Alberta
Game changer: Trans Mountain pipeline expansion complete and starting to flow Canada’s oil to the world
Workers complete the “golden weld” of the Trans Mountain pipeline expansion on April 11, 2024 in the Fraser Valley between Hope and Chilliwack, B.C. The project saw mechanical completion on April 30, 2024. Photo courtesy Trans Mountain Corporation
From the Canadian Energy Centre
By Will Gibson
‘We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil’
It is a game changer for Canada that will have ripple effects around the world.
The Trans Mountain pipeline expansion is now complete. And for the first time, global customers can access large volumes of Canadian oil, with the benefits flowing to Canada’s economy and Indigenous communities.
“We’re going to be moving into a market where buyers are going to be competing to buy Canadian oil,” BMO Capital Markets director Randy Ollenberger said recently, adding this is expected to result in a better price for Canadian oil relative to other global benchmarks.
The long-awaited expansion nearly triples capacity on the Trans Mountain system from Edmonton to the West Coast to approximately 890,000 barrels per day. Customers for the first shipments include refiners in China, California and India, according to media reports.
Shippers include all six members of the Pathways Alliance, a group of companies representing 95 per cent of oil sands production that together plan to reduce emissions from operations by 22 megatonnes by 2030 on the way to net zero by 2050.
The first tanker shipment from Trans Mountain’s expanded Westridge Marine Terminal is expected later in May.
Photo courtesy Trans Mountain Corporation
The new capacity on the Trans Mountain system comes as demand for Canadian oil from markets outside the United States is on the rise.
According to the Canada Energy Regulator, exports to destinations beyond the U.S. have averaged a record 267,000 barrels per day so far this year, up from about 130,000 barrels per day in 2020 and 33,000 barrels per day in 2017.
“Oil demand globally continues to go up,” said Phil Skolnick, New York-based oil market analyst with Eight Capital.
“Both India and China are looking to add millions of barrels a day of refining capacity through 2030.”
In India, refining demand will increase mainly for so-called medium and heavy oil like what is produced in Canada, he said.
“That’s where TMX is the opportunity for Canada, because that’s the route to get to India.”
Led by India and China, oil demand in the Asia-Pacific region is projected to increase from 36 million barrels per day in 2022 to 52 million barrels per day in 2050, according to the U.S. Energy Information Administration.
More oil coming from Canada will shake up markets for similar world oil streams including from Russia, Ecuador, and Iraq, according to analysts with Rystad Energy and Argus Media.
Expanded exports are expected to improve pricing for Canadian heavy oil, which “have been depressed for many years” in part due to pipeline shortages, according to TD Economics.
Photo courtesy Trans Mountain Corporation
In recent years, the price for oil benchmark Western Canadian Select (WCS) has hovered between $18-$20 lower than West Texas Intermediate (WTI) “to reflect these hurdles,” analyst Marc Ercolao wrote in March.
“That spread should narrow as a result of the Trans Mountain completion,” he wrote.
“Looking forward, WCS prices could conservatively close the spread by $3–4/barrel later this year, which will incentivize production and support industry profitability.”
Canada’s Parliamentary Budget Office has said that an increase of US$5 per barrel for Canadian heavy oil would add $6 billion to Canada’s economy over the course of one year.
The Trans Mountain Expansion will leave a lasting economic legacy, according to an impact assessment conducted by Ernst & Young in March 2023.
In addition to $4.9 billion in contracts with Indigenous businesses during construction, the project leaves behind more than $650 million in benefit agreements and $1.2 billion in skills training with Indigenous communities.
Ernst & Young found that between 2024 and 2043, the expanded Trans Mountain system will pay $3.7 billion in wages, generate $9.2 billion in GDP, and pay $2.8 billion in government taxes.
Better, faster, more affordable auto insurance
Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.
After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.
Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.
“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”
“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”
Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.
Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.
Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.
In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.
Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.
By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.
