The federal government’s approval on Tuesday of the multibillion-dollar Trans Mountain pipeline expansion project is being called a step in the right direction for Alberta’s economy.
The Canadian Association of Petroleum Producers said the approval paves the way for Canada to start competing on the world stage.
In a statement, CAPP said the approval “means Canadian oil will finally gain some access to growing overseas markets. This will enable Canada to receive full value for our natural resources while helping to reduce net global greenhouse gas (GHG) emissions.”
The expansion project “is critical infrastructure that will diversify markets for Canadian oil, create a stronger energy future and expand economic benefits for all Canadians,” said CAPP. “With vast experience and leadership in technology and innovation, as well as responsible development, Canadian oil producers are ideally suited and ready to play a significant role in providing more efficient energy and modelling best practices. Lowering … emissions and minimizing the environmental footprint through technology and innovation are in line with corporate goals of lowering costs, operating efficiently, and being sustainable partners within the communities in which we operate.”
CAPP said the pipeline expansion is a step in the right direction toward offering a longer-term solution to improve investors’ confidence in Canada.
It said it expects an average incremental $20 billion of annual investment in the sector if domestic competitiveness is enhanced, an extra $45.4 billion in economic activity by 2030, sustaining 120,000 direct and indirect jobs, and government revenues of approximately $7.5 billion per year.
“The International Energy Agency’s (IEA) World Energy Outlook 2018 report projects that in 2040 oil will comprise 27 per cent of total world energy demand, or 105 million barrels per day (b/d) – representing the largest share of any fuel source. The world needs more energy and a significant amount currently comes from sources that do not have Canada’s environmental and social standards. Canada can now seize this opportunity to be a leader in supplying responsibly produced energy to a growing global middle class, displacing fuels produced from other jurisdictions with lower or no standards.”
Rebekah Young, director of fiscal and provincial economics with Scotiabank, said the approval is good news for Canada’s oil patch “as it will alleviate chronic capacity constraints over the long run.”
“However, reliance on oil-by-rail will persist as new capacity would hit markets by 2022 at the earliest. Meanwhile, expect continued opposition to make for a bumpy ride.”
In a report, Young said this is an important decision in what has been a long regulatory saga, but it is certainly not the end.
“The expansion has been approved by the National Energy Board twice already, most recently in February after 2016’s decision was overturned by the Federal Court of Appeal for failing to sufficiently consult Indigenous peoples. In response to concerns, the federal government has pledged to use revenues from the pipeline for clean energy investments and to launch a new round of engagement with Indigenous groups on how to share benefits of the project, including potentially equity stake or revenue-sharing arrangements,” she said.
“The approval comes as no surprise – the federal government owns the pipeline after all. It purchased the pipeline last summer for $4.5 (billion) after U.S. Kinder Morgan backed away from the investment in light of costly regulatory uncertainty. The government has maintained it will bring the project to completion under a Crown corporation before looking to new investors to take over. Today’s decision is a positive development for Canada’s western oil sector, but it will have little impact on short term production. The expansion will go a long way in alleviating chronic capacity challenges that have plagued the Canadian oil sector as it is expected to boost TMX’s current capacity threefold to 890 kbpd.
“Construction is to begin this season, according to the government. However, with the earliest completion date only by 2022, Canadian crude will still rely on oil-by-rail to get its product to market in the meantime. It will force a fast reset on pipeline politics as federal election season kicks off. With both leading parties throwing explicit support behind pipelines, mud-slinging will require far more precision as differentiation comes down to the details.”
Following the federal government’s announcement, Assembly of First Nations (AFN) National Chief Perry Bellegarde said First Nations will ensure their rights, title and jurisdiction are respected and the federal government must respect these rights.
“First Nations are not mere stakeholders. We are the rights and title holders and our rights, title and jurisdiction must be respected,” said Bellegarde. “It’s clear First Nations have different positions on this project but they all stand firm that their rights be respected and their traditional territories be protected.
“Only First Nations can determine if those conditions are met. The government needs to engage fully with First Nations – to uphold rights and for the basis of good business. This entire situation is an important reminder why the UN Declaration on the Rights of Indigenous Peoples and free, prior and informed consent is the way forward. It’s the way we avoid conflict, lengthy and costly court cases. It’s how we create peaceful approaches and economic certainty for everyone.”
Mario Toneguzzi is a Troy Media business reporter based in Calgary.