The federal government isn’t saying much about how it plans to save the Trans Mountain pipeline expansion project, but Prime Minister Justin Trudeau has promised one thing: the project will not die.
Kinder Morgan, the company behind Trans Mountain, has given Trudeau until the end of May to convince British Columbia’s NDP government to cease all efforts to block it.
B.C., meanwhile, is standing behind Indigenous and environmental groups who argue Trans Mountain is both unnecessary and dangerous.
WATCH: Thousands opposed to the Trans Mountain pipeline expansion make voices heard
There are a few options available to break the impasse, and Trudeau will be meeting Sunday with the premiers of B.C. and Alberta to try to figure out a solution.
But what if Kinder Morgan does scrap the project? Well, gas prices could go up, for one thing. Here’s a look at some other potential fallout, both in the oil patch and beyond.
Rail reliance
Necessity is the mother of invention, and experts say killing Trans Mountain will definitely necessitate a re-orientation of the sector’s plans.
What’s important to remember, according to IHS Markit analyst Kevin Birn, is that the pipeline expansion is one of three projects currently in progress. The other two are Keystone XL, given a reprieve by U.S. President Donald Trump, and Enbridge’s Line 3.
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Regardless of whether Trans Mountain moves ahead, Birn noted, there will be a heavy reliance on rail to move oil and gas product over the next two years. Rail movements will “easily exceed” 200,000 barrels a day this year, he added, and will increase again in 2019.
READ MORE: What to know if you haven’t been paying attention to the Trans Mountain dispute
Right now, Canadian oil is being sold at a discount compared to what’s being offered elsewhere, largely due to supply bottlenecks.
“Fundamentally, it’s on a rail scenario at this point, through until not (just) the next pipeline is online, but the next two pipelines,” said Birn.
“Line 3 was the one trending to be online late 2019. We don’t think it’s big enough at this point.”
Trans Mountain and Keystone are close behind, moving forward on approximately the same timeline and scheduled to be operational by 2021.
“Either one of those, at that point, we think could bring the market (price) back into balance … but it won’t remain there,” Birn predicted.
Innovation
Companies have been experimenting with other strategies as well, attempting to lighten oil sands bitumen so it can flow through existing pipelines without the need for additives that just take up more space.
There is work underway to perfect drag-reducing additives to get the oil moving more quickly, and even to turn oil into pellets for transport.
WATCH: Trudeau defiant in Trans Mountain pipeline construction
But opponents of Trans Mountain have argued that, aside from the environmental concerns linked to the continued exploitation of oil and gas, the pipeline is unnecessary and could actually result in too much capacity.
READ MORE: How Ottawa might try to save the Trans Mountain pipeline
Birn says it’s hard to predict if that would be the case, calling it a “chicken and egg” scenario.
“If you don’t have another pipe, you have less investment probably, so your (production) outlook may be less,” he explained. “Maybe you don’t need (a new pipeline) as soon. But if you do have a pipe, maybe you’d have more barrels.”
Investment
Dwindling investment in Canada’s oil and gas sector is already a problem; one that even the Liberal government has openly acknowledged. Supporters of Trans Mountain say it will almost certainly get worse if the project is abandoned.
“This is bigger than just the energy sector,” said Tim McMillan, president and CEO of the Canadian Association of Petroleum Producers (CAPP).
“Are there risks beyond this? I think absolutely. The world has an impression of Canada today that is not very flattering … The list of (energy) projects that we have seen come and go. Energy East, Northern Gateway, Pacific Northwest.”
READ MORE: Feds to spend $280k to study why Canada’s oil and gas sector is falling behind
As Canada struggles to compete, he said, the U.S. is growing their oil and gas investment by 37 per cent this year.
It’s unclear how much potential investment might be lost, however, or if other economic sectors might compensate (at least in part) for those losses.
Jerry Dias, the head of Canada’s largest private-sector union, Unifor, called fears about Canada being perceived as closed for business “foolish.”
“Canada is rich in natural resources and raw materials … no question, oil and energy is going to be our key export,” Dias said Thursday.
“Are we closed for business? That doesn’t make a snitch of sense. We are an export nation, 85 per cent of everything we manufacture is shipped. That’s not going to change.”
Political fallout
There are broader political realities at play with Trans Mountain as well.
One of the reasons Alberta agreed to sign on to the Pan Canadian Framework on Clean Growth and Climate Change (which includes carbon pricing), for example, was that it would be allowed to export its resources by pipeline.
If Trans Mountain dies, Alberta Premier Rachel Notley may have a much harder time selling continued support for the federal climate plan to Alberta’s electorate in the next provincial election.
Opposition leader Jason Kenney is waiting in the wings and has said he’ll oppose any carbon pricing scheme if elected.
WATCH: Rachel Notley’s new bitumen battle plan
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