Open this photo in gallery: Three berths able to load vessels with oil are seen at Westridge Marine Terminal, the terminus of the Trans Mountain Pipeline expansion project in Burnaby, B.C. on April 26.CHRIS HELGREN/REUTERS
When a tanker called the Dubai Angel steamed away from Burnaby, B.C., with the first shipment of crude pumped through the expanded Trans Mountain pipeline, it marked a milestone. Alberta’s oil is now less landlocked. The discount on each barrel is shrinking. There will be a noticeable bump in Canada’s GDP.
You’d think there’d be some cheering.
Six years ago, Prime Minister Justin Trudeau gambled on buying the pipeline, arguing it was necessary infrastructure to get Canada’s resources to market. The funny thing is that Mr. Trudeau and his Liberals aren’t doing much celebrating now.
The Trans Mountain Expansion Project (TMX) once symbolized a big part of Mr. Trudeau’s political brand: a grand bargain. There didn’t have to be a tough choice, Mr. Trudeau insisted. Bringing resources to market and action on climate change would go together. Canadians would meet in the middle.
“There was an explicit proposition that we were going to be able to put a price on carbon and also get our resources to market by de-risking this project,” former finance minister Bill Morneau, who led the negotiations to buy the pipeline, said in an interview. “That constituted, if you want to call it, the deal.”
But now, the politics around climate change and energy are more polarized than ever.
Buying TMX turned out to be a political loser for Mr. Trudeau’s Liberals. They never won any political credit in the oil patch. Instead, they lost green votes elsewhere. After the Liberals came back from the 2019 election with a minority government, their tactics have been more about wedge politics. They want to look greener.
When the pipeline opened, Alberta Premier Danielle Smith called it a “game-changer” but every opposition party in the House of Commons treated it as some kind of failure. Even pipeline-loving Conservatives argued the $34-billion cost was unnecessary. And the Liberals put up only a perfunctory defence. There was no big speech, and no ceremony.
“I think a lack of celebration is likely due to the politics around this,” Mr. Morneau said. “I do think, though, that the economics will show up over time.”
He’s right. The TMX project will deliver on its part of the bargain.
Total loan guarantees for Trans Mountain up to $19-billion
In 2018, the Liberal notion of the bargain was essentially for one pipeline. Twinning the Trans-Mountain pipeline was deemed the viable option for environmental and political reasons.
When owner Kinder Morgan balked at the costs of fighting political opposition from the B.C. government and Indigenous legislation, Ottawa paid $4.5-billion for the existing pipeline and the expansion project to add a second conduit.
The cost overruns, blamed on the COVID-19 pandemic and flooding, among other things, ballooned the sticker price to a shocking figure.
But University of Calgary economic professor Trevor Tombe believes there’s still a good chance that the project breaks even financially. And it will certainly pay enormous dividends for the Canadian economy very quickly.
Most of the $34-billion was paid with debt, and the interest will be more than covered by higher tolls for oil shippers. If potential buyers think the pipeline will be heavily used for decades, most of the $8-billion in equity could be recouped in a sale, he thinks.
But Mr. Tombe said the far bigger benefit is the economic impact. The expanded pipeline ships another 550,000 barrels a day to the Pacific, tripling the flow and essentially opening Asia as a market. Cheaper pipeline transportation is already reducing the discount on Alberta oil so every barrel, even if not shipped by TMX, fetches a higher price.
The same barrels, with the same emissions, bring more dollars into the Canadian economy.
It is true that better prices are an incentive to produce more oil. But Mr. Tombe noted the efficient way to counteract emissions growth is through carbon pricing.
But in 2024, the notion of building a political bargain between pipelines and carbon pricing is more or less dead.
Now, political parties target one side or the other.
Conservative Leader Pierre Poilievre talks about “unleashing” the oil-and-gas sector and gives the impression he seeks to remove all climate constraints. The Liberals have upped their climate-change rhetoric and proposed a cap on oil-and-gas emissions – and they can barely speak the name of the pipeline they bought.
That’s too bad. One day, Canadians are still going to have to hammer out a long-term political bargain to deal with climate change. In the meantime, the Trans Mountain expansion is bringing a windfall to the economy.