Back to Analyst

High Noon For Kinder Morgan’s TransMountain Pipeline Expansion

|

Amid all the news over rising gas prices, driven by the steady increase in oil’s value, it may be easy to miss a battle over a Canadian pipeline expansion that could have far-reaching consequences for fuel prices in the Pacific Northwest and the future viability of Canada’s oil sector.

Since 1953, Alberta oil has made its way to markets hundreds of miles away in Vancouver and Washington State to awaiting refineries. Since then, and without any major incident, the TransMountain Pipeline (TMP) has been upgraded to deliver not only varied heavy and light crudes but, by the world’s first process of “batching,” it can carry 300,000 barrels a day of oils, distillates and gasoline. Due to increased demand for both heavy oil and fuel products, the TMP’s owner, Kinder Morgan, applied for a doubling of the pipeline, similar to the U.S. Colonial pipeline. After two years of scrutiny, Kinder Morgan received regulatory approval from the Canadian government, in May 2016. Since then, a change in British Colombia’s provincial government to a left-leaning coalition of socialists and greens has embarked on a legal challenge that effectively ensures the building process will be delayed until the B.C. government exhausts a lengthy judicial process intended to dissuade Kinder Morgan from continuing the project.

At issue is the well-financed, foreign-funded opposition to the pipeline which would allow Canadian heavy oil to join with thousands of vessels every year in that region that export, import, ship and receive oil and petroleum products from Alaska and Asia. The effect of Alberta being able to reach coastal tidewaters, via the twinning of the pipeline, would lift the value of its oil known as WCS (Western Canadian Select) from the current $20 to $30 a barrel discounts it currently gets to the WTI (West Texas Intermediate) crude benchmark, to international prices. Indeed the net effects on the Alberta and Canadian economy would represent a $15 billion boost in activity and staunch the exit of what has been, so far, a $60 billion flight in investments in Canada’s oilsands.

In the face of this opposition and the apparent unwillingness of the Canadian government to override BC’s legal ruse and apply the full weight of its constitutional authority, Kinder Morgan has signaled it will withdraw from this vital project by next Thursday, should the impasse not be resolved. For its part, Alberta has threatened to turn off the taps of the existing TransMountain Pipeline, potentially creating a chaotic situation for refineries in Vancouver and Washington State, as well as motorists in Vancouver, who rely on the conduit for critical supplies.

For analysts and pundits, all eyes will be trained on the unfolding events in the northwest next week. Energy prices and the very future of Canada’s energy sector may well be on the line.

Senior Petroleum Analyst, Canada

Dan is a skilled and noted bilingual (French and English) consumer advocate specializing in energy and current affairs. Known as Canada's “Gas Guru,” he founded tomorrowsgaspricetoday.com to better help motorists anticipate the price of gasoline in advance across Canada. He has over three decades of experience in the petroleum industry, as a parliamentarian and an analyst.