Big money's last hurrah

By Dermod Travis

The big money party is over – and what a party it was. Given its well-deserved reputation in B.C., it's fitting that it went out with a bang in 2017.

First, though, a walk down memory lane for an appreciation of its shock and awe legacy on B.C. politics.

Between 2005 and 2017, B.C.'s political parties reported $206.9 million in donations ($250+), with the B.C. Green party raking in $4.3 million, the B.C. NDP ($63 million) and the B.C. Liberal party ($132 million). Trade unions accounted for $20.6 million of the haul, individuals ($74.9 million) and corporations ($90.4 million), with the balance split among unincorporated businesses and non-profits.

The Liberals brought in another $7.9 million in donations under $250 and the NDP $18 million.

The United Steelworkers Union was the top donor at $3.35 million (all to the NDP), while Teck Resources was runner-up with $2.6 million to the Liberals and $112,230 to the NDP. 

The award for most generous sector goes to the real estate industry at more than $27 million.

Together, the B.C. Real Estate Association, three industry-related firms and 42 property developers accounted for $23 million of the $27 million. 

Befitting its reputation, 2017 was par for the course.

The Green party raised $1.44 million and all of it from individuals. It's largest donor was former candidate Jerry Kroll at $29,190. The party ended the year with a $206,951 surplus.

The Liberal party pulled in $13 million. There was a four-way tie for largest donation at $100,000 between Aquilini Investment Group, Townline Homes, Rick Ilich and Chip Wilson. It ended the year in the red by $7.4 million.

The NDP was tops in the fundraising department at $15.4 million, with the United Steelworkers cutting the largest cheque at $500,000. The party ended 2017 with an $820,470 surplus.

The Liberals raised $3.2 million from corporations post-election, more than $1.1 million of it from 13 property developers. 

Companies controlled by UK-based billionaire Murray Edwards donated $48,900 to the Liberals, including $11,900 from Imperial Metals owner of the Mount Polley Mine. 

When the government changed hands, though, something funny happened on the way to the bank. Turns out quite a few traditional Liberal party donors were no longer that party's best friends forever. 

The New Car Dealers Association donated $90,050 to the Liberals in 2017 and $55,500 to the NDP, but only after it had assumed power.

In the preceding 12 years, the association donated $1.3 million to the Liberals and $82,790 to the NDP.

Site C contractor-to-be Aecon ($5,000) made its first-ever appearance on a NDP donor list.

The NDP went on the political fundraising equivalent of a pub crawl on Sept. 21 reporting $579,500 in donations from the booze industry.

The party brought in more than $700,000 from property developers – $500,130 from 10 families alone – but unlike the crawl, no one date jumps out. The results seem more like a family-by-family affair.

Hoping for the best, companies in the oil and gas industry pumped more than $64,000 into the party's coffers, including: Encana ($30,525), Woodfibre LNG ($6,850) and Conocophillips ($1,050).

Kinder Morgan doesn't appear on the NDP's list.

The NDP raised more than $126,000 from trade associations, including the Insurance Bureau of Canada ($21,200), the Progressive Contractors Association ($5,000) and the Victoria Harbour Authority ($500).

Even the slots paid off for the NDP with $68,483 in donations from B.C. casinos.

Despite tabling a bill on Sept. 18 to ban corporate and union donations, both the NDP and Liberals continued the practice till “big money's” final breath, pulling in just shy of $3.2 million between them.

Conspicuous by his absence from any list was “Condo King” Bob Rennie ($305,550), a faithful Liberal donor since 2007, while another donor returned to the Liberal fold, former premier Christy Clark ($340).

Almost fittingly – given its 2017 fundraising results – one of the NDP donors was Superachievers Financial ($1,250) and, perhaps, having run a $7.4 million deficit, a donation from Finale Editworks ($1,500) might not be a good omen for the Liberals.

RIP, big money. You won't be missed.

– Dermod Travis is the executive director of IntegrityBC


ICBC's uncertain future

By John Chant

It's no secret that the Insurance Corp. of British Columbia (ICBC) is under financial distress. But should it be saved?

