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Energy

Transmountain Pipeline Expansion Project a success?

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5 minute read

From the Frontier Centre for Public Policy

By Chris Bloomer

 

The Transmountain Mountain Pipeline expansion project (TMEP) was completed on May 01, 2024. Its startup the following month ended an eleven-year saga of tectonic federal energy policy initiatives, climate change requirements, federal regulatory restructuring, and indigenous reconciliation. That it was finished at all is a triumph, but there was muted celebration.

The original proponent for TMEP was Kinder Morgan (KM), who filed its application with the federal energy regulator in 2013. The expansion would be constructed in the existing right of way of the existing pipeline and increase capacity from 300,000 barrels of oil and refined products to 890,000 barrels of oil per day. This included expansion of the existing dock and loading facilities. Protests began virtually the next day. The cost estimate at that time was $7.4 billion for the 1,150 km pipeline and related facilities. The federal regulator and the federal government approved the project in 2016.

Between 2016 and 2018, the intensity of the protests against TMEP and a new government formed in British Columbia that vowed it would use any means possible to make sure TMX would not be built created significant hurdles. KM warned that the protest’s impact and B.C.’s regulatory and legal challenges were creating significant uncertainty, and the project would be delayed at least a year, stopping all non-essential spending. Ultimately KM decided it would not continue with the project because of the increased execution risk and cost to complete the project that the legal and regulatory challenges, and increasing protests, posed.

The project’s shelving by KM led to the federal government acquiring all the Kinder Morgan assets, including TM for $4.7 billion in 2018. Construction then began in 2019.  The execution risks remained the same with the legal and regulatory challenges. They were compounded by a legal challenge to the substance of the federal government’s consultation with indigenous people, which was their constitutional duty. The courts agreed that the federal government had not met its constitutional duty to consult and ordered that it be redone. This led to further delays and in 2020 the cost estimate increased to $12.6 billion, then increased again to $21.4 billion in 2022. Ultimately, the federal regulator imposed 157 conditions on TMEP that it had to meet before it could operate.

COVID, extensive flooding and regulatory delays led to a further cost increase up to $30.9 billion in 2023. The final updated cost increased to $34 billion in 2024 due to labour costs, inflation, and materials delays.

The foregoing “Coles notes” version of events sets out the challenges endured by TMX as of Thursday, May 23, 2024. It also highlights that delays in a major project like TMEP have a massive impact on costs. But what gets lost in all this is that in 2013 KM, a public company, made a commercial decision to proceed with the project. There was and still is a huge market pull for the pipeline and the incremental oil volumes. There is huge economic and strategic value for Canada that will benefit all sectors of the economy and indigenous communities, who will most likely end with significant pipeline ownership.

Market access for Canada’s oil production in the Pacific markets will change the oil trading dynamics and value for Canadian production. Canada has the third largest oil reserves in the world. Canada is among the best in its class for environmental, safety, social and governance of its energy production. Canada is also among the best in pipeline construction and safety. So, who best to execute a monumental project like TMX?

We need to reflect and admire the skill, diligence, and perseverance of everyone involved with bringing to fruition TMX as a world class, state of the art major piece of energy infrastructure.

Yes, TMX is a success but the process through which it had to persevere was a failure and we should reflect and learn from it. In the end, despite the final cost, Canada will reap the economic benefits from TMX for decades because the world needs oil and Canada has lots of it.

Chris Bloomer is a board member of FCPP and the former president and CEO of the Canadian Energy Pipeline Association. He has held senior executive positions in the energy industry in Canada and internationally.

2025 Federal Election

MORE OF THE SAME: Mark Carney Admits He Will Not Repeal the Liberal’s Bill C-69 – The ‘No Pipelines’ Bill

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From EnergyNow.Ca

Mark Carney on Tuesday explicitly stated the Liberals will not repeal their controversial Bill C-69, legislation that prevents new pipelines being built.

Carney has been campaigning on boosting the economy and the “need to act forcefully” against President Donald Trump and his tariffs by harvesting Canada’s wealth of natural resources — until it all fell flat around him when he admitted he actually had no intention to build pipelines at all.

