Construction of the Trans Mountain pipeline expansion is scheduled to begin this fall but with more than 150 conditions to satisfy and a growing number of opponents lining up on the west coast, just when the first shovel goes in the ground remains to be seen. One of the biggest capital projects in Canadian history, the $6.8-billion expansion of Kinder Morgan’s original pipeline, which was built in 1953, will cover 1,150 kilometres between Strathcona County near Edmonton to Burnaby, B.C. when it goes into service, scheduled for late 2019.
The current pipeline carries 300,000 barrels per day but the expansion will nearly triple capacity while simultaneously increasing tanker traffic in the Burrard Inlet seven-fold. The new line, which will carry heavier oils than the current one with capabilities for also transporting light crude oils, was approved by Ottawa last November, two months before the B.C. government provided its provincial environment certificate.
“All those pieces mean we are moving forward and we’re doing a lot of the work that’s needed around the conditions to get ready for construction,” said Ali Hounsell, spokeswoman for Trans Mountain Project. The conditions include engineering design details, environmental protection plans, socio-economic assessments, land use investigations and mitigation and monitoring documentation.
One of the big drivers behind the expansion is the opportunity to sell oil for a higher price on the international market. Currently, Canadian oil is sold almost exclusively to the U.S. “The price on the world market is higher than in the North American market. That’s why it’s important to get the oil to the coast,” Hounsell said. Trans Mountain already has commercial agreements with a dozen shippers, representing about 80 per cent of the pipeline’s capacity, with the rest expected to be sold on the spot market. “We’ve got the demand in place for that,” Hounsell said.
The nearly $7-billion expansion of the Trans Mountain pipeline is expected to yield $46.7 billion in taxes and royalties to governments, more than 800,000 person-years of employment over the life of the project – or the equivalent of 40,000 jobs annually for more than 20 years – and enable producers to reap an additional $73.5 billion in revenues. Source: Kinder Morgan
In fact, since 2008, regardless of where oil was in the supply and demand cycle, the pipeline has been full and Trans Mountain has had to turn barrels away. “The pipeline capacity out of Western Canada is four million barrels per day. It’s at capacity and has been for quite a long time,” she said. With oil prices hovering slightly above $50 US per barrel, roughly one-third of the all-time highs set in 2008, Hounsell noted the shippers have signed long-term contracts so short-term price fluctuations aren’t going to impact the project one way or the other. “A pipeline is a long-term investment and our shippers see it as such,” she said. “We all know there’s been a downturn in the industry. We may see a few changes in these contracts and the companies may change their focus but we do have binding contracts. We’re confident they’ll come through with the commitments they’ve made or there are options for them to be sold to other people.”
The City of Vancouver is leading legal efforts to derail the expansion and it has lots of company. The Living Oceans Society and Raincoast Conservation Foundation have also filed applications for judicial review of the project and nine B.C. mayors have petitioned the federal government to overturn its decision. Derek Corrigan, mayor of Burnaby, has taken things one step further and pledged to stand in front of the bulldozers if some significant amendments aren’t made.
“The risk of a spill here is terrifying in terms of its impact on the environment. We’ve seen studies that predict one million people could get sick and 500,000 birds would die,” said Eugene Kung, staff counsel at the West Coast Environmental Law Association. The Vancouver-based shop represents a number of aboriginal, environmental and community groups opposed to the expansion. Thus far, nine separate lawsuits representing more than 15 First Nations along the proposed pipeline route have been filed against the federal government’s approval. “First Nation opposition can delay and stop a pipeline. The company is talking about starting construction (this fall). I’d be very surprised if that happened,” he said.
Hounsell is well aware of the opposition but she’s confident Trans Mountain can quell their fears. “We’ve been operating the pipeline for more than 60 years. We have relationships with aboriginal communities and municipalities and we have operations in all of those communities. We have seen lots of opposition but having those relationships in place, we know these people already. We have an operating record and a history in the communities. We have made changes to the project based on what we’ve heard,” she said.
The Canadian Association of Petroleum Producers has a keen interest in seeing the pipeline expand as most of the oil shipped in the current pipe comes from its members. Chelsie Klassen, Calgary-based manager of media relations and issues management at CAPP, said there’s no question the expansion will be “transformational” once it’s completed. “There’s more than enough production to fill the line. That’s why we need multiple lines to multiple markets,” she said. “We ship 99 per cent of our oil and natural gas to one customer, the U.S. Any business person would tell you, the more customers you have the better the business because it allows you to get a more global price for your product. When you see it only going to one market, that limits our options to get a better price,” Klassen says.
Even though not a single metre of the Trans Mountain pipeline expansion will run through Saskatchewan, a provincial government spokesperson said it has the potential to have a significant impact on the local oil and gas industry. “Although there won’t be any Saskatchewan oil sent in this pipeline, it frees up space in other inter-provincial pipelines to move resources,” the spokesperson said. It’s not yet known whether steel company Evraz will be the pipe supplier but if it is, a significant number of jobs will be created in Regina, too. “Saskatchewan is supportive of pipeline expansion as it helps the industry get products to market,” the spokesperson said.