In 2016-17, it suffered its largest loss ever - $889 million, an amount equal to 18 per cent of its total premiums. What's worse, it's heading for an even larger $1.3 billion loss this year, which would represent 23 per cent of its premium revenue. Why has this happened?

ICBC is a hybrid of an auto insurer and an instrument of government policy. It operates driver licensing and testing, and undertakes road safety programs. It also offers discounts to seniors and the disabled, together with insurance premiums that can't reflect either the age or gender of the drivers it insures. Even with these added duties, ICBC managed to cover its costs for many years by raising rates, since it has a monopoly on mandatory coverage.

So what's changed to cause the large losses?

ICBC's basic business - providing mandatory auto insurance coverage - has fallen victim to both an unfriendly environment and misguided provincial government policies. The adverse environment arises from a greater frequency and severity of claims. The higher costs from more vehicles and greater congestion are largely beyond ICBC's control.

But reduced enforcement by police on the roads may have increased the number of accidents. And the way ICBC assesses property damage claims may have also raised costs.

But cost escalation is only part of the story. The provincial government's rate-smoothing measures that limited ICBC's ability to raise the rates for its basic business have left revenues short of covering costs, resulting in losses in four of the last six years. Without this requirement, ICBC could have preserved its finances by raising rates to reflect increasing costs. While the rate increases would have been significant (and certainly not welcomed by customers), they would have saved ICBC from implementing larger rate increases in the future.

However, multiple years of losses at ICBC's insurance monopoly have been offset by $1.4 billion in transfers from ICBC's optional - or non-mandatory - car insurance business. Indeed, without these extra funds, ICBC's insurance business coffer would have fallen below the regulatory minimum, leaving the insurance business essentially insolvent. Unfortunately, the transfers have simply masked the underlying problems and delayed corrective measures.

ICBC's condition has now become so desperate that B.C.'s attorney general has suspended the minimum capital requirements for ICBC's basic business, leaving a smaller buffer to meet its claims.

ICBC differs from private insurers in one important respect. Private insurers can and do fail, without a substantial impact on the auto insurance market because other insurers can take over their business. Failure of ICBC would be much more damaging because of its size (annual premiums total more than $5 billion) and because it's the only supplier of mandatory insurance in the province. Clearly, ICBC's financial position is unsustainable.

The new provincial government deserves credit for bringing the issue forward and seeking informed advice. But Band-Aid solutions won't be enough. ICBC's role must be rethought, as must the objectives and role of government in the auto insurance business in B.C.

Should the government be in the auto insurance business? If so, should ICBC be treated as a purely commercial concern? Or should it continue to serve as an instrument of government policy? If the latter, then how can these activities be sustained while maintaining the financial soundness of ICBC?

John Chant is a senior fellow at the Fraser Institute.

– Troy Media

Pipeline - gloves dropped

By Ken Green

Earlier this month, pipeline company Kinder Morgan announced it will suspend all "non-essential" activities and "related spending" on the federally-approved Trans Mountain pipeline expansion. In unusually clear language, Kinder Morgan explained that it can't invest more money into a project that it can't ensure will see completion.

Kinder Morgan chief executive officer Steven Kean said that "a company cannot litigate its way to an in-service pipeline amidst jurisdictional differences between governments" and that Kinder Morgan can't expose shareholders to "extraordinary political risks that are completely outside of our control and that could prevent completion of the project."

The company said that to proceed, it must reach agreement by May 31 with the various stakeholders: the British Columbia government, First Nations, municipalities, etc. Without such an agreement, Kean said it's difficult to conceive of moving ahead with the project.

The sound of gloves hitting the ice came swiftly after the Kinder Morgan announcement.
Alberta Premier Rachel Notley released a sharply-worded statement about B.C.'s continuing obstruction of the pipeline, with overt threats of economic retaliation if such tactics continues.

Federal Natural Resources Minister James Carr also issued a statement in support of the Trans Mountain expansion project, naming and shaming B.C. Premier John Horgan: "The government of Canada calls on Premier Horgan and the B.C. government to end all threats of delay to the Trans Mountain expansion. His government's actions stand to harm the entire Canadian economy."

