Some Canadian oil industry and development leaders are suggesting Ottawa should reconsider the plan to sell the Trans Mountain pipeline to the private sector amid a spike in oil prices with no end in sight.
This comes at a time when global oil markets are rattled as a result of the Iran war and, more specifically, the closure of the vital Strait of Hormuz, with the International Energy Agency warning on Wednesday that the conflict is “depleting global oil inventories at a record pace.”
Mark Maki, the president and CEO of Trans Mountain, spoke on Monday at a Canadian Club event and said it’s a “sovereign pipeline” that operates almost entirely within Canada and that it’s an “incredibly strategic asset” to the country.
With demand spiking for Canadian oil to help offset losses from the Middle East, experts say there is a case to be made both for selling the pipeline sooner and for keeping it.
The Trans Mountain pipeline is Canada’s only pipeline currently in operation that transports crude oil and other petroleum products from Alberta to Canada’s West Coast.
More pipeline proposals are being considered, with Prime Minister Mark Carney and Alberta Premier Danielle Smith expected to make a related announcement on Friday.
The leaders of Trans Mountain Corporation and the federal agency that oversees the Crown corporation say it’s possible Ottawa will own the current Alberta-to-B.C. pipeline indefinitely.
On Monday, Maki was joined on stage by Elizabeth Wademan, who heads up the Canada Development Investment Corp.
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Trans Mountain is a subsidiary of the investment corporation and Wademan describes her agency as a “friendly yet challenging shareholder” in the pipeline firm.
Wademan said there’s a case for the federal government to be a long-term holder in the Trans Mountain pipeline and she “personally would love to see it owned by Canadians.”
The pipeline expansion was first proposed in 2012 by Kinder Morgan Canada, which encountered so much environmental and Indigenous opposition that it ultimately threatened to scuttle the project.
The federal government purchased the pipeline for $4.5 billion in 2018 in an effort to get the project over the finish line. Once construction did start, the project ran into numerous delays and budget overruns, with its price tag spiralling over the course of four years to an eye-popping $34 billion.
Ottawa has said it does not plan to be the permanent owner of the pipeline, but would instead sell the asset to the private sector in time while maintaining regulatory oversight.
The Iran war has caused the price of crude oil, which is set globally, to rise to about US$100 as of publication — up from roughly $60 at the start of the year.
When oil and gas prices go up, so too does revenue for oil companies and governments, which may collect taxes and other fees on the sale of those products, though some of those gas taxes have been paused for now to help provide some relief for consumers at the gas pump.
This is why there may be a push to sell the pipeline sooner while the value of oil is spiking.
“The intention all along was to sell it off to a private company, Indigenous groups or a combination of the two. I don’t think that when the price temporarily goes high that you then go back on your word and say, ‘Well, maybe we’re going to rethink this,'” says Moshe Lander, an Alberta-based economics professor at Concordia University.
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Masson says finding a buyer may be a challenge.
“Financing it is where international investors come in. They’re typically very passive…. Their mandate, like any other management team, is trying to maximize cash flow for the shareholder, and that can all work, but I don’t think there’s likely any pipeline company who wants to step up and say, ‘I want to take on this big pipeline right now.'”
Trans Mountain is also actively seeking to expand its capacity of nearly 900,000 barrels of crude oil per day by about 25 per cent, including by introducing methods to deliver oil faster through the pipeline over the next few years.
Part of this plan also includes dredging the Port of Vancouver’s Westridge Marine Terminal to allow tanker ships to fill up with more oil at the mouth of the pipeline and take it to international markets like Asia.
Masson says he’d like to see Trans Mountain prioritize maximizing its capacity over the next few years before Ottawa looks to sell it.
“So I wouldn’t try to disrupt the whole apple cart with the sale process in the middle of all that.”
If Ottawa looks to prioritize increasing Trans Mountain’s capacity, it may wind up holding onto the pipeline for a little longer, but Lander says ultimately, it’s in the government’s best interest to eventually find a buyer.
“If the government continues to maintain ownership of the pipeline, the government is responsible then for maintaining that pipeline and everything that comes with it,” he says.
“If we’re purely talking about what are the economics of the pipeline, it doesn’t make sense to stay in government hands.
“There’s no reason that we need to rush and make any of these decisions precipitously.“
— with files from The Canadian Press
Significant debt (~C$12–27B depending on accounting/recapitalization) incurs interest. Government has restructured some financing (e.g., equity-like injections), making TMC appear more profitable on paper, but overall taxpayer exposure remains high. Annual returns of C$1.7B+ help service this, but full “payoff” could span decades
The transportation rates for the pipeline are very high. Just under the cost of rail transport of oil. The extremely high rate is an attempt to pay off the pipeline in 30 years. That is one of the reasons Alberta needs independence to allow the private construction of multiple low cost pipelines to the west coast even through the USA to the west coast if needed.
This article is dumb!! They just did another article a few days ago saying there are no private investors and Ottawa is stuck with it!
don’t just give it to the Indians
so 34 billion dollars of Canadian taxpayer money went into the project. It was first blocked by the Liberals, and their support of the natives and environmentalists. It would have been much cheaper if the Liberals would have just supported it.
Now they are thinking of selling it. 2 provisos… It sells for more than what it cost. and the money goes back to the Canadian taxpayer, not some Liberal slush fund.
BTW: how much did your taxes go down when PetroCan (used to be Gulf, bought with tax dollars) was sold to private industry? The money goes into general revenues, but strangely comes close to the Liberal Green slush fund…
Kerp now it starts paying the bills.