Indigenous groups pursue Trans Mountain ownership, but pathway forward remains uncertain
Deputy Prime Minister Chrystia Freeland says TMX would need third-party funding to complete the project through banks or public debt markets. She says Ottawa plans to sell the pipeline once it is complete.
From the storage yards and into the ditches, much of the pipe is now laid as the Trans Mountain expansion project nears the finish line.
However, some say it is the end of an era.
The limitations on pipeline capacity and the reality that new energy projects take longer than a year to get off the ground remain a continued concern.
Bill C-69, the Impact Assessment Act, has given Canadian and international investors a hard time getting shovels in the ground on their projects, even after securing regulatory approval.
Alberta and Saskatchewan will plead their case in the Supreme Court of Canada (SCC) on Wednesday and Thursday, arguing that the federal Environmental Impact Assessment Act (IAA) violates Section 92A of the Constitution Act and oversteps into provincial jurisdiction.
The IAA, known as Bill C-69, authorized federal government regulators to examine the effects of any significant infrastructure project, such as highways, mines, and pipelines, for environmental impact and social issues.
Four women protesting the Trans Mountain expansion project will spend time behind bars after being convicted of criminal contempt over an October 2020 incident in Kamloops, BC.— Rebel News Canada (@RebelNews_CA) March 2, 2023
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In May, the Alberta Court of Appeal (ACA) found the IAA and its regulations threatened the ability of provinces to develop their natural resources by a court ruling of 4-1.
"Policies matter, and when investors are indicating they would rather invest in American states instead of Canadian provinces, policymakers should take note," said Julio Mejia, a policy analyst at the Fraser Institute.
Cenovus Energy CEO Alex Pourbaix said he doesn't foresee another large-scale pipeline.
"The industry is always finding ways of doing things," he said.
While the Trans Mountain pipeline is necessary, industry experts said there is less need for more pipes beyond this project as oil production growth in western Canada is slowing.
According to findings from ATB Financial, Alberta set an annual record for oil production last year with an output of approximately 3.73 million barrels daily in crude oil.
According to Trans Mountain Corp (TMX), the cost of the taxpayer-owned Trans Mountain pipeline expansion jumped 44% from last year's estimate ($22.35 billion) to a whopping $30.9 billion.https://t.co/JkTiuJRUUk— Rebel News Canada (@RebelNews_CA) March 14, 2023
The data reveal that the province officially beat its previous oil production record set in 2021 and nearly doubled the amount of oil it produced in 2010.
Conventional oil production rose 12% yearly, while oil sand production rose 2% compared to the previous year. For December, oil output for the region rose 4.4% higher compared to the same time last year.
"While Alberta is not experiencing a boom, the positive prospects for our oil and gas sector are providing a significant boost that will continue into 2023," said ATB Financial Deputy Chief Economist Rob Roach.
Roach expects a 20% jump in oil and gas extraction capital spending next year and another 5% in 2024.
However, he expects investment to "hit [the] wall after next year" because "without more pipelines, you just can't keep expanding production."
Crude oil prices plunged below US$70 last week, and Canadian energy stocks took a beating as market chaos continued amid concerns about a spreading bank crisis.
Two women received a prison sentence in British Columbia of three weeks for their involvement in a Trans Mountain pipeline expansion (TMX) protest in Burnaby last year.— Rebel News Canada (@RebelNews_CA) February 2, 2023
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Roach said this is likely the last significant capital investment in the province's energy sector for the foreseeable future.
Pipeline politics have plagued the country for over a decade, with Trans Mountain often in the spotlight.
"TMX is very polarizing [owing to the] protection of the environment [because] pipeline integrity is always in question," said Indigenous Resource Centre President Stephen Buffalo.
According to an Angus Reid poll from 2018, the federal government's support for twinning the pipeline from northern Alberta to BC's south coast risked alienating voters opposed to building pipelines that delivered a majority mandate to the Liberal Party in 2015.
But Canadians are more likely to support the pipeline expansion project (49%) than to oppose it (33%). Almost one in five (18%) are unsure, suggesting that those who take British Columbia's side in the ongoing debate are less solid in their position than those who side with Alberta.
However, senior energy executives also criticized Canada's "unpredictable provincial governments" for discouraging significant capital investment into energy infrastructure.
