Peter Menzies: Pipeline Proposal a Positive Step, but Considerable Challenges Lie Ahead

Crude oil tankers are docked at the Trans Mountain Westridge Marine Terminal, where crude oil from the expanded Trans Mountain Pipeline is loaded onto tankers, in Burnaby, B.C., on June 10, 2024. The Canadian Press/Darryl Dyck

Commentary

The good news for Canada is that it is now more possible than at any time in the past 10 years that an oil pipeline may be constructed from Alberta to the West Coast.

The proposal put forward July 2 by Alberta Premier Danielle Smith and endorsed by Prime Minister Mark Carney in many ways represents a victory for the art of the possible. The 1,200-kilometre pipeline is to run from Bruderheim, Alta., to the Roberts Bank Terminal in Delta, B.C., and is intended to carry as much as a million barrels a day of crude oil to the coast for export to foreign markets.

It is to be built along the same corridor as the two existing Trans Mountain pipelines and creates opportunities for indigenous groups to profit. Unlike oil being exported to the United States, that which flows through this pipeline would be sold at world prices and not subject to the $15.15 heavy oil discount.

The cost of the project is significant, estimated at between $35 billion and $44 billion, and it would be undertaken by the Trans Mountain Corporation along with the Alberta Petroleum Marketing Commission. The Pembina Pipeline Corporation may take a minor 10 percent position.

If the proposal is approved by the federal government as a project of national interest by Oct. 1, which at this stage appears inevitable, it is possible construction could begin as soon as September 2027.

All of that most definitely fits the category of good news. Canada, which has the world’s fourth-largest oil reserves, has shifted away from a self-loathing, “tarsands” hating, eco-warrior identity adopted by Carney’s predecessor, Justin Trudeau, to something more closely representing a pragmatic nation under adult supervision.

The bad news is how incredibly complicated this process had to become for it to get to that point. At the risk of being trite, in a fully functional Canada, the process involving the construction of a pipeline should look something like this:

• oil companies identify foreign markets interested in buying their product;
• pipeline companies identify potential routes, apply for and receive regulatory approval;
• pipelines get built entirely by private investors.

That is how the process once worked in Canada and is how it works, more or less, in some other countries, such as the USA. In modern Canada, however, the process now looks much more like the following (and feel free to decide if this is a good thing or a bad thing).

A new prime minister takes over a government that, in its previous three terms, has created a regulatory and legislative minefield. It is comprised of a ban on oil tanker traffic along the Northwest Coast, an initially unconstitutional Bill C-69 also known as the no more pipelines act, and enhanced expectations for indigenous participation that, in combination, are so onerous private investment flees the country.

So scarce is investment that the government needs to form a new Crown corporation just to complete the long-delayed twinning of an existing pipeline.

For a variety of reasons ranging from his own ideological affiliation with the fight against climate change, to opposition within his own caucus, to fear of losing voters on the far left, the new prime minister chooses to leave all the impediments to private investment in pipelines in place.

The prime minister seeks the approval of a pipeline from an advocacy group of nine Coastal First Nations (there are 203 First Nations in British Columbia) and fails. He then seeks the approval of the premier of B.C.—which both the prime minister and the premier know is not required. Following a series of transactions and promises, including more than $3 billion to buy overbuilt condos from distressed developers, the premier agrees to a pipeline project he had no power to halt in the first place. That pipeline is built on a route that adds an additional one to three days for ships to deliver oil to Asia.

Finding no one in the private sector interested in investing in a pipeline under the current conditions, the Alberta government forms an alliance with a federal Crown corporation to build a pipeline at an exorbitant cost. For context, Kinder Morgan’s original estimate on the cost of the TMX pipeline doubling was $5.4 billion. That had grown to $7.5 billion by the time a frustrated Kinder Morgan sold the pipeline to the federal government and gave up on Canada. By the time the new Crown corporation had completed the project, the cost came in at $34.2 billion.

This history has of course led skeptics of the new pipeline proposal to suspect its true cost will wind up somewhere north of $60 billion. Others still anticipate the possibility of years of legal challenges. We shall see.

The bottom line in all this is that Canada is in a better place now than it was before this pipeline proposal was put together. But notwithstanding the announcement of plans for a new pipeline from Alberta to Sarnia, Ont., there is still no hope for a pipeline through to the East Coast. Further, the nation remains in a position where Canada is still viewed as an unsafe space for private investment.

Yes, it’s a start. But Canada has a very long way to go.

Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.