The latest environmental critique of the $12.6-billion Trans Mountain pipeline expansion project takes a business-case approach to an argument that the rationale for building it no longer stands up.
Companies are building or expanding pipeline capacity far more than Canada’s projected oil production over the coming decades, argues earth scientist David Hughes, who compiled the analysis as part of a joint initiative between the University of Victoria, the Canadian Centre for Policy Alternatives (CCPA) and the Parkland Institute.
“If you build TMX (Trans Mountain expansion) and take 590,000 barrels a day away from the other (pipeline) capacity, then it … destroys the economics of the existing pipelines,” Hughes said, with respect to one of a half-dozen points in his critique.
Hughes argues that emissions from Canadian oil-and-gas alone will blow past the country’s greenhouse-gas reduction targets by 2050, even with a suggested cap on the industry’s output.
And Hughes argues there isn’t a substantial market for Canadian heavy oil in Asia, where buyers tend to seek discounts for the heavy oil they buy from other producers such as those in Mexico.
Conditions around the project have changed since Canada assumed ownership of Trans Mountain in 2018, Hughes said, which he argues cast bigger doubts on the need for TMX, considering the government’s commitments to reduce greenhouse-gas emissions.
“If Canada has any hope of meeting its emissions reduction target, it’s got to cap the oilsands,” Hughes said.
However, as the CCPA published Hughes’s report, Trans Mountain continued construction on the 1,100-kilometre expansion, with no changes in the commitments of oil producers that it’s relying on.
And even with a crash in world oil demand caused by COVID-19, Hounsel said Trans Mountain has still had to limit customers’ access to its existing pipeline, which wants to move more oil and petroleum than its 350,000-barrels-per-day capacity can accommodate, said spokeswoman Ali Hounsel. The existing pipeline was last improved in 2008 and “has been running at its maximum capacity and has been (at limited access) every year since that time.”
As for the expansion, Hounsel said those shippers are still obliged to use 80 per cent of the expansion’s capacity for terms of 15-to-20 years.
Energy forecasts are published by a lot of groups on a regular basis, Hounsel said, and Trans Mountain “will continue to respond to the market needs of our customers who know how best to supply those markets served by the Trans Mountain pipeline.”
The CCPA published Hughes’s report not long after the International Energy Agency released one of those forecasts, its annual World Energy Outlook, which estimated that world oil demand could peak by the 2030s, or sooner, depending on how governments push the transition away from fossil fuels in recovering from the pandemic.
However, the agency forecast still shows rising demand for oil until the 2030s, said Tim McMillan, CEO of the Canadian Association of Petroleum Producers. And even if demand starts to fall, that will be from a peak of over 100 million-barrels-per-day of oil use, where McMillan argues TMX can still play a role for Canada.
“The amount of capital it takes to sustain that 100-million-barrels-per-day is substantial,” McMillan said, and “I think the world is better served if Canada is the (destination for) the next dollar invested in the energy sector.”
And McMillan argued that the industry will still have a use for all the pipelines being built, even if their capacity will be more than production because the existing system is subject to occasional bottlenecks.
“It’s like having a freeway that is built to be in a traffic jam,” McMillan said, “and we’re building a new freeway that gives us optionality that we can send our product to multiple different markets.”
However, Hughes argued that TMX will be an expensive way to give oil producers that option.
“It’s just another option for them, but we’re a country that is pledged to reduce emissions,” Hughes said. “So at some point, the country has to override purely commercial interests.”