TMX solution: Crown corp buys Kinder Morgan pipeline assets, plans to build 10 new dilbit pipelines to West Coast as part of 20-year plan

Calvin Helin. Source: Reuters.

Calvin Helin, Eagle Spirit Energy. Photo: Reuters

Potential 4.7 million b/d of new oil sands supply + northern infrastructure corridor to BC coast + indigenous ownership = 10 new pipelines by 2038

As Kinder Morgan’s May 31 deadline to resolve inter-governmental conflict over regulation of the Trans Mountain Expansion pipeline draws nigh, the likelihood of Canada and Alberta buying the project outright appears a pretty good bet. If that happens, why not stop with one pipeline? If oil sands output grows to 7.5 million b/d by 2038, as a recent study suggests could happen, Alberta may need as many as 10 new pipelines over the next 20 years. Why not build them with a crown corporation?

Prof. Duane Bratt, Mount Royal University.

I have been speculating over the couple days that by the end of the month you’re going to see a major investment into the pipeline by the Alberta government. That is risky but I think that will generate greater [public] support,” political scientist Duane Bratt told Energi News in a recent interview.

And I’m convinced that the investment by the federal government in the pipeline will ensure that it gets built.”

Finance Minister Bill Morneau suggested 10 days ago that one option Ottawa is considering would indemnify the Texas-based pipeline giant for any losses it sustains while the governments sort out their constitutional dispute. Morneau also hinted that if a deal can’t be struck with Kinder Morgan, there are other private investors willing to step up to the plate.

“If Kinder Morgan isn’t interested in building the project we think plenty of investors would be interested in taking on this project, especially knowing that the federal government believes it is in the best interest of Canadians and is willing to provide indemnity to make sure that it gets done,” Morneau said at a May 15 press conference in Ottawa.

Industry insiders pooh poohed that idea.

For instance, Roger McKnight, petroleum analyst with En-Pro International, told Vancouver’s News1130 that, “I wouldn’t touch it with a barge pole.”

Morneau has no choice. The Trudeau Government cancelled Northern Gateway, doomed Energy East by heaping increasingly unrealistic review burdens on the project, and imposed an oil tanker moratorium on the north coast of BC.

Alberta is increasingly desperate for TMX’s 590,000 b/d shipping capacity.

Then there is the equally pressing issue of TMX having become a proxy for the integrity of the Canadian regulatory system. International investors want to know – and are becoming increasingly skeptical – that Canada’s approval of a natural resource development project means it will be built, even if there is provincial, local, or First Nation opposition.

Bill Morneau, left, and Justin Trudeau.

There is no backing down now. Trudeau and Morneau have painted Canada into a corner.

But if Canada and Alberta buy Kinder Morgan’s assets and commit to complete Trans Mountain Expansion, why stop there?

A recent study by the Canadian Energy Research Institute about supply costs in the Alberta oil sands included a High Case Scenario estimate of crude oil supply growth from now until 2038 – from 2.8 million b/d to 7.5 million b/d.

That’s 4.7 million b/d of crude oil that would have to find its way to market, most likely in Asia, serving growing demand in China and India.

That much crude oil, assuming it’s bitumen – which includes 20% to 30% diluent to flow in a pipeline – would require approximately 10 pipelines the size of Trans Mountain Expansion.

Is there demand for that much bitumen?

Contrary to the claims of Vancouver pipeline opponents, Alberta is well positioned in the global heavy crude oil market. Competitors, such as Mexico and Venezuela, are suffering production declines, leaving market space Alberta can move into.

And Kevin Birn, director of the Oil Sands Dialogue for IHS Markit, says if Alberta can prove it can ship reliably to the Asian market, refiners will invest in the “kit” to process the lower value diluted bitumen. “If Alberta producers can get bitumen to tidewater, it will find a buyer, no question,” he said in an interview.

The shortest route to tidewater is through British Columbia.

Given the opposition to Trans Mountain Expansion, does anyone seriously think even one more pipeline could be built to the lower mainland of BC?

Eagle Spirit Energy pipeline route.

In case it’s not clear, the answer is a resounding, no.

But Calvin Helin and Eagle Spirit Energy may have an answer in the north. Backed by the powerful Aquilini family (billionaire owners of the Vancouver Canucks), Helin has signed agreements with 35 northern BC First Nations to support a $16 billion pipeline in return for 35 per cent of the project.

But why stop at one pipeline?

In 2016, the School of Public Policy at the University of Calgary released a study into the feasibility of a “national infrastructure corridor” that would stretch across the country, providing a single connected route for pipelines, power transmission lines, freight transport, etc.

Last year the Canadian Senate studied the issue and happily endorsed it.

In Nov. the Trudeau Government jumped on the bandwagon. According to a press release from the Senate standing committee on banking, trade, and commerce, federal transport minister Marc Garneau said the government “agrees with the committee’s finding that improving national transportation and communication networks will encourage economic growth and facilitate exports.”

Most importantly, according to the committee, Garneau “endorsed the committee’s finding that Indigenous peoples’ early participation in these sorts of infrastructure projects is critical to success.”

Thanks to Calvin Helin, that spadework is already complete.

Yes, such a corridor would take years of careful planning. And there remains the sticky issue of the federal government’s own oil tanker ban.

Most of the pieces of the pipeline puzzle are there, ready to be assembled in the right order.

A Canada and Alberta pipeline crown corporation might be the final piece to complete the puzzle.

If Pipeline Corp turns out to be Ottawa’s solution to the Trans Mountain Expansion debacle, then future expansion of the Alberta oil sands and more pipelines should be part of the inevitable debate.

If this is the route Canada is forced to take, why not take it in a big way?

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