Jim Flaherty undecided on 2015 election run

Canada's Finance Minister Jim Flaherty has not yet decided whether to run for office again in the 2015 general election, he told Reuters on Tuesday, amid speculation he may step down before then to attend to health issues.

"We'll see. I haven't decided," Flaherty said in an interview when asked to confirm his intentions.

He answered "yes" at a Nov. 13 news conference when asked whether he would run for re-election in October 2015 in the southern Ontario district he represents.

Flaherty suffers from a rare but non-fatal skin disease that causes blisters and is usually managed with powerful steroid medication.

Activities, travel scaled back

He had long been one of the most vocal cabinet ministers in Prime Minister Stephen Harper's Conservative government and gave frequent speeches to promote the government's agenda.

Since going public with his condition over a year ago, he has sharply scaled back his activities and travel.

He made an exception to attend the meeting in Sydney last week of the Group of 20 finance ministers and central bank governors and was in Melbourne on Tuesday for a business forum.

Flaherty, 64, has vowed to stay on the job until he eliminates the country's budget deficit, and he repeated on Tuesday that he expects to achieve that without difficulty next year well before Canadians go to the polls.

In remarks to a business audience on Tuesday, Flaherty, a veteran of G20 meetings, urged his colleagues to focus on balanced budgets.

Hailed as 'fantastic spine stiffener' by Australian counterpart

Australia's Treasurer Joe Hockey, an ideological ally, described him as a voice of fiscal conservatism and a "a fantastic spine stiffener" within the group for questioning any talk of more taxes or regulation.

Flaherty repeated his criticism of the U.S. Federal Reserve for its bond-purchasing program designed to stimulate the economy and which it is now in the process of tapering.

"I was never a fan of the approach the Fed took," Flaherty said of the so-called quantitative easing, which the Canadian central bank also considered during the crisis but never used.

"I think there's a risk and now we're seeing the consequences of having to get out of it ... and it's very difficult on the emerging economies."

Flaherty raised eyebrows last October when he said the Fed should end its bond purchases as quickly as it could.

Tight-lipped on Canadian dollar

He would not be drawn into reacting to earlier remarks made by Nouriel Roubini, chairman of Roubini Global Economics and an economics professor at New York University's Stern School of Business, that the value of the Canadian dollar was too strong and the Bank of Canada should commit to keep interest rates low for longer or adopt an easing bias in order to weaken the currency.

Asked whether he agreed the Canadian dollar was overvalued despite depreciating sharply in recent months, Flaherty said,

"I wouldn't characterize it in any way other than that it's a market currency. The market decides where the dollar sits."

The Canadian dollar has depreciated about 10 percent in the past year to the relief of exporters, but Roubini said it needed to fall another 10 percent to really help struggling manufacturers.

Ottawa open to further assistance to Chrysler 

On another issue grabbing attention in Canada, Flaherty signaled that Ottawa is willing to provide financial assistance to Chrysler Group LLC, which has said a decision on whether to go ahead with an investment in a Windsor, Ontario, minivan plant hinged on incentives from the federal and provincial governments.

"The auto industry has been a special case in Canada because of its importance in the manufacturing sector and in Ontario," Flaherty said, adding that he had not yet seen a proposal from Chrysler.

"We have an investment fund that I referred to in the budget last week and it's available for investments in plants and equipment," he said.

Industry Minister James Moore, not Flaherty, is in charge of industrial policy but Flaherty would likely be informed of the government's intentions.

His budget this month increased the amount of subsidies available for the sector by C$500 million ($451.69 million) in a bid to arrest the decline in the country's share of the North American car manufacturing.

Keeping close eye on housing

In the interview, Flaherty indicated he is not overly concerned about the state of the housing market and said, as expected, there are no imminent plans to intervene in the mortgage market to curb lending after having done so four times already since 2008.

But he said it would be "unwise" to rule it out as a tool in the future.

Canada's housing market caught fire following the 2008-09 recession as ultra-low borrowing costs prompted consumers to take on record-high debt and led to exorbitant prices and overbuilding.

