Two new analyses in the last two weeks are raising questions about whether the realities of the COVID-19 pandemic and falling global oil demand have undercut the economic case for completing the Trans Mountain pipeline expansion.
Yesterday, the Canadian Centre for Policy Alternatives (CCPA) said it’s time for the federal government to rethink its involvement with the taxpayer-funded Trans Mountain line, arguing that various other projects will leave the country with as much pipeline capacity as it needs through 2040. And in an opinion piece for CBC two weeks ago, Simon Fraser University professor Thomas Gunton makes a similar case.
The CCPA report, produced by oil and gas geologist David Hughes, casts doubts on the federal government’s long-standing argument that Trans Mountain will help deliver Canadian oil to buyers in Asia. “The federal government says at least 500,000 barrels a day will be available for export to global markets once the expansion is complete,” CBC writes. But the report concludes that “Canadian producers could be worse off” in those transactions, since “Asian markets have been paying less for heavy/sour oil, which is comparable to Western Canadian crude. Depending on market conditions and higher transportation costs, the report notes, producers could lose C$4 to $6 per barrel.”
The case for Trans Mountain looks “even worse in the context of Canada’s commitment to net-zero emissions by 2050, as TMX will exacerbate Canada’s emissions reduction problem by incentivizing additional oil production growth,” CCPA adds. That’s at a time when the Ottawa is falling farther behind on its inadequate, Harper-era carbon reduction target for 2030, and has not yet explained how it plans to keep its 2050 promise.
“The existing (Trans Mountain) pipeline is not at all a waste,” Hughes told CBC. “But what we are talking about is tripling the capacity to make a lot of money in Asia. And you really have to look at the facts.”
Gunton, director of Simon Fraser’s Resource and Environmental Planning Program, agrees that “spending $12.6 billion of taxpayer funds to build a pipeline when private sector companies are adding more than enough capacity to meet Canada’s need without any taxpayer support is hard to justify.” The federal government justifies taxpayers’ involuntary investment in the project by pointing to signed shipping contracts as evidence of demand, he adds. “But these contracts were signed when the oil market was booming and, when they expire, it is unlikely that they will be renewed, leaving Trans Mountain and the taxpayer at risk. In the interim, oil will just be moved off existing pipelines to ship on Trans Mountain.”
Gunton calls on Ottawa to redirect its funding for Trans Mountain into action on climate change. “Those funds can also be used to help Alberta transition to cleaner growth sectors and build a more sustainable economy that studies show will generate more jobs than the fossil fuel sector,” he writes.
Meanwhile, with Trans Mountain Corporation’s annual meeting coming up, 350 Canada is looking for sign-ons from Canadians interested in asking questions by email. “We’re TMX shareholders,” 350 says. “Let’s have our say.”
The AGM takes place November 17, the Canada Development Investment Corporation is taking questions until November 3, and 350 gets you started with one of the many you might have a hankering to ask:
“As a shareholder, I have the following question for the Trans Mountain Crown corporation: how many trees could we plant across the country if we redirected the public funds we’re currently using to build the Trans Mountain pipeline?”