Given that both Notley and Prime Minister Justin Trudeau have in part justified their climate policies on the basis that this pipeline will be built, the harder language is not surprising. But Horgan is not backing down, insisting that "the federal process failed to consider B.C.'s interests and the risk to our province. We joined the federal challenge, started by others, to make that point."

The three met for a summit of sorts on Sunday. It resulted in no meaningful progress.

It's hard (if not impossible) to see the damage that a failure on the Trans Mountain expansion would have on investor confidence in Western Canada (and the rest of Canada, for that matter). In its annual global survey of oil and gas executives, the Fraser Institute has seen steep drops in investment attractiveness in both provinces in recent years. In 2017, B.C. dropped to 76th out of 97 jurisdictions (from 39th of 96 last year) on our index, which measures how public policies can deter oil and gas investment.

Meanwhile, Alberta - ranked 33rd overall in 2017 - is the second-lowest ranked Canadian jurisdiction after B.C. Alberta's ranking remains far behind 2014 levels when it placed 14th globally out of 156 jurisdictions. What investor, looking at the train-wreck failure of recent pipeline regulatory processes in Canada, would put their dollars down on Canada when only a few hundred kilometres to the south there are vastly more profitable (and vastly more predictable) investment opportunities.

In the 2017 oil and gas survey, six of the world's top 10 jurisdictions are in the United States compared to only two in Canada (Newfoundland and Saskatchewan). While Alberta and B.C. are falling in the rankings, U.S. states (Texas, Oklahoma, North Dakota) are consistently among the top performers.

Make no mistake, the Kinder Morgan announcement reflects a watershed moment in Canadian history. What happens in its wake will definitively show the world's investment community whether Canada's governments and regulatory processes can inspire the confidence they need to come to Canada (or stay in Canada) to help develop our natural resources and get them to world markets that command higher prices.

Both the province of Alberta and the federal government have made the right pronouncements.
Now it's imperative that Ottawa back up those words with deeds.

Kenneth Green is senior director of natural resource studies at the Fraser Institute.

– Troy Media


High cost of obstruction

By Kenneth P. Green, Elmira Aliakbari and Ashley Stedman

In recent months, Canadian crude oil prices have dropped relative to other international benchmark prices, costing the economy billions in foregone revenues.

The recent increase in the Western Canada Select price discount compared to West Texas Intermediate is largely due to Canada's insufficient pipeline capacity. The result is increased crude shipped by rail and higher transportation costs.

Between 2009 and 2012, the average price differential was $13 a barrel. However, in February 2018, the differential reached $34 a barrel, which is a striking increase of two-and-a-half times.

This increase in the price differential reflects Canada's lack of transport capacity and restricted market access.
Despite growing oil production in recent years, Canada hasn't built any major pipelines, resulting in excess oil production and lack of transport capacity. There aren't enough pipes to move Western Canada's crude oil.

TransCanada's Energy East and Eastern Mainline projects were cancelled due to a number of factors, including significant red tape. And despite receiving regulatory approval, Canada's remaining pipeline projects - the Trans Mountain expansion, the Line 3 Replacement Project and Keystone XL - continue to face delays due to market uncertainty, environmental and regulatory concerns, and political opposition.

For example, B.C.'s government, led by Premier John Horgan, is blocking the Trans Mountain pipeline expansion despite federal government and National Energy Board approvals, prompting Kinder Morgan to suspend all "non-essential" activities and "related spending" on the project indefinitely.

Analysts suggest that new pipelines may be built between 2019 and 2022, but this timeline seems optimistic given the pipeline obstructionism ramping up across the country. The reality is that many new Canadian pipeline projects remain in political or regulatory limbo.

Meanwhile, insufficient pipeline capacity has increased oil shipments by rail - a more expensive and slightly less safe mode of transportation - leading to higher costs for Canadian producers.

Increased crude-by-rail traffic has also created a new problem for oil producers: they now struggle to compete with farmers and grain companies for space. In fact, rail companies recently cut back on shipping crude to free up capacity to ship grain, leaving oil products stranded.

To make the matters worse, rail companies now demand much higher rates "to move oil because they fear the business will evaporate once new export pipelines come on stream." According to the recent Financial Post article cited above, rail costs to transport crude from Western Canada to the Gulf Coast may reach US$20 a barrel, which is much higher than previous estimates.

