The Canadian Government Approves the Northern Gateway Pipeline

Last week, the Canadian government approved the construction of the Northern Gateway pipeline that is intended to ship crude oil produced from the oil sands of Northern Alberta to Kitimat, a small port city on the West Coast in British Columbia. The approval comes with 209 conditions, an unusually high number for the legally parsimonious Canadians, but this is a very controversial project. The Canadian Prime Minister, Stephen Harper is from Alberta, and is desperate to make sure Canadian oil sands crude has an export outlet. Harper is many things, but he is not stupid; he wants to sell oil before greenhouse gas regulations start to gain currency worldwide and the demand for crude starts to ebb. An outlet to the West, and a shipping lane to China, a country that is likely to be one of the last to embrace fossil fuel curtailment, would be a great alternative to Keystone XL, or even the patched-together pipeline route to the East. 

However, Northern Gateway faces intense opposition from the 70 some-odd distinct aboriginal groups in the pipeline's path. The 209 conditions are not likely to be a big deal as far as the federal government is involved, as long as Stephen Harper is Prime Minister. The question is whether the Canadian Supreme Court will uphold aboriginal challenges to the pipeline that are almost certain to arise from at least some of the groups. What must be very alarming, from the perspective of the pipeline proponent, Enbridge, is that aboriginal groups in British Columbia have already accepted a natural gas pipeline that will pass through much of the same territory. In particular, the Haisla Nation, which holds territorial rights around Kitimat, accepts the gas pipeline but vigorously opposed the crude oil pipeline. This suggests that aboriginal groups such as the Haisla are fine with natural gas, but not oil. It will be hard to characterize that legally as unreasonable, as oil pipelines always pose the risk of spills, while gas pipelines are much less onerous to keep clean. I have always found it hard to guess at what the Canadian Supreme Court will do, but past cases such as Haida v. BC Ministry of Forests signal that the Court will expect some pretty sincere efforts to accommodate aboriginal claims and interests.

There is a larger economic question for the whole country of Canada. In the past, large parts of the Canadian economy have centered upon timber, fish, and minerals, and Canada's possession of the second-largest reserve of oil in the world seems to consign Canada to staying that way for a while. I do not believe that crude imposes a traditional resource curse on Canadian exports -- there are many other political factors that render Canada uncompetitive other than a strong petroloonie -- but I do worry that the political economy of Canada will tether Canada's education and commerce infrastructure towards resource extraction. A 2012 paper by Elena Suslova and Natalya Volchikova suggests that a second kind of resource curse is the diversion of public monies towards resource development rather than the development of a more diverse base of human capital, like say, high technology. The pipeline really could create some path-dependencies for the Canadian economy. In that sense, the natural gas pipeline really may not be much better than the Northern Gateway oil pipeline.