While many economists still worry about an eventual collapse, the latest data on prices and sales underscore the view that the real estate market should be softer but relatively stable this year as borrowing costs rise.

For now, the minister is focused on increasing scrutiny of the mortgage insurance business of the federal housing agency, the Canada Mortgage and Housing Corporation (CMHC), and encouraging the growth of private mortgage insurers.

'Close eye' on mortgage security

"We keep a close eye on it. We have a new chair and we have a new CEO. There's much more financial expertise now at CMHC than there was before," he said.

In Canada, high-risk mortgages - where the borrower has paid less than a 20-percent down payment on a home - are required to have insurance that is provided by CMHC.

Flaherty has expressed concern about CMHC's role in selling insurance to banks to cover portfolios of mortgages that do not otherwise require insurance, because of the risks to taxpayers. 

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Mt. Gox, Bitcoin exchange website, offline

The website of major Bitcoin exchange Mt. Gox is offline amid reports it suffered a debilitating theft, a new setback for efforts to gain legitimacy for the virtual currency.

The URL of the Tokyo-based Mt. Gox was returning a blank page. The disappearance of the site follows the resignation Sunday of Mt. Gox from the board of the Bitcoin Foundation, a group seeking legitimacy for the currency.

Separately, several Bitcoin exchanges released a joint statement saying that funds under their control are held securely.

The Bitcoin operators said they are working to "re-establish the trust squandered" by the failings of Mt. Gox, which should not be considered a reflection of the value of Bitcoin or the digital currency industry.

A "crisis strategy" report shared widely online that purports to be an internal Mt. Gox document says more than 740,000 Bitcoins are missing from the exchange, which froze withdrawals earlier this month.

Mt. Gox CEO Mark Karpeles said the company would soon issue a statement.

"We should have an official announcement ready soon-ish. We are currently at a turning point for the business. I can't tell much more for now as this also involves other parties," he wrote in an email to Reuters.

The cloud hanging over Mt. Gox is a possibly fatal blow to Bitcoin. Supporters of the virtual currency have said its cryptography makes it immune to theft or counterfeiting.

On Bitcoin exchanges, the currency's value has fallen below $500 from about $550 in the past few hours.

Bitcoin was started in 2009 as a currency free from government controls. It had been inching toward broader acceptance despite wild swings in value in the past year. For most of the currency's history, each digital coin had been worth less than $10

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Housing to get less affordable as mortgage rates rise, RBC warns

The Royal Bank of Canada says the ability of Canadians to keep up with housing costs has been improving of late, but warns that's about to change.

RBC's latest housing affordability measure shows home servicing costs relative to incomes dipped slightly in the last three months of 2013 after having risen the previous two quarters.

But the relief will be temporary, the bank says in a new report, because mortgage rates are due to start rising this year.

"RBC anticipates that as longer-term interest rates begin to moderately rise, the costs of owning a home at market value will gradually outpace (growth) household incomes by late-2014, leading to strained affordability in several markets across Canada, much like the trend in Toronto," RBC chief economist Craig Wright said in the report.

The finding bucks the recent trend, which has seen mortgage rates remain stable or even moving lower, with some brokers offering five-year fixed rates below three per cent.

Mortgage rates expected to rise

Still, the report predicts that with bond yields expected to drift upward on the strength of an improving economy, mortgage rates will be pushed north as well.

The RBC notes that bond yields influence long-term mortgage rates more directly than the Bank of Canada's rate setting, which impacts short-term rates and is not expected to change until sometime in 2015.

In the fourth quarter, the bank estimates maintaining a detached bungalow at current market prices would have taken up 43.1 per cent of average household income, while the cost of a two-storey home would have taken 48.7 per cent.

Both measures are 0.2 points lower than was the case in the third quarter.

The improvement was mostly attributed to growth in average household incomes outstripping moderately increased home ownership costs in the last three months of the year.

But the change is in the margins, the report adds, noting that home affordability in Canada has remained largely stable in the past few years.

Vancouver market the least affordable

Given the nature of the Canadian market, the measure varies widely by location. For instance, the affordability measure on a detached bungalow in Vancouver dropped 2.3 points in the fourth quarter but still stood at 81.6 per cent, by far the highest in the country.