“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”
Quick facts
- Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
- A 2023 report by MNP shows
Alberta maintains a balanced budget while ensuring pressures from population growth are being addressed.
Alberta faces rising risks, including ongoing resource volatility, geopolitical instability and rising pressures at home. With more than 450,000 people moving to Alberta in the last three years, the province has allocated hundreds of millions of dollars to address these pressures and ensure Albertans continue to be supported. Alberta’s government is determined to make every dollar go further with targeted and responsible spending on the priorities of Albertans.
The province is forecasting a $4.6 billion surplus at the end of 2024-25, up from the $2.9 billion first quarter forecast and $355 million from budget, due mainly to higher revenue from personal income taxes and non-renewable resources.
Given the current significant uncertainty in global geopolitics and energy markets, Alberta’s government must continue to make prudent choices to meet its responsibilities, including ongoing bargaining for thousands of public sector workers, fast-tracking school construction, cutting personal income taxes and ensuring Alberta’s surging population has access to high-quality health care, education and other public services.
“These are challenging times, but I believe Alberta is up to the challenge. By being intentional with every dollar, we can boost our prosperity and quality of life now and in the future.”
Midway through 2024-25, the province has stepped up to boost support to Albertans this fiscal year through key investments, including:
- $716 million to Health for physician compensation incentives and to help Alberta Health Services provide services to a growing and aging population.
- $125 million to address enrollment growth pressures in Alberta schools.
- $847 million for disaster and emergency assistance, including:
- $647 million to fight the Jasper wildfires
- $163 million for the Wildfire Disaster Recovery Program
- $5 million to support the municipality of Jasper (half to help with tourism recovery)
- $12 million to match donations to the Canadian Red Cross
- $20 million for emergency evacuation payments to evacuees in communities impacted by wildfires
- $240 million more for Seniors, Community and Social Services to support social support programs.
Looking forward, the province has adjusted its forecast for the price of oil to US$74 per barrel of West Texas Intermediate. It expects to earn more for its crude oil, with a narrowing of the light-heavy differential around US$14 per barrel, higher demand for heavier crude grades and a growing export capacity through the Trans Mountain pipeline. Despite these changes, Alberta still risks running a deficit in the coming fiscal year should oil prices continue to drop below $70 per barrel.
After a 4.4 per cent surge in the 2024 census year, Alberta’s population growth is expected to slow to 2.5 per cent in 2025, lower than the first quarter forecast of 3.2 per cent growth because of reduced immigration and non-permanent residents targets by the federal government.
Revenue
Revenue for 2024-25 is forecast at $77.9 billion, an increase of $4.4 billion from Budget 2024, including:
- $16.6 billion forecast from personal income taxes, up from $15.6 billion at budget.
- $20.3 billion forecast from non-renewable resource revenue, up from $17.3 billion at budget.
Expense
Expense for 2024-25 is forecast at $73.3 billion, an increase of $143 million from Budget 2024.
Surplus cash
After calculations and adjustments, $2.9 billion in surplus cash is forecast.
- $1.4 billion or half will pay debt coming due.
- The other half, or $1.4 billion, will be put into the Alberta Fund, which can be spent on further debt repayment, deposited into the Alberta Heritage Savings Trust Fund and/or spent on one-time initiatives.
Contingency
Of the $2 billion contingency included in Budget 2024, a preliminary allocation of $1.7 billion is forecast.
Alberta Heritage Savings Trust Fund
The Alberta Heritage Savings Trust Fund grew in the second quarter to a market value of $24.3 billion as of Sept. 30, 2024, up from $23.4 billion at the end of the first quarter.
- The fund earned a 3.7 per cent return from July to September with a net investment income of $616 million, up from the 2.1 per cent return during the first quarter.
Debt
Taxpayer-supported debt is forecast at $84 billion as of March 31, 2025, $3.8 billion less than estimated in the budget because the higher surplus has lowered borrowing requirements.
- Debt servicing costs are forecast at $3.2 billion, down $216 million from budget.
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