CALGARY -- Although construction on the Trans Mountain pipeline expansion has not resumed in 2021, some political leaders and energy watchers say confidence in the project has not wavered.
Attention turned to Trans Mountain (TMX) after U.S. President Joe Biden revoked the permit for the Keystone XL (KXL) in an executive order shortly after taking office.
“What has happened with KXL makes the argument for TMX even more strong, even stronger. We have to diversify our customer base,” said Seamus O’Regan, federal Minister of Natural resources speaking with Alberta Primetime on Friday.
The projects have major similarities and major differences.
KXL would have carried Alberta crude oil from Alberta through the U.S., ultimately bound the refineries in the Gulf Coast — whereas TMX would twin an existing line to take crude from Alberta to a port destination in Burnaby, B.C.
POLITICAL GAMBLE
The two pipeline projects were backed by different levels of government, which means taxpayers are on the hook for both.
Alberta Premier Jason Kenney’s government invested $1.5 billion in KXL (and up to $6 billion in loan guarantees) while the Liberals under Prime Minister Justin Trudeau purchased the TMX project for $4.4 billion in 2018 (estimated cost now above $12.6 billion).
In a statement to CTV News, Trans Mountain says the project is still in the midst of a voluntary-safety stand down initiated in Dec. 2020 after a worker was seriously injured at the Burnaby marina and the death of a contractor in Edmonton last October.
Delay or not, one energy analyst says the completion of TMX has now become even more important to the Canadian economy.
“I have no doubt that we will have further delays on the line, on the estimated service date, but at the same time I am much more confident now than anytime before that the pipeline will eventually come into service,” said Rory Johnston, managing director and market economist for Price Street, and former commodity analyst.
The statement from Trans Mountain continued, “We are reviewing the impacts to our construction timeline and are working through strategies to mitigate delays.
We are committed to completing the project in a safe, timely and efficient manner.”
As of Dec. 31, 22 per cent of the project has been completed, employing approximately 7,300 people.
Johnston says his confidence in TMX is tied to its ownership structure.
“It’s much harder to get around the fact that Ottawa now owns the pipeline, it owns the income streams. Sink or swim, (the federal government is) going to be judged on that in a way that it wouldn’t for another political promise,” he said.
Meanwhile, a Calgary-based political watcher says while two different levels of government took a gamble with taxpayers dollars, KXL was much riskier for the province.
Duane Bratt says there is a potentially long legal fight ahead for TC Energy and the Alberta government to recoup its investment.
“Even if they win, there will be some compensation but the pipeline still won’t be built,” said the political science professor from Mount Royal University. “There’s no major hurdles in front of TMX and Keystone’s dead.”
PIPELINE PROSPECTS
One crude oil analyst says western Canadian oil producers will benefit from the increased market access once oil is flowing through TMX.
“Access to tidewater western Canadian producers is really about price security. Being able to load a vessel and that vessel will move to the highest price point globally subject to the transportation to get there,” said Kevin Birn, with IHS Markits.
A Vancouver-based political watcher also says TMX has become more crucial to Canadian energy with KXL’s prospects looking grim.
“It also makes TMX more financially secure. It turns out that the federal government’s financial involvement in TMX was the smarter move compared to Alberta’s financial involvement in KXL,” said Werner Antweiler, professor with the Sauder School of Business at the University of British Columbia.
He added, “Alberta’s provincial government gambled on a second Trump term and lost. It was a risky gamble, whereas the federal government in Ottawa could help steer TMX to success in the courts.”
“Could it really be that, in the end, Trudeau is doing more for Alberta’s oil patch than Kenney?”
Trans Mountain says 2021 is expected to be the year for peak production, and is working through strategies to mitigate delays.
The expected in-service date for the pipeline is December 2022.
