By September 7, 2016 Read More →

Equalization payments for pipelines? PSAC’s plan is flawed in so many ways

Mark Salkeld, CEO of Petroleum Services Association of Canada.

Mark Salkeld, CEO of Petroleum Services Association of Canada.

Equalization payments for pipelines is unconstitutional, poor way to stimulate Canadian debate

Mark Salkeld is basking in oil and gas industry approval for his recent media comments about linking Eastern Canada equalization payments and pipelines approvals. He shouldn’t be. The strategy is wrong-headed and ultimately harmful to industry’s own interests.

Mark Salkeld.

Mark Salkeld.

Salkeld is the CEO of the Petroleum Services Association of Canada, the trade group representing Canadian service companies supporting oil and gas producers. Members include international heavy hitters like Halliburton and Baker Hughes, as well as smaller national and regional outfits.

PSAC made the argument in a submission on the federal budget back in Feb. The Canadian Press obtained it through an access-to-information request:

The association recommended that the Trudeau Government “amend equalization payment criteria such that transfer payments can be reduced or forfeit if a recipient province refuses transit of extra-provincial goods and/or products, or unduly impedes another province’s market access, including unreasonable delays to transportation infrastructure projects.”

This is actually a poorly constructed argument. As I have reported over and over again, inter-provincial pipelines are the sole and exclusive jurisdiction of the Canadian government. Furthermore, the well-established principle of “primacy” forbids provincial or municipal governments from enacting any legislation or bylaws, or undertaking any action that interferes with the Canadian government’s exercise of its authority.

So, “a recipient province” like Quebec or Ontario cannot refuse the transit of Alberta dilbit through a pipeline nor can they in any way cause “unreasonable delays to transportation infrastructure projects” like pipelines.

If they try, the Supreme Court of Canada will slap their fingers fast and hard based on legal precedents dating back to 1954.

As it turns out, in an interview with North American Energy News, Salkeld said that denying Ontario or Quebec equalization payments was never the real intent of PSAC’s budget submission.

“An elbow to the ribs, just getting people’s attention, getting the national conversation going,” he said. “The average Canadian, if they even pay that much attention to the [pipeline] issue, they’re not even aware of where their energy comes from.”

What Salkeld characterizes as an elbow to the ribs, Calgary-based communications consultant Doug Lacombe describes as a poke in the eye with a sharp stick.

canada-bell-curve-politics-1“Hostility is really not a very good political strategy,” he said in an interview. “I think many campaigns the industry has run – with very little success – are all kind of adversarial in some way or insistent upon respect or very defensive.”

Based on my interviews with them, both Salkeld and Lacombe agree that roughly 20 per cent of Canadians oppose pipelines, 20 per cent vigorously support them, and 60 per cent are just not engaged much in the public debate.

I ask Salkeld why, if he’s trying to win the support of Canadians in the middle, would he advocate taking away revenue from their governments, a move that might be seen as aggressive? Hardly seems like a tactic designed to garner support.

Salkeld pauses, intrigued by the question, one he has not perhaps considered before, but then gets back on message. “Nobody thinks about energy, not like those of us who work in the industry. If this conversation gets going sort of a thing, then I’m fine, good or bad,” he says.

Bad political strategy and bad communications strategy, says Lacombe.

“When they take this kind of a stance, they alienate centrist Canadians, the two-thirds in the middle to whom it all sounds like noise, like the bad kids on the right are fighting with the bad kids on the left,” he said.

“And who can make sense of these people clammering at each other? It’s not a sensible, rational discussion.”

What makes PSAC’s strategy even more confusing is that the Energy East pipeline enjoys strong support among Canadians. A March Angus Reid Institute public survey found that 64 per cent support the 1.1 million b/d pipeline that will carry mostly Alberta oil sands crude to Eastern refineries and export markets. Quebec was most opposed at 56 per cent, but not overwhelmingly so. And 70 per cent of Ontario residents are supportive.

Why draw so much negative attention to a project that already has fairly robust public support? Lacombe says this approach is common throughout the industry and generally doesn’t work.

“Unfortunately, we’re dealing in the realm of emotion here. That lever they’re pulling is all about negative emotion, which I do not see moving the industry forward,” he said.

Oil and gas opponents, on the other hand, have employed a two-pronged approach that has been very successful in British Columbia, the first pipeline battleground, where Enbridge’s Northern Gateway appears dead in the water and Kinder Morgan’s Trans Mountain Expansion was approved by the National Energy Board, but faces fierce local opposition.

The first prong is negative, focusing on climate change, oil sands CO2 emissions, pipeline leaks, and threats to the environment. The second is positive, emphasizing a sustainable future based on renewable energy, clean energy technologies like electric vehicles, and clean tech jobs for young workers.

“The eco-activists have done a great job of painting a future filled with rainbows and unicorns, an energy future that people feel comfortable with,” he said. “Industry has to counter with its own positive vision for the future, something better than pointing out over and over again all the benefits hydrocarbons provide.”

That’s not likely to happen.

Salkeld says PSAC’s budget submission was approved by his board of directors. And since the story broke earlier in the week, he has received plenty of support from across the industry.

“I’ve got texts from my board members saying, ‘excellent job,’ and I’ve been in the media and getting all sorts of attention and really strong support,” he said.

That attitude, right there, is the Canadian oil and gas industry’s Achille’s Heel. The need to circle the wagons and fire back at the bad guys rather than winning the hearts and minds of Canadians who might actually support pipelines and, in the end, grant the social license the Justin Trudeau Liberals need to approve both the Kinder Morgan pipeline (decision expected in Dec.) and Energy East.

Time for a new strategy. Before it’s too late.

Ph: 432-978-5096 Website:

Ph: 432-978-5096 Website:

Posted in: Markham on Energy

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