Why Canada likely won't need any more big new oil pipelines after Trans Mountain
With slowing oil production growth, developers would be hesitant to pitch projects
Construction of the Trans Mountain expansion project is set to wrap up later this year, and it's likely the last new oil export pipeline the country will ever need.
The pipeline has faced many obstacles over the years, including protests, court challenges and massive cost overruns. Last week, the cost of the federally owned project was updated to more than $30 billion.
Over the last decade, several other high-profile pipeline proposals have faltered, but the Trans Mountain expansion is more than 80 per cent built, and oil is expected to start moving in early 2024.
As oil production growth slows in Alberta, some in the industry suspect there won't be a need for any more new oil export pipelines.
"I think we'll be good," Alex Pourbaix, president and CEO of Cenovus Energy, said in an interview.
"I don't think we're going to see another large-scale liquid pipeline coming forward, certainly in the next decade."
Protests, political battles, court challenges
When the Trans Mountain expansion was first pitched more than a decade ago, the proposal seemed relatively straightforward, since the project would twin an existing pipeline largely along the same route. In addition, the pipeline wouldn't cross multiple borders, running from Alberta to British Columbia.
For the first few years after the project was announced in 2012, it received very little attention — especially as the spotlight was on other pipeline proposals, such as Northern Gateway, Energy East and Keystone XL.
Still, as those projects faltered and the Trans Mountain expansion neared construction, the scrutiny quickly followed.
There were protests from Indigenous communities and environmental advocates; political battles between Alberta and B.C.; regulator and court challenges; and many other obstacles that caused more delays, uncertainty and expenses.
The Trans Mountain project was bought by the federal government for $4.5 billion in 2018, after previous owner Kinder Morgan Canada Ltd. — which was acquired by Pembina Pipeline Corp. in December 2019 — threatened to scrap the pipeline's planned expansion project in the face of environmental opposition, legal challenges and political risk.
The cost of the project has escalated over the years because of several factors, including global inflation and supply chain challenges, severe floods in British Columbia, route changes, challenging terrain and security expenses.
Pipelines close to capacity
Despite all of the problems, experts say the economic case for the pipeline remains, since it will allow Canadian oil to reach the coast and fetch a better price than shipping it to the United States, where the majority of Canadian oil flows.
The industry also needs another export channel, since existing pipelines are running out of space.
"We're pretty close," said, Kevin Birn, a vice-president with S&P Global Commodity Insights in Calgary, who expects the Trans Mountain expansion to be full of oil when it's up and running.
"Overall, through the back end of this decade, we see the entire western Canadian system — even including some expansions and optimizations that haven't happened — running north of 90 per cent utilization. And that's well into the 2030s with the completion of TMX."
Birn said he also doubts that the country will see the construction of any more large oil pipelines — not only because there won't be enough oil production to justify the need, but because all of the problems with the Trans Mountain expansion would make a pipeline developer cautious and hesitant to build a big project in Canada.
Meanwhile, for the main opponents of Trans Mountain, there is some solace, considering how much has changed in Canada over the last decade in terms of natural resources development, environmental policy and Indigenous rights.
"They kind of lost the battle but won the war," said George Hoberg, a professor at the School of Public Policy and Global Affairs at the University of British Columbia in Vancouver.
He documented the pipeline and several other projects in his book The Resistance Dilemma: Place-Based Movements and the Climate Crisis.
The federal government was able to leverage its support for Trans Mountain to get Alberta to join the Pan-Canadian Framework on Clean Growth and Climate Change, Hoberg said, while Indigenous groups have gained more rights after Ottawa adopted the United Nations Declaration on the Rights of Indigenous Peoples.
Even without new oil export pipelines proposed again in the country, experts say there will still be conflict over the continued operation of existing oil infrastructure, as well as the development of new natural gas, carbon dioxide and hydrogen pipelines. The construction of new electricity transmission lines will cause similar controversy, Hoberg said.
"They are pipelines for electrons, and they have the same features as a pipeline in the sense that they are long, linear infrastructure," he said.
Ownership comes next
As construction of the Trans Mountain expansion nears the finish line, the focus will soon turn to the project's ownership. The federal Liberal government has said it would sell the pipeline but only after it's certain the project will be completed.
For a few years, some Indigenous-led groups have been preparing to make bids.
"TMX is very polarizing because of the protection of the environment," Stephen Buffalo, president and CEO of the Indian Resource Council, said, noting the risk of a spill.
If Indigenous groups have an ownership stake in the project, there is more accountability and involvement by local communities to ensure environmental protection, he said.
The existing Trans Mountain pipeline, which runs for 1,150 kilometres, carries 300,000 barrels of oil per day and is the only pipeline system transporting oil from Alberta to the West Coast.
The expansion will raise the daily output to 890,000 barrels.