July 4, 2023: After a decade of touting the Trans Mountain pipeline as the solution to their economic woes, Canadian oil producers expressed “growing disappointment with the highly-anticipated project” as they looked ahead to rising costs to ship their product, Bloomberg News reported, in an early July story that is continuing into the new year.
Five of the country’s biggest oil sands operators—BP, Canadian Natural Resources Inc. (CNRL), Cenovus Energy, PetroChina, and Suncor Energy—“have filed letters with the Canada Energy Regulator voicing concerns about how much of the project’s cost overruns they’ll have to pay for as well as how the pipeline plans to handle fees for late shipments,” Bloomberg writes. Taxpayer-owned Trans Mountain Corporation was expected to reply by the end of last week.
The long-running effort to triple the size of the existing Trans Mountain line “was supposed to provide a fast and relatively cheap way to sell Canadian crude into Asian markets through shipping terminals near Vancouver, breaking producers’ dependence on U.S. refiners,” Bloomberg recalls. “But environmental opposition and construction challenges have delayed the line and boosted its costs. The resulting higher tolls may make Trans Mountain a more expensive way to reach Asian buyers than shipping through the U.S. Gulf Coast.”
Yesterday, Reuters confirmed that TMX will probably route Canadian oil to the U.S., “as Asia gobbles up Russian oil that is cheaper due to sanctions from Western countries after Moscow’s invasion of Ukraine.” While “Asia’s heavy crude refining market is roughly nine times the size of California’s,” the news agency adds, “the geopolitical upheaval means Canada will struggle to reduce its reliance on its No. 1 oil customer,” the United States.
“A lot of our lunch has been eaten by the Russians and Middle Eastern countries like Iraq,” one Canadian oil trader told Reuters.
Bloomberg notes that the cost of completing the pipeline has increased more than five-fold since it was first proposed, becoming what Dogwood BC called a “catastrophic boondoggle” when the latest, C$30.9-billion price tag was announced in March. That’s alongside a litany of other problems along the line.
As those costs continue to skyrocket, the oil sands producers who’ve signed on to use the pipeline are only on the hook for 20 to 30% of the cost increase, Bloomberg notes. But “these so-called uncapped costs have climbed to C$9.09 billion from $1.77 billion in 2017.”
That had CNRL complaining to the Canada Energy Regulator that “the level of proposed increase in the tolls will negatively impact netbacks obtained by Canadian producers and may adversely and materially impact the overall competitiveness of Canada’s oil industry and the public interest.”
In other pipeline news, the Canadian Centre for Policy Alternatives is urging the federal government to support the United States against a US$15-billion lawsuit from Calgary-based pipeliner TC Energy over President Joe Biden’s decision, on his first day in office, to cancel the Keystone XL pipeline, The Canadian Press reports.
“Though the TC Energy dispute pits a Canadian company against the U.S. state, it does not follow that it is in Canada’s interest for TC Energy to prevail,” the CCPA report says. The other option is “for both governments to defend their ability to pursue climate-friendly public policy without being forced to ‘unjustly’ enrich impacted investors,” CP writes, citing the report.
“The Keystone XL case is a clear example of a company wanting to be compensated for making a risky bet,” wrote co-authors Stuart Trew and Kyla Tienhaara.” And clearly, “this bet didn’t play out.”