Toronto was the second least affordable market tipping in at 55.6 per cent on the RBC index, followed by Montreal at 38.8, Ottawa at 36.7, Calgary at 33.8 and Edmonton at 33.3 per cent.

As well, there is a major difference in affordability based on the nature of the home ownership, with owning a detached home at market value "more of a stretch" for homebuyers than owning a condominium, the report states.

The RBC index represents the percentage of pre-tax household income that is needed to service the cost of owning a home at current market prices, including payments for a mortgage, utilities and property taxes.

The affordability measure has more relevance to newer home buyers since the vast majority of Canadians will have bought their homes in the past, when prices were lower.

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BMO profit up 2% to $1.06B

Bank of Montreal reports it had $1.06 billion of net income in the first quarter, up two per cent from a year earlier, as the bank cut its provisions for credit losses by nearly half.

BMO's net income amounted to $1.58 per share, before adjustments, up five per cent from a year earlier and five cents higher than analyst estimates.

Its provisions for credit losses dropped to $99 million, from $178 million a year earlier, largely as a result from improved recoveries from its impaired loan portfolio.

BMO's adjusted net income was $1.08 billion, up $54 million or five per cent from a year ago. Adjusted earnings per share rose seven per cent to $1.61, which was also ahead of analyst estimates.

The bank says that it had improved results from most of its major divisions.

Its main Canadian banking arm for consumers and businesses contributed $484 million of net income, up $37 million or eight per cent from a year earlier.

BMO's profit increased last quarter to just over $1 billion.

"We gained market share in domestic personal lending complemented by double-digit growth in both commercial loans and deposits," said Bank of Montreal chief executive Bill Downe.

Bank of Montreal's wealth management arm increased net income by eight per cent from a year earlier to $175 million.

Meanwhile, its U.S. personal and commercial banking arm saw net income fall by 15 per cent to US$153 million, although the bank says the division's adjusted net income showed an improvement.

"Margins were stable on both sides of the border, and Wealth Management and Capital Markets posted robust revenue growth."

But BMO Capital Markets saw lower net income, which fell seven per cent from a year earlier to $277 million, as the company was affected by higher expenses, lower loan recoveries and a higher tax rate.

BMO Capital's expenses increased $85 million or 16 per cent due to higher employee-related costs, including severance, and higher support costs to adapt to the business and regulatory environment.

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Tim Hortons plans 800 more restaurants

Tim Hortons has laid out an ambitious plan to add 800 more franchise outlets by 2018, the latest shot in an escalating war to stay on top of the quick breakfast and coffee market.

The TSX-listed company said Tuesday it will add as many as 300 new locations in the U.S. in the next four years, a market where it has had difficulty gaining a foothold.

It also plans 500 more locations in Canada, including 160 in Canada as early as this year, a market where the brand enjoys extreme brand loyalty but is perceived to be near saturation.

"We believe that our enviable guest loyalty … will present significant opportunities to grow our Canadian business over the next five years," the company said in a press release.

The company singled out a number of American markets where it already has almost 100 would-be franchises lined up, including 40 in St. Louis, 25 in Youngstown, Ohio, 15 in Fort Wayne, Ind. and 15 in Minot, N.D.

Last year, Tim Hortons was the target of activist shareholders who didn't like the direction of the company and pushed it to abandon international expansion plans and focus on its strength — cranking out cash from Canadian locations, enough to boost the dividend.

Tuesday's roadmap shows the chain is doubling down on growth plans, under the leadership of new CEO Marc Caira, who took the reins last July after executive positions at Nestle and Parmalat.

The chain has growth plans as well in the Persian Gulf, a region of the world where it's eked out a surprising foothold, with 38 locations.

The road map laid out Tuesday includes adding about 220 locations in that area over the same period.

At the end of last year, Tim Hortons had 3,588 restaurants in its Canadian system, 859 in the United States and 38 in the Gulf region.

Tim Hortons shares were up slightly, trading at $58.22  on the TSX.

