The Fight Over a Gas Pipeline Is Paralyzing Parts of Canada’s Economy

(Bloomberg Businessweek) -- The long-simmering conflict between Canada’s indigenous people and its leading industries has exploded again, but this time it’s not just delaying a pipeline or halting a logging project—it’s threatening to hit an already-shaky economy.

And the recent rash of protests that have hobbled the country may be just a warmup to an even more pitched battle later this year.

The latest flare-up started last month, when members of the Wet’suwet’en First Nation in British Columbia blocked roads to try to halt construction of the Coastal GasLink natural gas pipeline through their lands. In the past two weeks, protesters showing solidarity with those Wet’suwet’en have blockaded rail lines, ports, and other key economic arteries.

The demonstrations have backed up cargo-ship traffic, temporarily halted the nation’s passenger rail service, and caused more than 400 freight train shipments to be canceled, delaying deliveries of oil, grain, propane, and consumer goods. The protesters, who use the hashtag #ShutDownCanada, are taking on new targets every day. The disruptions may knock first-quarter economic growth in Canada to a 1.5% annualized rate, down from a previous estimate of 1.8%, according to Capital Economics analyst Stephen Brown.

Prime Minister Justin Trudeau, whose Liberal government has made a priority of improving relations with First Nations, initially struck a conciliatory tone. He instructed his ministers to reach out to indigenous communities and assured them that he was listening to their concerns. On Friday, Trudeau acknowledged those efforts to negotiate a solution had failed and signaled that he'd be open to police intervention. “We cannot continue to watch Canadians suffer shortages and layoffs,” the prime minister told reporters, adding that the responsibility to enforce court orders lies with provincial police forces. “The barricades must now come down,” he said. 

Trudeau’s initial overtures to the protesters angered some business leaders and Conservatives, some of whom pressed the government to use force to swiftly end the protests. Alberta Premier Jason Kenney, whose oil- and gas-rich province stands to benefit from the natural gas pipeline that sparked the dispute, criticized the protests as “ecocolonialism” by urban Canadians who are projecting their “fringe political agenda” onto indigenous people. “This is a dress rehearsal for illegal protests on pretty much any major project,” Kenney said at a press conference in Calgary on Feb. 11.

The major project Kenney may have in mind is the Trans Mountain pipeline expansion, a much larger development than the gas line at the center of the Wet’suwet’en protests. The C$12.6 billion ($9.5 billion) Trans Mountain project seeks to roughly triple the capacity of an oil pipeline running along a 1,150-kilometer (715-mile) route from Edmonton, through the Rocky Mountains, to a shipping terminal near Vancouver. The expansion would boost the pipeline’s capacity to 890,000 barrels a day, equal to about 18% of Canada’s 4.94 million barrels of estimated daily oil production this year.

The opposition to the project has been so fierce that the pipeline’s original owner, Kinder Morgan Inc., threatened to scrap the expansion, prompting Trudeau’s government to swoop in and buy the pipeline in 2018. Construction started in late 2019 and is scheduled to resume in earnest this year after the winter freeze ends, possibly kicking off a new round of protests.

This isn’t the first time Canada’s indigenous communities—which account for about 5% of the nation’s population—have clashed with industry. In the 1990s, more than 10,000 people protested logging activities in the Clayoquot Sound on Vancouver Island, leading to almost 1,000 arrests. In Canada, the episode is often referred to as “The War in the Woods.”

The latest demonstrations have the support of about 39% of Canadians, while 51% support the natural gas pipeline, according to a poll released by the Angus Reid Institute on Feb. 13.

Canada’s First Nations aren’t united in their opposition to the Coastal GasLink line. The project has the support of all 20 indigenous communities along the line’s route, according to TC Energy Corp., including the elected council of the Wet’suwet’en. The main source of resistance to the project is a number of the Wet’suwet’en hereditary chiefs. TC Energy has said it’s working with indigenous groups to provide them the opportunity to acquire a 10% stake in the line.

There are already precedents for such deals. The Fort McKay and Mikisew Cree First Nations own 49% of a Suncor Energy Inc. oil storage facility near Fort McMurray, Alberta, an investment that was financed in part with a C$545 million bond sale in 2017, the largest issue for an indigenous group in Canada.

At least three indigenous-led groups have drawn up competing proposals to give First Nations a chance to buy a stake in the Trans Mountain pipeline. The groups are attracted to the idea of having a reliable source of revenue. They’re also aware that providing the project with an imprimatur of indigenous approval could help it overcome resistance from local communities.

Chief Mike LeBourdais, who leads the Pellt’iq’t people near Kamloops, British Columbia, has organized a group of communities that is seeking to buy a majority stake in Trans Mountain. “This pipeline is important to Canada, and that’s the bottom line,” he says. “It supersedes if you are a Liberal, Conservative, NDP, or Green. If we want doctors and standing armies and Royal Canadian Mounted Police and a health-care system, then you get the pipeline done. I’m trying to help them do that.”

But support from groups like LeBourdais’s may not be enough to head off protests. Kanahus Manuel, a member of the ‎Secwepemc people, lives in a community of tiny houses in the mountains of central British Columbia, near where a 1,000-person work camp is planned for the builders of the Trans Mountain expansion.

Manuel says she and a group of fellow Secwepemc people are going to put up a fight, and they have supporters and friends ready to join them, including some of the hundreds of individuals who camped out at Standing Rock, N.D., three years ago and delayed the construction of the Dakota Access Pipeline. “Canada purchased the pipeline to de-risk it,” Manuel says. “The risk is us.”

To contact the editor responsible for this story: Cristina Lindblad at mlindblad1@bloomberg.net

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