While the House of Commons has been busy passing legislation on transportation and marine vessels, the federal government, it seems, is unable to get the much-anticipated Kinder Morgan project down the pipes. The Trans Mountain extension currently carries a maximum of 300,000 barrels of crude and refined oil each day from Alberta to British Columbia.
Finance Minister Bill Morneau followed through on an earlier commitment and reached an agreement with Kinder Morgan for the completion of the Trans Mountain pipeline.
The deal includes “short-term” ownership of the pipeline by the Government of Canada. Terms in a nutshell:
· Canada will guarantee financing through the 2018 summer construction season through a loan from Export Development Canada of approximately $1.5 billion
· Purchase of the project, existing pipeline and terminal assets for $4.5 billion, to close in August 2018
· The Alberta provincial government will provide an emergency fund to cover unforeseen circumstances, up to $2 billion
· The federal government will indemnify a future owner against financial loss from “politically motivated delays” and indemnify a future owner for costs and reasonable return if the project is abandoned in the future due to either a final adverse court decision against the expansion or the proponent being unable to complete the project by a predetermined date. If either of these two events occurs, Canada has the option to repurchase the project and assets.
Canada’s intention is to sell the Trans Mountain project to a new owner at a profit down the road – but not too far. “Many investors have already expressed interest in the project, including Indigenous groups, Canadian pension funds and others,” said Minister Morneau.
Why is Trans Mountain important? When the Liberal government came to power, there were four pipeline projects on the books, all experiencing significant degrees of difficulty, all designed to get Canada’s heavy bitumen from the Alberta Oil Sands out to the coasts or down to the U.S. for refining:
· Keystone XL was blocked by U.S. President Obama in 2015. When President Trump came to power he signed an executive order approving Keystone XL, but it continues to sit in the U.S. courts
· Energy East was a pipeline project to get oil out to the east coast by expanding an existing natural gas pipeline which covered 70 percent of the route and converting it to oil transport. Amid ongoing opposition, a lack of support from the Liberal government and opposition from the Quebec government, TransCanada cancelled the project in October 2017
· Enbridge’s $7.9 billion Northern Gateway pipeline project, first proposed in the early 2000s and approved by the previous Conservative government in 2014, would have taken bitumen from Alberta to a tanker terminal in Kitimat, British Columbia. The Trudeau government banned large tanker traffic on the B.C. coast in 2015, effectively killing the project, and then officially rejected it in 2016.
The effect of all these pipeline roadblocks leaves Alberta oil restricted to relatively low-volume, costlier rail transport. This depresses the cost of Canadian oil, because increased shipping costs are necessary in order to have an overall competitive price globally.
The greater impact is the lost opportunity cost, thousands of jobs and billions of dollars in lost economic investment from these projects that are not proceeding. Currently, lost revenue to Canada from the inability to move Alberta oil is pegged at approximately $16 billion a year.
Trans Mountain has the potential to nearly triple the amount of oil traveling between provinces, to 890,000 barrels a day and requiring 12 new pumping stations. The federal government has deemed this project a national interest. The line, running nearly parallel to the existing pipeline, will not only increase capacity but also inject $7.4 billion into the economy, creating jobs and opening Canada up to foreign markets through marine transportation, previously inaccessible to Canada.
The new agreement still doesn’t guarantee smooth sailing. The hurdles remain, mainly originating in British Columbia with the recently elected New Democratic Party (NDP) government. This minority government, being propped up by Green Party supporters, worked quickly to reverse the previous provincial government’s project approval. In late January 2018, the B.C. NDPs put in place restrictions on the quantity of diluted bitumen that can be imported into the province until studies on potential spillage are complete.
The discussion of bitumen continues as Natural Resources Canada scientists determine whether this oil product will sink or swim in Canada’s waters. However, good news for the pipeline project recently came through from Natural Resources. Heather Dettman, senior scientist at Natural Resources Canada, says that “the material will float on the surface for up to three to four weeks, even under wave conditions that would cause conventional crude to mix in with the water column.”
A determined Alberta also lent its support to the fight to keep the pipeline project alive by passing a bill to cut off B.C. gas supplies. Rachel Notley announced in May that the Alberta government had passed a bill to shut down the flow of gasoline if B.C. continued to block the project from going forward, something that would send gas prices sky high and continue the already-inflated costs for B.C. consumers at the pumps. AED has and continues to support the pipeline expansion. Brian P. McGuire, AED president and CEO, recently wrote to Prime Minister Justin Trudeau and Natural Resources Minister Jim Carr to express the organization’s support for the pipeline expansion.
“AED is unequivocal in its support of the Trans Mountain Pipeline. The project has significant economic benefits and is in Canada’s best interests,” McGuire wrote.
Trans Mountain is a vital infrastructure project that directly impacts Canadian members, in particular the members of Western Canada.
With the summer break months approaching, MPs will return to their ridings until September. AED members are encouraged to schedule a visit with their local MP for a tour of their main branch or location.
For assistance in reaching out, contact Stuart McCarthy, Canadian Public Affairs, at firstname.lastname@example.org or 613-241-3512 x225 or Mike Dexter, Director of Canadian Engagement, at email@example.com or 630-465-2888.