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Canadian dollar lifts, but stocks fall

The Canadian dollar turned higher late morning Friday amid data showing the economy continued to register respectable growth during November.

The loonie was ahead 0.22 of a cent to 89.78 cents US as Statistics Canada reported that gross domestic product grew by 0.2 per cent, which was in line with expectations. That was down slightly from a 0.3 per cent gain in October.

But stocks dropped, with concern over emerging currency turmoil and Europe's low inflation returning to haunt investors. The TSX/S&P index was off earlier lows by the end of the day but still down 40.34 points to 13,694.94.

ew York's Dow industrial index dropped  149.76 points to 15,698.85, the Nasdaq slipped 19.25 points to 4,103.88 and the S&P 500 index lost 11.6 points to 1,782.59.

"The slowing in November GDP was not unexpected after very strong increases in October and September of 0.3 per cent," observed RBC Economics Assistant Chief Economist Paul Ferley.

"There is the risk of a more pronounced slowing in December for which inclement weather in the final two weekends before Christmas may even result in activity declining marginally in the month."

The U.S. dollar had been higher earlier in the morning with traders in a risk-averse mood after data raised worries about the eurozone slipping into deflation.

Eurostat, the EU's statistics office, reported that inflation in the eurozone fell to 0.7 per cent in the year to January from 0.8 per cent the previous month.

There are concerns that the eurozone could slip into a situation where prices are actually falling. Such a development can hurt an economy as consumers delay purchases and businesses postpone investment.

The deflation concerns added to emerging market worries that have buffetted markets this past week.

Countries including Turkey, South Africa, India and Russia have seen their currencies slide sharply over the past week. Traders worry that growth will slow and money will flow out of their economies as the U.S. Federal Reserve tightens its monetary policy.

Other economic data released Friday showed that U.S. consumer spending rose 0.4 per cent in December, compared with November when spending had increased an even stronger 0.6 per cent. That was the best gain in five months.

For all of 2013, income growth was 2.8 per cent, the weakest performance since 2009.

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Keystone XL gets environmental OK from U.S. State Dept.

The U.S. State Department gave a vote of confidence to the Keystone XL pipeline on Friday, saying in a report that it has no major environmental objections to the construction of the megaproject.

The report says development of the massive pipeline to move oil from Alberta to refineries on the U.S. Gulf Coast won't significantly increase the rate of oil extraction and release an unacceptable level of greenhouse gases.

That had been a key hurdle standing in the way of the project's approval. Calgary-based TransCanada has been seeking approval for the 1,800-kilometre, $7-billion project for several years.

Canadian Natural Resources Minister Joe Oliver welcomed the report's findings and said he hoped for a speedy approval of the project.

A final decision may not come for several months, but this study is seen as a critical step in determining whether the project will go ahead.

"This is the fifth federal study on the environmental impact of the Keystone XL pipeline. Each previous one has stated that building Keystone XL would not adversely affect the environment," Oliver said.

He noted that the report says that not building the project would actually lead to the release of as much as 28 to 42 per cent more greenhouse gases, because of energy consumed moving the same volume of oil via other means, such as by rail, trucks or barges.

"The benefits to the U.S. and Canada are clear. We await a timely decision on this project," Oliver said.

Long project

Friday's report is a step closer toward final approval, but far from the final one.

The State Department has yet to rule on whether the project is in America's best interest for non-environmental reasons and there is no date set for that ruling. Beyond that, ultimately the approval for the project will rest with the White House, which has yet to OK the deal. Obama sent the plan back to the State Department for further study before the last presidential election in 2011.

"Approval or denial of any one crude oil transport project … is unlikely to significantly impact the rate of extraction in the oilsands or the continued demand for heavy crude oil at refineries in the United States," the report says.

The report calls for a 90-day comment period, where stakeholders and interested parties are asked to comment on the report's environmental assessment of the project.

The Canadian government and other backers of the project welcome the report's conclusions. Alberta Premier Alison Redford called the report "an important step toward approval of a pipeline that will build our economic partnership with our friends in the U.S. and help foster North American energy security and independence."

The American Petroleum Institute CEO Jack Gerard declared the report had put environmental concerns to rest.

