Western Canadian oil and gas products have been sold at a discount compared to world prices for decades due to a lack of access to deepwater ports for export. With the Trans Mountain pipeline being maxed out in shipping oil to the West coast and with the pipeline expansion hopelessly delayed, the United States remains Canada’s sole customer for oil and gas exports. This allows them to purchase the products at a reduced rate, as they know Canada can’t sell elsewhere.
Alberta Premier Danielle Smith may have found a workaround for the bottleneck with her proposal to bring Alberta, Saskatchewan, and Manitoba together to work on expanding the rail and export capability at the Port of Churchill in Manitoba. Prairie provinces could increase their ability to export goods while saying to Ottawa, “What are you going do about it?”
Section 121 of the Constitution is explicit in protecting the free movement of trade goods between provinces. No province should be able to tax, halt, or hinder goods coming from or going to another province. However, the constitutional clause is toothless in practice because the federal government refuses to enforce it when it may prove politically difficult for them. The governments of Quebec and B.C. have both been active in hindering efforts to get pipeline access across their provinces though they have no constitutional ability to stop them. Rather than lay down the law with Quebec, the federal government regulated the proposed Energy East pipeline to death. Rather than risk a fight with the B.C. government over the Northern Gateway pipeline, Trudeau shut it down altogether.
The world is hungry for the energy products that Canadian Prairie provinces could provide but for now, the products are landlocked. Even if Quebec and B.C. were to become receptive to new pipelines, Prime Minister Trudeau is ideologically opposed to hydrocarbon exports and wouldn’t support the development of any new export infrastructure. That became clear when he absurdly told German Chancellor Olaf Scholz there was no business case for exporting liquid natural gas to Europe. Trudeau literally had a European customer sitting in front of him practically begging for our natural gas products. How much more solid can a business case get?
Premier Smith’s plan to bypass Ottawa and expand the Port of Churchill surely must have some federal government powerbrokers sweating. They will lose a big hammer they have been able to wield over the Prairie provinces for a long time. If Ottawa chooses to oppose this initiative though, they could be in for a battle with not one but three premiers. The federal government will be put into a tough spot.
There are certainly some challenges in exporting products through Hudson’s Bay. The shipping season is limited, the rail expansion would be very expensive to upgrade, and negotiations with First Nations that may be impacted by the expansion could be prolonged. That said, there is no indication that world energy prices are going to drop any time soon and demand is sure to be high for a long time.
A pipeline could eventually be built to Churchill, but that would take some years. Expanding the existing rail line and port capacity could be done in relatively short order though, and it wouldn’t need Ottawa’s approval. Oil by rail can be lucrative, especially if it is being purchased at full world prices.
It’s not just energy products that could benefit from an expanded port in Churchill. All manner of resources, from mined metals to potash to forestry and agricultural products, could also be exported. The port could also turn into an import hub as well, as manufactured goods could be received and distributed by rail throughout central North America.
Having an export terminal in the very centre of the country would empower the Prairie provinces like never before. Smith’s proposed Sovereignty Act has rattled the Canadian establishment though the act hasn’t even been drafted yet. An alliance with her fellow Prairie premiers to bypass the jealously guarded port access on the East and West coasts could shake the Confederation to its core.
The irony of it all is this potential threat to national unity could have been avoided had the federal government simply enforced the Constitution to begin with. They put the Western provinces into a corner, but Premier Smith may have found the way out.
