Varcoe: Alberta gives Ottawa some credit, some knocks as TMX nears finish

‘It’s a little bittersweet. “I think a lot of people are thinking about what could have been, but at least this one hit the market,” Danielle Smith said.

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Premier Danielle Smith welcomes the imminent launch of the Trans Mountain pipeline expansion this spring.

While she’s grateful the federal government has stuck with the project through thick and thin, don’t expect the prime minister to pat Ottawa too much on the back for taking the Trans Mountain (TMX) expansion to completion. finish line.

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After all, three other pipelines proposed to take oil out of Western Canada were blocked, he notes.

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“I’m sure everyone is saying, ‘It’s about time,’ because we had a lot of other opportunities that just didn’t pan out,” Smith said in an interview Tuesday, before speaking at the annual CERAWeek by S&P Global energy conference. In Houston.

“It’s a little bittersweet. “I think a lot of people are thinking about what could have been, but at least this one hit the market.”

For years, oil producers and the provincial government have watched a game of whack-a-mole unfold on a pipeline. As new pipelines appeared from Western Canada, they were torn down and had to be readjusted.

At the same time, oil sands production increased.

Transportation bottlenecks have emerged at times over the past decade, costing producers and governments billions of dollars due to deeper discounts in Western Canadian oil prices.

Enbridge’s Northern Gateway project to move oil from Alberta to Kitimat, British Columbia, was derailed in 2016 by the Trudeau government.

TransCanada Corp.’s ambitious Energy East project to build a 4,500-kilometre pipeline to transport oil from Alberta and Saskatchewan to New Brunswick collapsed in 2017. The company pulled the plug after facing political and environmental opposition, although federal officials blamed business factors. .

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The Keystone XL project, designed to transport oil from Alberta to Nebraska, was dragged into an intense political debate in the United States. It was already under construction when US President Joe Biden rejected its permit in 2021.

“Due to uncertainty and political decisions, those three (other pipelines) ended up being cancelled. So (TMX) became the last one standing and probably wouldn’t have gone forward because of the uncertainty if the federal government hadn’t stepped in to end it,” Smith said.

“We are grateful they did it, but remember that Energy East was canceled due to uncertainty. . . Northern Gateway was approved and then the federal government canceled it,” he said.

“And Keystone XL, they never defended it when Biden canceled it, so I think they were obligated to intervene. . . “I’m glad it’s finally over, but it would have been better if the four of them had moved on.”

Danielle Smith
Prime Minister Danielle Smith. David Bloom/Postmedios

It is debatable whether all of the proposed pipelines would have been built, given the competitive and economic forces at play.

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But Trans Mountain is now at the finish line, the only project that will move more of Western Canada’s oil to the tides for export.

And it has been expensive.

In 2018, the federal government purchased the project from Kinder Morgan Canada for $4.4 billion as the expansion faced opposition from environmentalists and the British Columbia government.

Since then, construction costs have skyrocketed.

The price tag for the project, which a decade ago was set at $5.4 billion, is now expected to exceed last year’s estimate of $30.9 billion, probably about 10 percent higher, according to regulatory filings from the federal corporation. the Crown that operates it.

The line will nearly triple the existing capacity of the Trans Mountain pipeline, which runs from the Edmonton area to a terminal in Burnaby, British Columbia, to 890,000 barrels per day (bpd).

Trans Mountain Corp. Chief Financial Officer Mark Maki, who will speak at the energy conference on Wednesday, confirmed that the organization still expects to see the first oil shipments in the second quarter.

Maki said the last “significant construction activity” on the project is taking place in the Fraser Valley between Chilliwack and Hope. Once completed, the line can be filled with oil while preparing for commercial operations.

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“We have already done some line filling work. “It’s a very staged process where some of the system circuits will be filled with oil over the next little while, and then the rest of the line filling will take place (between) April and May,” Maki said Tuesday.

“Confidence is high in the second quarter (for) first oil.”

He expects the pipeline to be heavily used by 2025 and almost full. This is essential as Alberta’s oil production grows.

The provincial government expects oil production to average almost 3.9 million barrels per day, rising to more than 4.2 million bpd by 2027.

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The construction of TMX is a strategic move for Canada, allowing the industry to access markets outside the United States.

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It will also help Canadian oil producers meet growing global demand for energy, said Heather Exner-Pirot, special adviser to the Business Council of Canada.

“You have to appreciate that the liberals have paid a very high political cost for buying TMX,” he said.

“The circumstances were terrible and they had to buy it, and they helped create those circumstances. But also, thank God they bought TMX and we are finally seeing it cross the finish line.”

However, rising costs mean taxpayers will end up footing a hefty bill for Ottawa to sell Trans Mountain to the private sector, said Eugene Kung, a lawyer with West Coast Environmental Law.

“This project definitely has to be one of the biggest boondoggles in Canadian history,” Kung said.

While that debate continues, the project is anticipated to reduce the price differential between West Texas Intermediate crude oil and Western Canadian Select heavy oil, and generate more revenue for the province.

Having enough transportation “is absolutely critical to maximizing value,” said Kevin Birn, vice president of S&P Global Commodity Insights.

“What TMX offers Canadians is optionality and potentially price stability.”

Chris Varcoe is a columnist for the Calgary Herald.

[email protected]

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