BREAKDOWN: The Pipeline Debate and the Threat to Canada’s Future is Dennis McConaghy’s sequel to his 2017 DYSFUNCTION: Canada after Keystone XL, which chronicled the saga of the Keystone XL project and its ultimate rejection in November 2015 by President Barack Obama.¹ BREAKDOWN essentially picks up where DYSFUNCTION left off, detailing events that occurred primarily within Canada from late 2015 to the end of 2018, a period of intense regulatory, political, legal and other developments related to proposals to expand export market access for Canada’s vast oil and natural gas resources.²

McConaghy knows his subject. With nearly 40 years of industry experience in infrastructure development, he was the lead TransCanada Pipelines executive for the Keystone KXL Project. Since his retirement from TransCanada in 2014, he has continued to follow developments closely, in the belief that Canada faces fundamental, existential questions:

Should the country commit itself to hydrocarbon development as an indispensable contribution to its economy? Or should Canada eschew that opportunity as incompatible with contributing reasonably to containing the risk of global climate change?³

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[I]s Canada so fundamentally conflicted on carbon policy and hydrocarbon development that all it is able to achieve is protracted and unreasonable approval processes that result in inevitable terminations?⁴

The current impasse in getting approvals for major hydrocarbon export projects is sometimes compared to the federal government’s 1980 National Energy Program, which McConaghy describes as “the great bête noir of Alberta economic ambitions.”⁵ However, as he notes, the NEP dealt with how to distribute the wealth from hydrocarbon production, “not whether hydrocarbon production and its resulting economic value should be realized in the first place.”⁶ McConaghy suggests that the current federal government has revealed a “fundamental equivocation on the merits of hydrocarbon expansion”⁷ but argues that, despite the polarization that has emerged, Canada “can, and must, find a consensus that balances credible and proportionate climate policy.”⁸

BREAKDOWN is the latest in a series of valuable books detailing the challenges, even barriers, faced by proposed major oil and gas infrastructure projects in the recent past.⁹ As McConaghy observes, by the end of 2018, only one Canadian-controlled market access option for oil, the Trans Mountain expansion project (TMX), remained in play – and it continued to face significant challenges. BREAKDOWN provides a valuable record of the demise of the Northern Gateway project (notwithstanding that it had received final Governor in Council approval) and the cancellation of TransCanada’s proposed Energy East project midway through the regulatory process.

Much of the public controversy surrounding recent energy infrastructure projects has been focused on oil pipelines but, as BREAKDOWN records, natural gas export projects have similarly faced regulatory and political obstacles. In 2017, the Pacific North West LNG project was terminated notwithstanding that it had received final approval in 2016, subject to 190 conditions.¹⁰ The Shell consortium’s LNG Canada project, while approved and sanctioned, continues to face challenges.¹¹

BREAKDOWN is an important further contribution to understanding both the details and the dynamics of these developments. For example, it poses puzzling questions about the Northern Gateway project as to why the proponents and the federal government were not more proactive in moving ahead with the project after it had been found to be in the national interest and before the 2015 federal election.¹² BREAKDOWN also provides a valuable account of the events, and negotiations, that led to the federal government’s purchase of Trans Mountain and the TMX project.¹³

However, the real value of BREAKDOWN lies in the fact that, not only does McConaghy have a well-informed understanding of the challenges, he makes specific recommendations, albeit some with their own challenges. Part Two is boldly titled “Solutions.”

It is worth noting here that McConaghy is no climate change denier:

The nature of the climate change risk requires global collective and coordinated action; in my view, catastrophic impacts are possible without appropriate mitigation and adaptation policy responses.¹⁴

McConaghy proposes three core principles. The first should be patently obvious: “First, Canadian politicians must accept that any approval process is functionally useless if it fails to attract capital.”¹⁵ He asks, rhetorically, what is the point of any approval process if the private sector will not actually use it? Noting that environmental assessment is not an end in itself and only has purpose in the context of proposed development, he wonders if the Trudeau government understands “that basic reality.”¹⁶

Second, the government must provide clarity on policy, outside the approval process: “An approval process is not a forum for public policy debate.”¹⁷

