Does Trans Mountain green light mean ‘go’ this time?

Revenue from expanded pipeline to fund clean-energy projects, including electrification

Barring any regulatory delays or court injunctions, construction on the Trans Mountain pipeline twinning project will begin later this summer or in early fall, with commissioning expected for the second or third quarter of 2022.

That is the hope of Ian Anderson, CEO of Trans Mountain Corp., which is now owned by Canadians.

article continues below

Work will also resume on a $150 million expansion of the Western Canada Marine Response Corp.’s fleet of vessels and marine stations. Work was halted on both expansion projects nearly a year ago, when the Federal Court of Appeal quashed the original approval of the pipeline twinning project.

After addressing concerns raised by the court, Prime Minister Justin Trudeau last week again approved the project.

Markets reacted with apparent indifference. Stocks of major Canadian oil companies either barely nudged upward or dipped slightly, suggesting that the markets had already anticipated a green light or were taking an “I’ll believe it when I see it” attitude.

In making the announcement, Trudeau committed to earmarking all federal tax revenue from the pipeline – about $500 million a year – for clean-energy projects.

Asked what initiatives might qualify, Fisheries and Oceans Minister Jonathan Wilkinson said it could include public projects like beefing up interprovincial transmission interties.

“It could be the electrification of the upstream [natural gas fields], which is something that premier [John] Horgan been talking a lot about, in order for B.C. to meet and exceed its climate goals,” Wilkinson said.

Before shovels are in the ground, Trans Mountain will need to get a National Energy Board (NEB) certificate to proceed. Provincial and municipal permits – some of which would have expired – will also need to be issued or reissued.

In addition, Trans Mountain might have to alter the route for the section of pipeline that passes through the Coldwater Indian Band’s reserve.

Work in B.C. will restart first at Burnaby’s Westridge Marine Terminal. New construction on the 1,150-kilometre pipeline, which is broken down into seven “spreads,” will break ground in B.C. in the North Thompson region north of Kamloops.

Up to 6,000 workers will be needed at peak construction, and the project will be competing for workers with the $40 billion LNG Canada project, which will need up to 10,000 workers at peak construction.

Anderson confirmed that the project will likely exceed the last capital expenditure estimate of $7.4 billion, but could not say if it will come closer to the $9.3 billion that the parliamentary budget officer estimated in January.

“Once there’s more certainty on that regulatory process, and we know when we can get back to work, we’ll be in a better position to provide an update on both the specific schedule and project costs,” Anderson said. “As you can appreciate, those two are connected.”

Any delays will add to the pipeline’s costs, which will now be borne by Canadian taxpayers.

Canada owns the existing Trans Mountain pipeline and is responsible for expanding it. It is estimated that delays could raise the project’s capital costs as much as $2 billion.

The government intends to sell the pipeline once the expansion is complete. Even if all goes smoothly on the regulatory front, the project will almost certainly face more legal challenges and protests.

More than 200 people have been arrested to date at various demonstrations of civil disobedience. Anderson said an injunction that the company was granted last year is still in effect.

Martin Olszynski, associate law professor at the University of Calgary, expects environmental groups and local First Nations will again challenge the governor-in-council order approving the expansion at the Federal Court of Appeal and argue that the second approval, like the first, is deficient.

But to halt construction, the court would need to issue an injunction.

“Without prejudging that, it’s a pretty hard test, as a general rule,” Olszynski told Business in Vancouver. “And I think, in this context, where we’ve already had one approval that was struck down, and we’ve had this additional consideration and consultation, I think that we would expect that to be a relatively high hurdle at this point.”

The B.C. government is appealing to the Supreme Court of Canada a BC Court of Appeal decision that ruled the province doesn’t have the constitutional authority to regulate what goes through a federally regulated pipeline.

“I think most of us expect that to go nowhere,” Olszynski said.

All in, the acquisition of the Trans Mountain pipeline and its expansion could cost up to $12 billion.

Some analysts have questioned whether any buyer will pay that much. Former Liberal environment minister David Anderson recently weighed in on the project’s economic viability, saying there is no market for Alberta oil in Asia.

Statistics Canada export data suggests otherwise. As Business in Vancouver recently reported, despite severe capacity constraints on the existing Trans Mountain pipeline, 7.5 million barrels of Alberta crude shipped to Asia via Westridge Marine Terminal in 2018, with a value of $539 million. Of that, 6.3 million barrels ($442 million worth) went to China.

Wilkinson suggested the industry, which would include the 13 shippers that signed up for long-term contracts, would not be investing in a project if they didn’t think there was money to be made. Anderson confirmed that all 13 shippers remain committed to the project, not to mention contractually bound.

“We have a Crown corporation which is run by former Kinder Morgan [TSX:KML] executives, who assess this on an ongoing basis,” Wilkinson said.

“This is their business. They understand their business. And on the basis of everything that we know, this project is an economically viable project.”

nbennett@biv.com

@nbennett_biv

Read Related Topics

© Vancouver Courier

Read more from the BIV

Popular Real Estate

Popular Vancouver Courier