Outlook for investment confidence not yet clear from the top of Trans Mountain

When Bill Morneau said the federal government would spend $4.5 billion to buy Kinder Morgan's Trans Mountain pipeline assets and proceed with the contentious expansion, the finance ministerwas also makinga statement about Canada as place to do business.

"It means greater investor confidence," Morneau told reporters Tuesday.

It'sapoint made several times in recent days, a clear sign of the message'simportance not only to Canadians, but globally as well.

• Buying a pipeline: inside the talks on Trans Mountain
• Trans Mountain deal proof federal government willing to step up for oil and gas, says finance minister

But by riding to Trans Mountain's rescue, did Ottawa prove it has the conviction to see major projects overthe finish line and bolster the investment climate? Or does such an extraordinary step merely highlight the problems that forced a very expensivesalvage mission?

It will be likely some time before we know for certain theimpact of the government's decision, butthe outcomeis criticaland not just for Canada's energy sector.

"This is an issue for all Canadians,"PerrinBeatty, president of the Canadian Chamber of Commerce, said in Calgary last week.

What's the message?

"Because if the message that we send to the world is not to invest in Canada, then what we're going to see is jobs lost across Canada, tax revenues across Canada lost and investment going somewhere else, including Canadianinvestors taking their money somewhere else."

• On Trans Mountain, Trudeau chose the least awful of his political options

The issue of investmentconfidence has been a sensitive one in the Canadian oilpatchrecently, heightened by the trouble the sector has had building pipelines and the uncertainty surrounding an overhaul of the environmental assessment process for new energy projects.

The federal taxpayer buyout of Kinder Morgan will not help Canada's reputation as a place to invest, unfortunately-Christopher Sands, Johns Hopkins University

That uncertainty comes at a time when the United States is going all out to attract new investment albeit controversially by slashing both taxes and regulations. Earlier this year, the Canadian Association of Petroleum Producers went to Ottawa to warn politicians that investment in the oilpatch was being lured south.

It was feared that if a federally sanctionedproject like theTrans Mountain expansion pipeline died due to opposition fromone province, British Columbia,that the impact on Canada's reputation as a place to do businesscould have been significant.

On Tuesday, however, the Liberal government saidit wouldbuyKinder Morgan's Trans Mountain pipeline and related infrastructure for $4.5 billion, and build the $7.4-billion expansion, which could triple the amount of product shipped from Alberta's oilsands to Burnaby, B.C., for export.

"The most important thing is that it stopped what would have been a disaster for investor confidence," said Beatty, summarizingthe drama the following day. "If it had gone the other direction, it would have had very serious consequences for the Canadian economy."

Ottawa thinks it can make it work

Many Albertans breathed a sigh relief as the pipeline's prospects vastly improved even if B.C.'s resolve to protect itsenvironment hasn't diminished.

Morneau said it is clear Ottawa has the authority to ensure the Trans Mountain expansion is completed, despite ongoing opposition from the B.C. government.

• 5 Things: the next steps for getting the Trans Mountain project done

"That's why we're working diligently to remove the investment risks, the politically motivated investment risks, so that this project can go ahead as planned," Morneausaid Tuesday.

Natural Resources Minister Jim Carr told guests of the Edmonton Chamber of Commerce on Thursday that his government's decision sends a positive signal about investing in Canada.

"Already we are seeing signs that the decision of the government of Canada this week is being well-received in the international investment community," Carr said.

"We are fully confident in the long term that Canada is very well positioned because of our stable political system, because of our diverse workforce, and because the quality of our product, which is really the envy of the world."

StephenKallir, a senior analyst with Wood Mackenzie, said that faced with one of two outcomes Kinder Morgan abandoning the Trans Mountain project or Ottawa stepping up to keep it going Canada got the better result for business confidence.

Some signs of renewed confidence

"There has been some rhetoric thrown around that 'Canada isclosed for business, you can't invest here,'" Kallir said.

"I think that'swhat I just said: It's rhetoric."

• Nationalizing Trans Mountain: What can we learn from past government bailouts?

For positive signs, Kallirpointed to Thursday's newsthatMalaysian state-owned energy company Petronas had signed an agreement for an equity position in the LNG Canada project in Kitimat, B.C.

"That wasn't a small deal," he said.

But others believeOttawa's commitment to Trans Mountain won't have done much to improve Canada's reputation, particularlygiven the extraordinary stepsthe government choseto take.

"The federal taxpayer buyout of Kinder Morgan will not help Canada's reputation as a place to invest, unfortunately," Christopher Sands, director of theCentrefor Canadian Studies at Johns Hopkins University in Washington, D.C,, in an email toCBCNews.

Sands, an expert on energy and Canada-U.S. relations, said itis such an expensive option that future investors won't be confident that they'll get a similar buyout if their project runs into a similar jam. He adds that the decision doesn't changeCanada's infrastructure review and permitting processes,

But others are skeptical

"It is like having a kid who hits a ball through theneighbour'splate glass window," Sands said.

"It is expensive, but you have to pay to replace it. But unless you straighten [out] the kid or take away the ball, theneighbourwill remain wary and the same thing could happen again. And the homeowners association will keep a ginger eye on you and the kid thereafter."

Canada is overhauling its environmental assessment process for major energy projects under BillC-69. The ambitious legislation aims to restore trust in the process, while taking intoaccount not only environmental impacts, but also health, social and economic outcomes, as well as effects on Indigenous peoples.

It also strives to streamline the approval process and alsoprovide more clear direction to companiesbefore they spend billions of dollars developing a project.

But some members of the energy sector fear that without significant changes to the proposed legislation,it might make it even more difficult to build big projects, such as energy pipelines.

So even with Ottawa putting its shoulder behind Trans Mountain, the uncertainty hasn't fadedfor some.

"In my view, as a shareholder in both Enbridge and TransCanada, I'd be very disappointed if those companies proposed a project in Canada today because they're just going to lose money it's not going to work, it's not going to get to the finish line," former TransCanada CEO Hal Kvislesaid in an interview.

• Natural Resources Minister Jim Carr defends decision to buy Trans Mountain pipeline

"The fact that the government has to step in and buy a project from a private sector company that could not have confidence does not give me confidence that other private sector companies are going to have confidence. Maybe if the government buys all these projects we can have confidence. You know, that's a crazy solution."

Still, Kvisle said he supports Morneau's Trans Mountain decision, adding it was the only answerat this point a sentiment shared by many with a stake in Alberta's oilpatch.

Diverse opinions

James Coleman, an expert on energy trade and regulation, said Ottawa's Trans Mountain purchase has received a range of reviews from the international investment community, some believing it will help Canada's reputation and others not.

"There have been very diverse reactions from the investment community and I think that's appropriate given how kind of ambiguous this signal is," said Coleman, an energy law professor at Southern Methodist University, who previously worked at the University of Calgary.

Coleman said he would lean towardsaying the whole controversy has been a net negative for the prospect of investing in interprovincial projects in Canada, but added that could yet improve.

"That could ultimately be softened, first, if you see B.C. back down a little bit and, second, and probably more importantly, if there are future projects, whether they're natural gas projects or power projects, that go ahead without a hitch," Coleman said.

But there's no guarantee of either, which probably means the discussion aboutinvestor confidence will likely continue for sometime yet.