Third, Parliament should legislate to “clarify” rights to appeal regulatory decisions. Parliament should also legislate to clarify what constitutes adequate First Nations consultation and what constitutes justifiable infringement of Aboriginal title or claims to title.¹⁸

There may be some scope for Parliament to limit rights to appeal regulatory decisions. There is certainly some justification for McConaghy’s complaint about the risk of “having apparent regulatory approvals undone for alleged process deficiencies long after the fact.”¹⁹

McConaghy’s plea to clarify Aboriginal rights by legislation would likely prove more problematic, given that those rights are grounded in constitutional law and therefore the scope and meaning of those rights are ultimately to be determined by the courts, rather than by legislated definition. A restricted definition by Parliament would inevitably be challenged, with its fate ultimately being settled by the courts, a point that McConaghy seems to, at least partly, concede.²⁰

Given these three principles, McConaghy makes a compelling case that political sanction of major energy infrastructure projects must come at the beginning of the approval process, not at the end.²¹ He asserts that President Obama knew he would never approve KXL long before he formally rejected the project in November 2015: “He did not clarify his intentions earlier because it was politically expedient not to.”²² Referring to Enbridge’s ill-fated Northern Gateway project, he states “if no spill risk is to be countenanced in the Douglas Channel”, say so before a regulatory application is filed and hundreds of millions of dollars are needlessly expended.²³

By contrast, McConaghy observes that, under the recently implemented Bill C-69, “policy clarification comes implicitly embedded, if at all, in the final approval or rejection of a project, after a regulatory recommendation, subsequent to protracted regulatory process.”²⁴

BREAKDOWN is an important, well-written contribution to the ongoing debate about the future of Canada’s petroleum industry in the age of existential concern about the potential effects of climate change. In addition to providing a valuable and insightful perspective on developments in the recent past, McConaghy proposes specific solutions for moving forward and building “a consensus that balances credible and proportionate climate policy.”²⁵

1. DYSFUNCTION was reviewed in Energy Regulation Quarterly, Vol. 5, issue 2 June 2017, online: <https://www.energyregulationquarterly.ca/book-reviews/dysfunction-canada-after-keystone-xl-dennis-mcconaghy-dundurn-toronto-2017#sthash.pkN6aVNl.dpbs>.
2. In 2018, Canada was the fourth largest oil producer and the fourth largest exporter of oil in the world: Natural Resources Canada. See Natural Resources Canada, Crude Oil Facts, August 2019 update, online: <https://www.nrcan.gc.ca/crude-oil-facts/20064#L1>. In 2017, Canada was the fourth largest producer of natural gas in the world, see Natural Resources Canada, Natural Gas Facts, August 2019 update, online: <https://www.nrcan.gc.ca/natural-gas-facts/20067>.
3. Dennis McConaghy, BREAKDOWN: The Pipeline Debate and the Threat to Canada’s Future (Toronto, Ontario: Dundurn, 2019) at 3.
4. Ibid, at 8.
5. Ibid, at 18.
6. Ibid.
7. Ibid, at 77.
8. Ibid, at 5.
9. See: PIPE DREAMS: The Fight for Canada’s Energy Future (reviewed in ERQ Vol. 6, issue 4 2018, online: <https://www.energyregulationquarterly.ca/book-reviews/dysfunction-canada-after-keystone-xl-dennis-mcconaghy-dundurn-toronto-2017#sthash.pkN6aVNl.dpbs>; THE PATCH: The People, Pipelines, and Politics of the Oil Sands (reviewed in ERQ Vol. 7, issue 2 2019), online: <https://www.energyregulationquarterly.ca/book-reviews/the-patch-the-people-pipelines-and-politics-of-the-oil-sands-chris-turner#sthash.cwh89Hy2.dpbs>.
10. Discussed in BREAKDOWN, see supra note 3 at 61 et seq.
11. Ibid, at 169.
12. Ibid, at 60-61.
13. Ibid, at 103-105.
14. Ibid, at 3.
15. Ibid, at 127.
16. Ibid, at 128.
17. Ibid, at 129.
18. Ibid.
19. Ibid, at 167.
20. Ibid, at 162.
21. Ibid, at 129.
22. Ibid, at 131.
23. Ibid, at 133.
24. Ibid, at 131.
25. Ibid, at 5.