When a reporter asked Carney how he plans to maintain Bill C-69 while simultaneously building infrastructure in Canada, Carney replied, “we do not plan to repeal Bill C-69.”

“What we have said, formally at a First Ministers meeting, is that we will move for projects of national interest, to remove duplication in terms of environmental assessments and other approvals, and we will follow the principle of ‘one project, one approval,’ to move forward from that.”

“What’s essential is to work at this time of crisis, to come together as a nation, all levels of government, to focus on those projects that are going to make material differences to our country, to Canadian workers, to our future.”

“The federal government is looking to lead with that, by saying we will accept provincial environmental assessments, for example clean energy projects or conventional energy projects, there’s many others that could be there.”

“We will always ensure these projects move forward in partnership with First Nations.”

Tory leader Pierre Poilievre was quick to respond to Carney’s admission that he has no intention to build new pipelines. “This Liberal law blocked BILLIONS of dollars of investment in oil & gas projects, pipelines, LNG plants, mines, and so much more — all of which would create powerful paychecks for our people,” wrote Poilievre on X.

“A fourth Liberal term will block even more and keep us reliant on the US,” he wrote, urging people to vote Conservative.

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Alberta

Energy sector will fuel Alberta economy and Canada’s exports for many years to come

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From the Fraser Institute

By Jock Finlayson

By any measure, Alberta is an energy powerhouse—within Canada, but also on a global scale. In 2023, it produced 85 per cent of Canada’s oil and three-fifths of the country’s natural gas. Most of Canada’s oil reserves are in Alberta, along with a majority of natural gas reserves. Alberta is the beating heart of the Canadian energy economy. And energy, in turn, accounts for one-quarter of Canada’s international exports.

Consider some key facts about the province’s energy landscape, as noted in the Alberta Energy Regulator’s (AER) 2023 annual report. Oil and natural gas production continued to rise (on a volume basis) in 2023, on the heels of steady increases over the preceding half decade. However, the dollar value of Alberta’s oil and gas production fell in 2023, as the surging prices recorded in 2022 following Russia’s invasion of Ukraine retreated. Capital spending in the province’s energy sector reached $30 billion in 2023, making it the leading driver of private-sector investment. And completion of the Trans Mountain pipeline expansion project has opened new offshore export avenues for Canada’s oil industry and should boost Alberta’s energy production and exports going forward.

In a world striving to address climate change, Alberta’s hydrocarbon-heavy energy sector faces challenges. At some point, the world may start to consume less oil and, later, less natural gas (in absolute terms). But such “peak” consumption hasn’t arrived yet, nor does it appear imminent. While the demand for certain refined petroleum products is trending down in some advanced economies, particularly in Europe, we should take a broader global perspective when assessing energy demand and supply trends.

Looking at the worldwide picture, Goldman Sachs’ 2024 global energy forecast predicts that “oil usage will increase through 2034” thanks to strong demand in emerging markets and growing production of petrochemicals that depend on oil as the principal feedstock. Global demand for natural gas (including LNG) will also continue to increase, particularly since natural gas is the least carbon-intensive fossil fuel and more of it is being traded in the form of liquefied natural gas (LNG).

Against this backdrop, there are reasons to be optimistic about the prospects for Alberta’s energy sector, particularly if the federal government dials back some of the economically destructive energy and climate policies adopted by the last government. According to the AER’s “base case” forecast, overall energy output will expand over the next 10 years. Oilsands output is projected to grow modestly; natural gas production will also rise, in part due to greater demand for Alberta’s upstream gas from LNG operators in British Columbia.

The AER’s forecast also points to a positive trajectory for capital spending across the province’s energy sector. The agency sees annual investment rising from almost $30 billion to $40 billion by 2033. Most of this takes place in the oil and gas industry, but “emerging” energy resources and projects aimed at climate mitigation are expected to represent a bigger slice of energy-related capital spending going forward.

Like many other oil and gas producing jurisdictions, Alberta must navigate the bumpy journey to a lower-carbon future. But the world is set to remain dependent on fossil fuels for decades to come. This suggests the energy sector will continue to underpin not only the Alberta economy but also Canada’s export portfolio for the foreseeable future.

Jock Finlayson

Senior Fellow, Fraser Institute
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