In 2018, when Prime Minister Justin Trudeau made what was then his government’s largest-ever intervention in the economy by buying the Trans Mountain pipeline and expansion, it was a much different time.
The project cost was expected to be less than $10-billion and the government hoped for a near-term flip to a private buyer. Critics cast doubts about whether future demand for the oil would exist, and both opponents and supporters expressed the view – for much different reasons – that the pipeline would never actually be built.
Now, six years later, the reluctant pipeline owners haven’t gotten the resolution they had wanted. There’s been no sale, and the delays and costs have mounted to $34-billion. We won’t know for years or even decades whether the nationalized project will be fruitful, or a relic of a fossil-fuel age.
But we get a finale in one regard: The people who believed the project would never be built have been proven wrong. The expansion is days away from official operations, and already there’s demand for the oil it will transport.
Frankly, a bit of celebration would be in order: Canada got a big, complicated project done.
There are still major concerns from many people along the route about spills, and Canada’s oil sands producers have yet to prove they can bring their hefty emissions down. But it’s worth remembering the logic of all of this: Crude oil and crude bitumen made up 16.2 per cent of Canada’s total exports in 2023, the largest export in value terms by far, according to Statistics Canada. If you’re going to have a major oil industry, sufficient pipeline capacity to markets is a must.
The project nearly triples the flow of crude from Alberta to the coast, to a needle-moving 890,000 barrels a day. The expansion gives us one big oil pipeline connected to one of Canada’s own oceans. This means the country is not totally beholden to shipping to the United States, and has a chance to export to more lucrative Asia (much of the oil could still end up in new California markets where Alberta oil will likely displace a similar grade of crude called Basrah Heavy, produced in Iraq).
Why did the government have to buy the project in 2018? Because the expansion – the last project standing after the demise of Northern Gateway and Energy East – wouldn’t have gone ahead otherwise. British Columbia was fighting it, and Indigenous and environmental groups, and with that legal and financial uncertainty, the owner Kinder Morgan threatened to walk away.
Following this ultimatum, the Prime Minister interrupted a 10-day foreign trip to bring together the warring NDP premiers of B.C. and Alberta. He and Alberta’s Rachel Notley – who had already gone as far as cutting off wine imports from B.C. – were aligned and steadfast. “The Trans Mountain expansion is a vital strategic interest to Canada. It will be built,” Mr. Trudeau said after the meeting.
Not building it would have hurt Canada’s reputation as a place to invest. It would have also set a dangerous precedent, as former B.C. premier Ujjal Dosanjh described, of landlocked provinces being “at the whim and mercy of coastal provinces.”
The pipeline expansion was also part of the deal in having emissions-heavy Alberta participate in what was then, and is now even more so, a fragile national consensus on climate policies, which includes carbon pricing.
In her budget speech earlier this month, Finance Minister Chrystia Freeland praised her government for getting the project built, and noted the Bank of Canada estimated this project will add one-quarter of a percentage point to the country’s GDP in the second quarter.
The fact Ms. Freeland would mention the completion on budget day speaks to the shift in the priorities of voters. Six years ago, there was concern the Liberals could lose votes on environmental questions. If the Liberals lose an election now, it’s likely to be on housing costs and the state of the economy.
Whether you hate or love the project, that’s already baked in. The writedown the government is likely to take once it sells the pipeline (perhaps the potential buyers want to see it functioning for a while) is lost in larger concerns about federal debt and spending. Trans Mountain is no longer Canada’s biggest bet on industry: The federal Liberals have committed $44-billion, and counting, to bolster EV manufacturing.
If Albertans don’t appear grateful enough on Ottawa’s Trans Mountain purchase, it’s because they see reluctance on so many other fronts. Despite the wealth it creates, oil production doesn’t fit in with a governing party that wants the country’s brand to be EVs.
Still, Premier Danielle Smith was right last month to say thank you to Ottawa for the project. It really was time.