Saskatchewan and Alberta are leading the charge in contesting Ottawa's "no more pipelines" bill in court this week. All other provinces and territories are also participating, excluding Prince Edward Island and Nova Scotia.— Rebel News (@RebelNewsOnline) March 21, 2023
MORE: https://t.co/mRJUwqYsx2 pic.twitter.com/brLJnF0Jtz
Lat week, the price tag for the project increased to $30.9 billion — quadruple the original cost. First proposed more than a decade ago, construction is expected to wrap up by year's end.
Ottawa paid $4.5 billion to take over the Trans Mountain pipeline expansion project from Kinder Morgan in 2018 in a bid to almost triple the amount of crude oil moving from Alberta to customers overseas. The 1,150 km pipeline carries 300,000 barrels of oil daily and is Canada's only pipeline system transporting oil from Alberta to the west coast.
However, the cost of the taxpayer-owned Trans Mountain pipeline expansion jumped 44% from last year's estimate ($22.35 billion) to a whopping $30.9 billion.
TMX accounted for high global inflation and supply chain issues, floods in British Columbia, unexpected significant archaeological discoveries and challenging terrain for the cost increases in recent years.
The corporation added the current cost estimate excludes reserves for "extraordinary risks" and could once again change.
"As with all projects of this size, risks to the final costs and schedule will remain as work is completed through 2023," said TMX in a statement.
According to a Fraser Institute survey of petroleum-sector executives, Wyoming and Texas are considered far more attractive for investment than any Canadian province, including Alberta and British Columbia.— Rebel News Québec (@RebelNews_QC) December 2, 2022
MORE: https://t.co/LQQu5aTqWu pic.twitter.com/TdAzvudrAI
The Crown corporation said it is trying to secure external financing to fund the remaining cost of the project, which they hope will start shipping oil in the first quarter of 2024.
The government has since engaged BMO Capital Markets and TD Securities to advise on the project's finances.
On Friday, the banks wrote the federal government to relay that TMX is "commercially viable" and is expected to generate earnings before interest, taxes, depreciation and amortization of more than $2.4 billion annually.
While BMO declined to comment, TD did not immediately respond to a request for comment from Reuters.
In February 2022, Ottawa said it could no longer subsidize TMX after it skyrocketed to $21.4 billion, up from $12.6 billion in 2020 and $7.4 billion in 2017.
Deputy Prime Minister Chrystia Freeland said TMX would need third-party funding to complete the project through banks or public debt markets. She reiterated the federal government plans to sell the pipeline once it is complete.
Haisla First Nation will own Canada's first Indigenous majority-owned natural gas export facility after BC green-lit the Cedar LNG project this week.— Rebel News Canada (@RebelNews_CA) March 18, 2023
BC's Environmental Assessment Office approved the $2.4 billion project, announced Premier.
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"As we committed to Canadians last year, no additional public money will be invested in this project as construction is completed," said Freeland.
"The federal government does not intend to be the long-term owner of the project, and we will launch a divestment process in due course."
The 590,000 barrel-per-day pipeline expansion will nearly triple the flow of barrels and open access to Asian markets. However, regulatory delays and hefty budget overruns have beset it on top of the environmental opposition.
For a few years, some indigenous groups have been preparing to make bids on the energy infrastructure project despite the project's ballooning price tag.
Several Indigenous-led initiatives like Nesika Services, a non-profit organization working to help Indigenous communities along the pipeline's route, are looking at the prospects of acquiring a stake in Trans Mountain.
"It means the entire pie for the project is smaller," said Nesika Services executive director Paul Poscente. "We've done some modelling based on the publicly available information, and it's absolutely still viable."
The $14 billion project constituted a terminal for LNG exports from Western Canada and a 780-kilometre pipeline connecting the port of Saguenay to northeastern Ontario.— Rebel News Canada (@RebelNews_CA) March 17, 2023
MORE: https://t.co/f9aggul5CW pic.twitter.com/b3rIZyV7EF
"We believe Canada can sell a portion of this pipeline to Indigenous communities commercially. We have been urging Canada to start a negotiation."
Project Reconciliation managing director Stephen Mason also said his group isn't going away.
The federal government has indicated it does not wish to be the long-term owner of the pipeline and is open to the idea of Indigenous ownership. However, they would only sell the pipeline after it is certain the project will be completed.
- By Alexandra Lavoie
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