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Christy Clark’s unenviable path to B.C. pipeline prosperity

The last time a Canadian Premier complained loudly about getting shortchanged in energy developments, he dug in his heels and made what turned out to be very lucrative deals for his province.

That was Newfoundland's Danny Williams, who in the past decade demanded better terms from the world's largest oil majors as they planned the Hebron project on the Grand Banks.

The pugnacious former leader won the right to buy a 4.9-per-cent stake in the multibillion-dollar development, and established a policy for equity positions in future projects. He also imposed a new royalty regime that allowed the province to benefit from rising oil prices.

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Now, on the other side of the country, British Columbia Premier Christy Clark faces the prospect of questionable returns for her province from massive energy developments, with a few unique twists.

As she appears to be softening on proposed oil pipelines from Alberta, it's anything but clear what a deal with the industry or federal government to provide benefits to British Columbians might entail.

Here's the difficulty for Ms. Clark: If she supports bitumen transport projects, it can't be seen as just about the money. She'll have to show how some financial benefit makes up for environmental risk borne by people who polls have shown largely oppose the pipelines.

Unlike Newfoundland and its offshore bounty, the oil reserves in question – the oil sands – are located in the province next door. Ms. Clark's B.C. Liberal government has no economic stake in, or control over, their development, and Alberta Premier Alison Redford has ruled out any sharing of royalty revenue.

In addition, proposed transport projects such as Enbridge Inc.'s Northern Gateway pipeline and Kinder Morgan Canada's Trans Mountain expansion are federally, not provincially, vetted.

Here's where it stands: B.C. and Alberta bureaucrats are busy hammering out potential ways to smooth the road to new energy markets and expanding exports.

The initiative began last summer in Kelowna, B.C., when Ms. Redford and the newly re-elected Ms. Clark patched up their relationship after it had become famously "frosty" over the issue of oil pipelines.

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The two leaders are due to meet in Vancouver in early November, less than two months before the Joint Review Panel assessing the Northern Gateway application delivers its decision on the $6-billion project.

Then, by the end of the year, the B.C.-Alberta working group will deliver a final report on areas that closely resemble Ms. Clark's five criteria for supporting crude pipelines, including how to share fiscal benefits and risks of a "heavy oil project."

Alberta's rewards are clear. Ms. Redford and her ministers can hardly get through any conversation without touting the holy grail of "market access." The industry's crude must flow to coastal ports and on to Asia if it has any hope of escaping depressed North American pricing, they say. That means better returns, more investment and lots of cash in government coffers.

What could be in it, then, for B.C., where new pipes would end and where the loading facilities would send tankers across the Pacific?

The government has suggested three areas to look at. They include payments from the energy companies involved or from the federal government, or benefits from broad economic gains.

On the first part, perhaps B.C. could be offered an equity stake in the infrastructure to generate revenue. Enbridge has put such an offer on the table in hopes of winning over First Nations support, albeit with limited success so far.

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Another idea would be an interest in an Alberta oil-development project, either an existing or future one, giving B.C. some skin in the bitumen game. This might require the companies involved in such a venture to sell parts of their interests.

A third, admittedly long-shot, idea would be operating a refinery or some other processing plant that would generate steady fees from the torrent of heavy crude arriving at the coast.

Whether any of these would make up for the political backlash that would surely follow is hard to gauge. Newfoundland's Mr. Williams had one huge advantage – a majority of voters who wanted the projects to proceed.

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in energy, finance and environment for The Globe and Mail’s Report on Business, based in Calgary. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general  topics. More

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