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.