Ultimately, higher rail rates mean Canadian oil producers must absorb higher costs - leading to lower prices for Canadian crude. Unfortunately, the current price differential for Canadian crude is likely to remain high until more pipeline capacity comes online.

Steep WTI-WCS price differential and high rail costs reaffirm Canada's critical need for more pipeline capacity. Federal and provincial policy-makers should recognize the urgent need for new pipelines in Canada.

Kenneth P. Green is a senior director, Elmira Aliakbari and Ashley Stedman are analysts, at the Fraser Institute.

– Troy Media

Canada's climate failures

By David Suzuki

Scientists, academics, environmentalists and communicators have urged governments to take the climate crisis seriously for decades. We’ve outlined the overwhelming evidence, generated discussion and offered myriad solutions. 

We’ve confronted politicians who refuse to accept that a problem exists, or that we can do anything about it if it does. That’s frustrating and disheartening, especially for those of us with children and grandchildren, and more so for people who are children and grandchildren. It’s even more frustrating to deal with politicians who claim to take the matter seriously but whose actions belie their words.

We’re failing to take the necessary steps to confront or adapt to global warming. The current U.S. administration is going in the opposite direction. In Canada, despite hopeful rhetoric after the 2015 federal election and leading to the Paris climate summit, neither the federal nor provincial governments are doing enough to indicate they even understand the severity of the crisis.

Federal Environment Commissioner Julie Gelfand and auditors general in nine provinces conducted an audit of climate change planning and emissions-reduction programs between November 2016 and March 2018. They concluded, “most governments in Canada were not on track to meet their commitments to reducing greenhouse gas emissions and were not ready for the impacts of a changing climate.”

They further reported, “Most Canadian governments have not assessed and, therefore, do not fully understand what risks they face and what actions they should take to adapt to a changing climate.” Only two provinces, New Brunswick and Nova Scotia, are on track to meet their emissions-reduction targets, and federal, provincial and territorial governments are using a mishmash of approaches, targets and measurements. “As a result, it was unclear how the federal, provincial, and territorial governments would measure, monitor, and report on their individual contributions to meeting Canada’s national 2030 target.”

Meanwhile, the federal and some provincial governments bizarrely argue that the best way to confront climate change is to continue expanding the fossil fuel industry and its infrastructure, with increased oilsands and liquefied natural gas development and more pipelines.

Last year, this column’s authors wrote a book, Just Cool It!: The Climate Crisis and What We Can Do, with the hope of offering the public and politicians a readable guide to the science of and solutions to climate disruption. If politicians don’t have the time or inclination to read it or any of the other excellent books on the subject, we hope they would at least listen to the many experts in government, academia and elsewhere who have clearly outlined the crisis, evidence and solutions.

Instead, through lack of imagination and foresight and because of election cycle constraints and misguided priorities, many have chosen to continue serving the fossil fuel industry.

The audit is clear that Canada’s climate is “becoming warmer and wetter, and extreme weather events are becoming more frequent. Climate change impacts are felt across Canada and pose significant risks to Canadians and the economy.” Costs are mounting in the face of increasing and more intense floods, forest fires, heat waves, melting sea ice, rising sea levels and thawing permafrost.

Gelfand told Canadian Press that the federal Pan-Canadian Framework on Clean Growth and Climate Change, released in December 2016, is a positive step but that its proof will be in its implementation. Saskatchewan has yet to sign on to the framework and is opposing the requirement for provinces and territories to introduce carbon pricing, an effective and necessary tool to fight climate change.

Had governments, industry and the public recognized and started acting on the problem decades ago when it became clear that failing to do so would lead to catastrophe, we might be much further ahead, without the disruption that acting so belatedly will entail. We’d also be able to focus more on reducing the problem than finding ways to adapt to its consequences.

Many systemic problems are contributing to the climate crisis and other ecological challenges, including outdated economic systems based on constant growth and consumption. We must address those, but we at least need to start by living up to national and international climate commitments and acting quickly to implement the many known solutions and plans that will put us on track to a cleaner, healthier future.

– David Suzuki is a scientist, broadcaster, author and co-founder of the David Suzuki Foundation

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