"Five years, five federal reviews, dozens of public meetings, over a million comments and one conclusion ─ the Keystone XL pipeline is safe for the environment," said Gerard.

"This long-awaited project should now be swiftly approved. It's time to put thousands of Americans to work," he added. 

But the pipeline's many opponents are already vowing to redouble their efforts to see that it's ultimately halted.

Tim Gray of Canadian group Environmental Defence said the U.S. should be dealing with carbon pollution rather than building pipelines.

"The bottom line is that it will never be easy to build a pipeline anywhere in North America. The opposition to the pipeline is strong in Canada too," Gray said. 

Opposition mounting

There's already a lawsuit in Nebraska to prevent the governor from forcing landowners to allow the pipeline on their property. And there's a State Department internal investigation into conflict-of-interest allegations against contractors who worked on the report, but had also done past work for pipeline builder TransCanada Corp.

Project opponents made it abundantly clear that they wouldn't be deterred.

"In addition to the fact that [the report authors] ignored the science, interagency criticism, basic economics of the industry and TransCanada's own recent admission that the pipeline is the key to opening up the tarsands, the fact that a foreign oil company and foreign government were given critical intelligence ahead of everyone else tells you all you need to know about how useless this [report] is," an adviser to billionaire Keystone opponent Tom Steyer told The Canadian Press on Friday.

Shares of TransCanada rose slightly on the news, just over one per cent in the minutes after the release of the report.

TransCanada CEO Russ Girling welcomed the decision, saying the pipeline capacity the company can sell in advance is all spoken for. TransCanada emphasized the enhanced security of the pipeline compared to shipping oil by rail, which many of its customers are doing.

"From a safety perspective, this will be the safest pipeline built to date in the U.S. From that perspective, this pipeline is in the national interest of the U.S," Girling said in a teleconference.

"Keystone XL has been shown time and time again to be the safest way to transport North American oil, to get oil to refineries in the Midwest and the Gulf Coast. It will have a minimal impact on the environment and it will not exacerbate environmental emissions," he said.

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Bombardier, Quebec to invest $1B in Gaspé cement plant

Bombardier's founding family is partnering with Quebec's government and two provincial agencies to invest $1 billion
in a new cement plant in the Gaspé region.

The project is expected to support about 2,300 jobs during the construction phase. Once it's built, it will support about 200 jobs and another 200 indirect jobs.

The project is being led by McInnis Cement, a company formed by members of the family that founded Bombardier Inc. and its spinoff, BRP Inc.

The Quebec government will provide a guaranteed loan worth about $250 million. The province's investment arm will invest $100 million and the Caisse de dépôt, Quebec's pension manager, will invest an additional $100 million.

Project boon to depressed region

The location in the community of Port-Daniel-Gascons was selected because of its rich limestone formations and proximity to maritime shipping that will carry 95 per cent of annual production.

The plant is welcome news for an area of Quebec that suffers from high unemployment.
   

However, rivals in the cement industry say government funding will threaten other jobs in the province.

The Canadian Cement Association criticized the government, however, for supporting the project that will add unneeded supply.

Association president Michael McSweeney said the new plant would compete directly with Quebec producers at a time when 60 per cent of their capacity sits idled.

"The government's financial participation in the project jeopardizes jobs and existing plants," he said before the
announcement after reports surfaced late last week.

Rival Lafarge could cut jobs
 

French-based Lafarge, which is partially owned by Montreal-based Power Corp., has said it would be forced to cut jobs at its plant in St-Constant, Que., if it can't maintain its activities because of a further surplus of production capacity.

The idea of a cement plant in the region dates back more than 20 years. Planning for the project began in 1998 but was postponed for a few years due to the lack of financial support.

It got back on track with a more than doubling of output after the Beaudoin family's investment arm, which also partially owns Ski-Doo maker BRP.

The cement plant promises to be among the industry's most fuel-efficient and lowest emitters of greenhouse gases on the continent.

It will initially burn petroleum coke, a refinery product and may add biomass from logging and sawmills.

