The Canadian (yes, Canadian, not Venezuelan …) government has just nationalized the yet-to-be-completed Trans Mountain oil pipeline expansion (TMX) by buying its assets from Houston-based Kinder Morgan Inc. The company had worn out after six years of continual delays (due to environmentalist protests, government hearings and reviews, permit applications, and First Nations’ court challenges) and was ready to give up. The pipeline extension, intended to transport oil (or more accurately, diluted bitumen) from Alberta to a port near Vancouver, British Columbia and with great value-creation potential, was mired in political uncertainty, with no return on investment in sight.

The climate-change-crusading Prime Minister Justin Trudeau, a leading champion of the Paris Agreement, had himself said last year that we needed to phase out oil sands and “… to manage the transition off our dependence on fossil fuels.” To facilitate that goal, his government had already banned the Northern Gateway pipeline and killed the Energy East pipeline by regulatory strangulation. The TMX is therefore critical for getting Alberta’s oil to tidewater, to reach markets beyond Canada.

The previous government of British Columbia had been posing various conditions for the TMX, and the current socialist government has announced that it will block the pipeline construction altogether. Adding to these government obstacles and opposition, there has been protests and threats of violence by anti-human environmentalist leaders and their supporters who want to end the use of fossil fuels—currently the only reliable, affordable and abundant source of energy on which we all depend.

Given all these challenges and the uncertainty of the fate of the TMX and its eventual profitability, it is hardly surprising Kinder Morgan was ready to quit, and no private-sector buyers were interested. Kinder Morgan is a publicly traded corporation whose purpose is to create wealth for its shareholders by providing value—safe, efficient transportation of crude oil—for its customers, oil producers in Alberta.  But for a company to fulfill such a purpose, certain conditions are necessary.

Besides an environment where there is demand for its product and supply of the resources it needs to produce it, the company requires a stable political environment. This means a dependable government that will do its job: protect individuals and corporations against the initiation of physical force—nothing more and nothing less.

But this is exactly where the Canadian government failed. It failed to protect Kinder Morgan’s right to liberty and property against those who had initiated physical force against it, or who had threatened to do so.

Instead of enforcing the Constitution and using its authority against the British Columbia government and protesters initiating physical force against Kinder Morgan property and its employees, Trudeau stayed true to what he said prior to the last election: “Governments might grant permits, but only communities can grant permission.” In other words, he relinquished the government’s responsibility to protect individual rights, leaving it up to “communities” to violate those rights at will.

By nationalizing the assets of Kinder Morgan’s Trans Mountain pipeline in an attempt get the extension built (in a direct contradiction of Trudeau’s posturing at the Paris summit and pronouncements about phasing out fossil fuels), the Trudeau government also violated the Canadian taxpayers’ right to liberty and property. This, of course, is nothing new, as most governments’ do that all the time through taxation and regulation. But it was an over-reaching rights violation nevertheless, as the taxpayers were not consulted as to whether they agreed to their money of being spent this way and were robbed of their liberty to make different choices about their property.

Such government over-reach not only curtails the freedom of Canadians and of companies operating here. It adds to the political uncertainty and also hurts the economic well-being of Canadians by contributing to the flight of investment capital from Canada. A Financial Post article reports foreign direct investment (FDI) at a record low last year: $1.43 billion, only about the tenth of the average annual FDI in the previous ten years. The investment by Canadian energy companies in international assets is also at an all-time high. The flight of capital means less wealth being created, fewer jobs, and declining prosperity for Canadians.

It is not the government’s job to interfere in the freedom of citizens and corporations but to protect it against those who initiate physical force. Only that makes freedom and prosperity possible.

 

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