Some (modest) good news about two badly needed Canadian pipelines

The idea of expanding the Trans Mountain oil pipeline first emerged in the early 2000s. Terasen, the company that owned the existing Edmonton-to-Vancouver conduit, predicted expansion would cost $2-billion and be completed by 2010.

In 2014, Enbridge said its biggest-ever pipeline project, a $7-billion plan to replace its old Line 3, running from Alberta to Wisconsin, would be finished in 2017. Construction would roughly double the old pipe’s volume.

A growing Western Canadian oil industry, as you may have heard, needs that extra carrying capacity. And yet, as everyone knows, both pipelines are now light years behind schedule.

But, now, some good news. There is progress to report.

Oil has finally started flowing on the new Line 3. It received Canadian regulatory approval in the spring of 2016, and final approval from Prime Minister Justin Trudeau’s government later that year. Last week, the Canadian portion, from Alberta to Manitoba, went into operation.

However, the American section of the line, which crosses Minnesota to Lake Superior, is still not in operation. That regulatory and legal holdup is entirely Made in the U.S.

Enbridge last week signed labour contracts related to eventual construction in Minnesota, which can begin once those regulatory hurdles are cleared. But until they are, the Canadian portion of the line will be constrained to operate at about half of its new, higher capacity.

For Trans Mountain, the first pieces of new pipeline will be put into the ground this month. More than 2,000 people are working on the project. The saga is not over, but there is, finally, something tangible. One key legal case remains, the question of Indigenous consultations, which is before the Federal Court of Appeal this month. The pipeline could be finished in late 2022.

Mr. Trudeau serves as the chief target of frustration over Trans Mountain’s many woes. But the story stretches farther back and the reasons for the project’s trials are many. There’s a lot of blame to go around.

The application to expand Trans Mountain was filed in late 2013, several years after the early predictions of the pipeline’s completion. The proposal went through a review process designed by the Harper government. The National Energy Board approved it in 2016. The Liberal government gave final approval later that year, at the same time as Line 3.

Last year, the Federal Court of Appeal struck down the approval, finding that some aspects of Indigenous consultation and environmental review were inadequate. The Trudeau government wore it, but the practices the court found insufficient were in part products of the previous Conservative government. (The work was then redone, which is why the Trudeau government was able to reissue its approval earlier this year).

Before the loss in court, Kinder Morgan, the Texas company that bought Terasen and Trans Mountain in 2005, decided it wanted out. Without Ottawa’s backing, the expansion was in jeopardy. The people of Canada paid $4.4-billion. The money came from an increase in the national debt.

Today, there is not even a budget for the expansion project, even as pipe is put into the ground. One could call this a blank cheque. The expansion cost, over the years, has climbed from $2-billion to $5-billion to $5.4-billion to $6.8-billion to $7.4-billion. The only current estimate is “higher” than the past prediction. The Parliamentary Budget Officer this year cited a potential bill of $9.3-billion.

“This kitchen reno is taking forever – how much is this thing going to cost?” a homeowner might ask a contractor. “An unknown higher amount than I last told you” is not the answer anyone wants.

Ottawa’s budget deficit was $14-billion in 2018-19 – roughly equivalent to the Trans Mountain purchase price, plus the PBO’s estimate of expansion costs. The figure provides a perspective on the size of the burden Ottawa has taken on.

That opening two new pipelines has taken forever is a blow to the Canadian economy. A lack of oil export capacity is squeezing the energy sector, causing oil from the Prairies to sell at a discount and costing all Canadians a lot of money.

Once in full operation, Line 3 and Trans Mountain will add close to one-million barrels a day of export capacity. That’s a game changer. The two pipes are still far from the finish line. But the end is a bit closer than it was a week ago.