"Ultimately, the production of the project's cement plant will replace that of older plants," said a November report by engineering firm Genivar, now WSP.

Beaudoin vs. Desmarais?
   

That puts it in direct conflict with Quebec's Desmarais family, whose Power Corp. owns a 21 per cent stake in Lafarge.

Quebec media have labelled the competition a battle between two of Quebec's wealthiest families.

But Power spokesman denies any friction.

"There is no disagreement between the Desmarais and the Beaudoin families. They are in fact very good friends," Stephane Lemay said in an email.

Bombardier CEO Pierre Beaudoin sits on Power's board of directors.

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Head of CPP fund investing 'where the puck is going to be'

The man in charge of the $200 billion fund that underpins the Canada Pension Plan invests with a very long horizon.

Mark Wiseman, president and CEO of the Canada Pension Plan Investment Board, uses the analogy of Wayne Gretzky, saying  "we're going to go to where the puck is going to be, not where the puck is today."

That means a highly diversified portfolio, with only one third of its assets in Canada, said Wiseman, who joined the investment board in 2005 and has been its head since July 2012. He previously worked with the Ontario Teachers' Pension Plan.

The board manages the portion of CPP's capital that is not immediately needed for benefits, and Wiseman has a firm grasp of the potential impact of the baby boom retirees. He points out that most of them are still contributing to CPP.

"We expect to have net inflows of capital into the plan for about the next decade," he said in an interview with CBC's The Lang & O'Leary Exchange.

'The policy decisions are tough ones and we leave that up to politicians to make those decisions. What is clear is that Canadians by and large need to save more for their retirement'- CPPIB CEO Mark Wiseman

"So, as a result of that, because we don't have any money to pay out in the near term we can afford a bit of volatility in the way that we invest and therefore take a riskier position and get, hopefully, a larger return in the long run for taking a little bit more risk."

The chief actuary's report in December showed the CPP is sustainable for the next 75 years.

The $200 billion fund is only "middling" in size by global standards, Wiseman said, but its scale means it can take on investments in assets such as real estate and infrastructure that smaller investors cannot.

Diversified by assets, geographically

"So the best way to think about it is we're diversified in terms of risk," he said.

"We have government bonds, we have real estate and infrastructure which are reasonably low-risk, then we move up the scale and we invest in things like private equity and private debt that might be a bit more risky and overall what we're trying to do is get a highly balanced portfolio that's diversified by asset class and by geography."

The CPPIB has stepped up the pace of investment outside Canada, including investments in emerging markets such as Peru, China, Brazil and India.

That's what Wiseman means by having his eye on where the puck will be. He agrees there is turmoil now in emerging markets as money moves toward the U.S. dollar, but points out CPPIB has the kind of investment horizon that can last out market cycles.

Investment in India

"We recently announced our first investment in India, exactly at a time when other people are leaving", he said, "but taking the long-term view by having the luxury of being able to leave our capital in the country for a long period of time, we believe will pay off a substantial dividend in the long-run."

Similarly, he believes China will eventually be the world's largest economy and its growth, though slowing, will be faster than any developed country.

"We still have a third of the portfolio invested in Canada, but if you think about it, Canada represents less than three per cent of global capital markets today so even at 33 per cent we're effectively grossly overweight Canada," Wiseman added.

Wiseman assures Canadians that CPP benefits will be there for them at retirement, though he warns most will need to do some additional saving.

"People can count on the CPP being there in terms of what they had contributed," he said.

He said he doesn't get involved in decisions such as whether CPP should be expanded as Ontario would like or how private pensions should be reformed.

"The policy decisions are tough ones and we leave that up to politicians to make those decisions. What is clear is that Canadians by and large need to save more for their retirement," Wiseman said.

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Keystone XL supporters, detractors clash over U.S. pipeline report

The Conservative government received some much-needed good news this week in the form of the U.S. State Department's massive and benign final assessment of the proposed Keystone XL pipeline.

Ever since Stephen Harper called American approval of the $5.4-billion pipeline from Alberta to the U.S. Gulf Coast a "no-brainer" back in September 2011, a lot has been riding on the eventual vindication of the prime minister's thinking.

