Trans Mountain decision to come as pipeline crunch worsens, alternative projects languish in U.S. – By Jesse Snyder (National Post) / June 17 2019
Justin Trudeau announced that the federal government would buy the existing assets of the pipeline last summer for $4.4 billion, after the project’s owner threatened to scrap the project
OTTAWA — The Liberal government will announce whether it will push ahead with the Trans Mountain expansion project Tuesday, a decision that comes as rising oilsands production threatens to put ever more stress on Canada’s overcrowded pipeline system.
The decision, expected after cabinet ministers meet Tuesday morning, also comes as two other crucial conduits — the Line 3 and Keystone XL projects — languish in the U.S. legal and regulatory systems, leaving oil producers with few other options to get their barrels to market.
A decision to move ahead with the expansion on Trans Mountain would eventually provide at least some respite for Western oil producers, who have suffered low oil prices due to a shortage of takeaway capacity out of northern Alberta.
Still, analysts expect that increasing oilsands production next year could force a record number of barrels onto rail cars, prolonging financial pain in the oilpatch well before any new pipeline projects come online. Canada could be shipping as much as 500,000 barrels per day of oil by rail car next year, according to a recent estimate by IHS CERA in Calgary, or roughly one out of every nine barrels produced in the country. In 2016 that ratio was closer to one in every 43 barrels produced in Canada.
“The pressure on the system is just going to continue to build,” said Kevin Birn, analyst at IHS.
“We’re already over the line, and we’re just going to go further and further over.”
The pipeline shortage has in recent years fuelled deep resentments in such oil-rich provinces as Alberta and Saskatchewan, which claim that a failure by the Liberal government to re-approve the pipeline would do nothing less than cause a crisis of national unity in Canada. Some provincial governments and industry groups have also been calling on the senate to accept a long list of amendments to two controversial natural resource bills, C-69 and C-48, that they argue will stifle economic growth.
Prime Minister Justin Trudeau announced that the federal government would buy the existing assets of the Trans Mountain pipeline last summer for $4.4 billion, after the project’s private-sector owner threatened to scrap the project amid regulatory and legal delays. The move effectively nationalized the project, casting doubts on industry’s ability to build critical infrastructure projects.
Around the same time, a Federal Court of Appeal judge struck down an earlier approval of the Trans Mountain expansion, delaying construction and forcing the government to repeat a portion of its consultations with First Nations communities affected by the project. The development would nearly triple capacity from 300,000 barrels per day to around 870,000 barrels, costing roughly $12 billion.
In December 2018, a shortage of pipeline space caused Canadian heavy oil prices to drop to their lowest in years, averaging US$43 per barrel less than U.S. prices. Canada also exported 353,000 barrels per day of crude by rail cars during that same month, an industry record.
Plummeting prices prompted Alberta’s former NDP government to enforce a mandatory curb on oil production as a way to raise prices, angering some of the largest oilsands producers who had to shoulder the majority of the cut.
Industry groups called on Ottawa on Monday to promptly approve the expansion project and avoid further delays.
“If the project gets stalled until after the October election, we will miss the construction season, which will mean at least another year of delay,” the Canadian Association of Petroleum Producers said in a written statement Monday.
“If a decision is made to further delay the TMEP, it will signal that Canada is closed for business.”
It will signal that Canada is closed for business
An approval is particularly pressing for industry after a Minnesota court earlier this month rejected Calgary-based Enbridge’s Line 3 replacement pipeline, delaying the project until at least the end of 2020, according to some estimates.
The replacement project would ship oil from northern Alberta to Wisconsin, and double current capacity to 760,000 barrels per day.
Meanwhile, TC Energy’s Keystone XL pipeline will not begin construction this year, despite a favourable U.S. Court of Appeal ruling that allowed the company to move ahead with the project. The 830,000-barrel-per-day pipeline has met state-level resistance in Nevada.
Also on Monday, a coalition of business associations, including the Canadian Chamber of Commerce and the Canadian Manufacturers & Exporters, pressed Ottawa to accept a number of amendments to two controversial pieces of energy legislation.
Conservative senators earlier this month passed a number of amendments to Bill C-69, which would overhaul the environmental-assessment process for projects, and Bill C-48, a moratorium on oil tankers in northern B.C. The House of Commons rejected the majority of the proposed changes.
“We were all somewhat surprised when a lot of (amendments) were hived off,” said Dennis Darby, head of the manufacturers’ association, who urged senators to again put industry’s amendments back on the table.
Both bills are expected to be debated in the senate early this week after the House of Commons passed down its accepted amendments.
Pipes are seen at the Kinder Morgan Trans Mountain facility in Edmonton, Alta., Thursday, April 6, 2017.THE CANADIAN PRESS/Jonathan Hayward
