Alberta's multi-billion $ public investment in KXL takes another step toward a write-off. It leaves me wondering: what role did an erroneous understanding of "indemnification of political risk" play in getting us here? #ableg

There is a logic to public investment to indemnify a project against political risk in some situations: where the government making the investment has some control or influence over that risk.
It serves the same function as a change in law provision in a contract with government: the government accepts the losses of the prospective policy change that creates the risk. The losses are allocated to the party who can best avoid them.
The federal government's TMX investment is one example. The major impediments apparent were largely under Ottawa's control: adequate environmental assessment and adequate FN consultation.
By making the investment, Ottawa either carries out the necessary actions to allow TMX to proceed, or suffers the losses of failing to do so.
But this concept is wholly inapplicable to the Alberta government's investment in KXL: Alberta wields little-to-no control or influence over the U.S. executive discretion to grant or rescind its permit.
(Despite the Alberta government's expensive lobbying plan to gain influence https://t.co/5UI0o06I2b)
So, did a misunderstanding of the valid concept of indemnifying political risk lead #ableg to an enormous waste of public resources?
Richard Masson from @UCalgary's @policy_school suggested that this was the Premier's rationale. https://t.co/dBQtfURQV1
Of course, a government is welcome to indemnify against political risk that it has no control over, and no special inside knowledge about the outcome. But this is not a smart investment.
For the Premier's part, he seems to believe that he could actually influence the U.S. executive's decision, thus justifying the assumption of that political risk. https://t.co/KvfgLfPCUz
But that seems like a remarkably naive position to be taken by a shrewd political mastermind like the Premier.
He also referenced a "political risk" that has no connection to KXL at all: the risk that Ottawa would pull the plug on its own project. https://t.co/l67Tay8ysq
This feels more like the actual animus for someone who viscerally despises the Prime Minister. Unfortunately, political rivalry with Ottawa does not make a huge bet on Washington's decision any smarter.

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