By January 2012, Natural Resources Minister Joe Oliver had elevated pipeline politics — and the diversification of the country's foreign energy markets — to "an urgent matter of Canada's national interest."

Throw in the steady stream of Canadian supplicants to Washington on the Keystone file, a multi-million-dollar government ad campaign aimed at U.S. decision makers and consumers and, most recently, Foreign Affairs Minister John Baird's impolitic push for U.S. President Barack Obama to make up his mind, and the whole saga is taking on the aura of a slow-motion policy sink hole.

Natural Resources Minister Joe Oliver says Keystone's 'benefits to the U.S. and Canada are clear.' (Frank Gunn/Associated Press)

With 2014 shaping up as the year the Conservatives need to find some pre-election traction on their bedrock — dare we say, keystone — energy policies, the State Department assessment buttresses many of the government's long-standing arguments.

"The benefits to the U.S. and Canada are clear," Oliver said Friday after the pipeline study was released.

"We await a timely decision on this project."

He'd best not hold his breath.

Eight other U.S. federal agencies have 90 days to comment on the State Department report and the president can then ruminate for as long as his political calculus deems necessary.

"The file has been caught up in a political dynamic that goes beyond a rational exchange of numbers," said David McLaughlin, a former president of the National Round Table on the Environment and the Economy and chief of staff to Finance Minister Jim Flaherty.

Environmentalists ignore U.S. findings

Certainly the environmental movement is talking past the State report as though it was just another partisan news release.

"If President Barrack Obama truly wants to be able to tell his kids he did everything he could to combat climate change, then he must reject this pipeline because it is a fuse to one of the largest carbon bombs on the planet," Mike Hudema of Greenpeace Canada said in a release late Friday.

The U.S. State Department report on the Keystone XL pipeline is "good news" for the project, says David McLaughlin. (Tony Gutierrez/Associated Press)

The report says nothing of the sort.

Against that incendiary rhetoric, the Conservative Party of Canada responded with its own jeering web advertisement Friday within minutes of the State report's release.

"Now American billionaires are using their wealth to attack our oil industry," says the minute-long Conservative ad. "The distortion of facts and hysterical fear-mongering has to stop."

The ad was apparently in response to U.S. billionaire Tom Steyer, who has been a vocal opponent of Keystone XL.

And so while the State report should give the Harper government critical credibility on a key file, the benefits may be diluted in a political swamp.

Liberal Leader Justin Trudeau, a supporter of the Keystone project, said the State report shows opposition to the pipeline "is not scientific, it's political."

"It is a failing of our prime minister to actually make a proper case for the Keystone XL pipeline by demonstrating that you cannot separate the economy and the environment."

New Democrats, who oppose Keystone, made much the same allegation.

"The Conservative government's bumbling approach to oil sands development has given Canada a black eye and hurt our relationship with our closest ally," said NDP energy critic Peter Julian.

Harper's approach

What is emerging is a consensus among pipeline supporters and detractors alike that the Harper government's take-no-prisoners approach to promoting energy extraction has built a cage of its own.

McLaughlin is among those who note that Canada hasn't provided Obama much of an incentive, let alone political cover, to act.

If the president has "punted," the Keystone decision — to use Harper's recent description — the prime minister has repeatedly punted regulations on oil and gas sector emissions his government first promised in 2007.

Conservatives have also torched some environmentalists as being akin to terrorists, reduced environmental assessments and loudly derided an NDP cap-and-trade proposal as a job-killing tax grab.

Against that stands a U.S. State Department report that, in McLaughlin's assessment, is "good news for the (Keystone XL) project."

"There's now a clear environmental impact assessment on emissions and climate that shows it's not as negative as many environmental groups have pointed out," he said.

"But until and unless we can turn the Obama administration to Canada's corner in terms of making a positive argument that will cause the president some (domestic) political difficulty ... we have to look back over the years and say, have we invested enough political capital in return?"

McLaughlin sees it as a rhetorical question, given the current impasse — a question the State Department report can't answer.

"In that sense, I don't think anything politically has changed from yesterday to today." 

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