipe. Canada needed a lot of new pipe.
But the new pipeline that should have been first in the queue, Keystone XL, was delayed and eventually denied by the Barack Obama administration, for entirely political reasons. Long before Donald Trump started talking about a wall on the Mexican border, Democrats made their pitch for re-election by essentially promising to wall the U.S. off against a new Canadian pipeline. Other Canadian pipeline projects suddenly became not just viable, but necessary.
Enter Energy East. It was cooked up in response, as a repurposing of an underused natural gas pipeline, creating a route to take Alberta oil all the way to New Brunswick and the ocean.
A lot has changed in the last four years. Canadian oil production is still rising, but not as quickly as expected. Many oil sands projects have been shelved by lower oil prices.
Nevertheless, Canada still needs extra pipeline capacity. According to the Canadian Association of Petroleum Producers, even in this low-growth environment, Canada's oil sands will be producing an extra 1.3 million barrels a day by 2030.
Problem: Building new pipe capacity in Canada has become very politically challenging. For example, the Northern Gateway pipeline to the Northern British Columbia coast was last year blocked by the Trudeau government.
That left three other major Canadian pipeline options. All three of those involve reusing, rebuilding or expanding existing pipe, the better to reduce opposition.
There's Enbridge's Line 3 Replacement project, a rebuild of an existing pipeline from Alberta to the U.S. Midwest, increasing capacity from 390,000 to 760,000 barrels a day.
There's Kinder Morgan's proposed expansion of the ancient Trans Mountain pipeline. The company's plan is to add an extra 590,000 barrels a day of capacity. After lengthy review, Trans Mountain was given the green light by the Trudeau government – but there's still widespread opposition, it's been hit with court challenges, and B.C.'s New Democratic government is against it.
And facing even stronger opposition, there was Energy East. A pipeline sending Alberta oil to fill the tanks of Eastern Canadian cars is clearly better than importing foreign oil by tanker down the St. Lawrence river, but the government of Quebec and many Quebeckers were opposed. Quebec has one-quarter of the seats in the House of Commons, so pushing the pipeline through was not a job any government would relish.
What has saved the Trudeau government from having to choose between the West and Quebec is Donald Trump. He promised to revive the previously deceased 830,000-barrel Keystone XL, and, remarkably, he delivered. The project still needs state and local approvals, but it's likely to go through.
Mr. Trump appears to have solved most of the Canadian oil industry's pipeline shortage, making Energy East no longer economically necessary. The American President, who has had little luck getting much else done in Washington, has also temporarily solved one of the Trudeau government's, and Canada's, most challenging political problems.
Canada's regulatory review process may be dysfunctional, but the country and the economy likely will be spared having to pay the full price for that failure – thanks to Mr. Trump.
The Trudeau government must still stand firm on the Trans Mountain pipeline. Canada needs more pipeline capacity, and options beyond exporting to the U.S. Ottawa must also set a precedent. This country has to be capable of making evidence-based decisions on projects of national benefit, and making those decisions stick. We won't always have Mr. Trump to bail us out.