Trans Mountain pipeline delivers $12.6 billion in new revenue to oilpatch, windfall to governments: report

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4 days ago

The Trans Mountain pipeline — finished years behind schedule and massively over-budget — has delivered an estimated $12.6 billion in new revenues to the Canadian oilpatch and padded government budgets, according to a new report.
Still, the report by the financial group Alberta Central says any new export pipeline that might be built under Prime Minister Mark Carney's nation-building infrastructure agenda would not likely bring in a similar windfall.
The expanded Trans Mountain pipe that stretches from Alberta to the British Columbia coast, which came into service in May 2024, has significantly boosted market access for Canadian oil and raised prices for the country's producers, the report suggests.
'Whether these benefits justify the $34 billion in cost is likely to remain a source of debate for many years to come, (but) our analysis suggests that the benefits from TMX will outweigh the costs in the long run,' Charles St-Arnaud, Alberta Central's chief economist, said in the report.
The federal government under Justin Trudeau bought the Trans Mountain pipeline for $4.5 billion in 2018, but the price tag for the expansion later ballooned to $34 billion. And while it was the first new pipeline to the west coast in 70 years, it was finished six years behind schedule.
Still, economists like St-Arnaud and the University of Calgary's Trevor Tombe have argued it was worth every penny.
Trans Mountain has increased Canadian oil shipments to refineries in the United States and more than tripled the share of exports to countries abroad, including China. This expanded market access has allowed Canadian oil producers to fetch higher prices.
The country's heavy oil trades at a discount partly because the costs of refining it are higher. In recent years, the discount against North American prices expanded even more because there weren't enough pipelines, leading to an oversupply.
The Trans Mountain expansion, which nearly tripled the pipeline's capacity, has helped to ease that pressure and shave the discount to levels that are well below historical norms. As a result, the Alberta Central report suggests the pipeline boosted overall oilpatch revenues by $12.6 billion, an estimate that does not account for increased production made possible by the expansion.
The lift in prices is also expected to boost tax and royalty windfalls for the federal and provincial governments. Alberta could bring in $5.4 billion in additional funds, which would account for almost seven per cent of the province's revenues for the 2024-25 fiscal year, according to the report.
While the Trudeau government approved the pipeline project, the Liberals had also ushered in a spate of new policies that expanded environmental regulations and were widely seen in Alberta and Saskatchewan as hostile to the energy sector.
The Carney government is promising a change in tone with an agenda that favours oil and gas development. The prime minister has said a new oil export pipeline is 'highly likely' to make a list of so-called nation-building projects that would receive much faster approvals from the federal government.
Still, any new pipe may not bring the same kinds of financial benefits as Trans Mountain. A theoretical project — no private-sector proponent has come forward with a proposal — would not likely lead to even higher prices, according to the Alberta Central report. Instead, it would prevent Canadian prices from falling as companies produce more oil.
Already, there are signs that the country's pipeline capacity may not be keeping pace with a rise in crude production. The energy analytics firm RBN Energy said in a recent note that the oilpatch could face bottlenecks within the next three years.
'Things only get harder from here, because we don't have additional pipeline capacity coming on now, and the pipeline capacity that we do have, we're only going to keep filling it,' said Rory Johnston, publisher of oil market research report Commodity Context.
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'We're going to run into pricing pressure earlier than you'd think.'
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With files from Meghan Potkins