NO HIGH-CAPACITY PIPELINES TO EFFICIENTLY ACCESS EAST AND WEST COAST TIDE-WATER ARE BEING BUILT IN CANADA
Mike Priaro, P. Eng.
First uploaded April 16, 2020
Vancouver's Second Narrows bridges
Assuming each of the three current pipeline projects stick to current schedules, Enbridge’s Line 3 will add 390,000 bbl/d of new takeaway capacity from Western Canada to the U.S. Midwest in early 2021, the Trans Mountain expansion (TMX) will transport 590,000 bbl/d to Canada’s West Coast in late 2022, and Keystone XL will add 830,000 bbl/d to the Cushing OK hub sometime in 2023. That’s about 1.8 million bbl/d of new takeaway capacity, or perhaps a few hundred thousand barrels a day less after including crude now being transported out of Western Canada by rail.
The Trans Mountain expansion is owned by Canadian taxpayers who have incurred a $23-billion-plus liability to buy the existing line ($4.5 billion), build the expansion ($12.6 billion) and to replace the existing 67-year-old pipeline ($6-billion-plus). The Trans Mountain expansion cannot competitively access new, diverse, undiscounted, international markets in any significant volumes as its Aframax tankers, only partially-loaded as a result of shallow waters under Vancouver's Second Narrows bridges, will not be competitive with Very Large Crude Carriers (VLCCs) — the workhorses of the international oil trade. TMX will primarily serve U.S. Puget Sound refineries, California refineries, and U.S. Gulf Coast refineries via Panama.
Furthermore, the very high capital cost of TMX will result in pipeline tariffs easily double or triple current line tariffs.
Keystone XL is currently effectively owned by Alberta taxpayers who have made a $1.5 billion direct investment and given $6 billion in loan guarantees to get the line built. Keystone XL will serve U.S. Gulf Coast refineries with no plan, approvals, or ports in-place to load VLCCs for direct, large-scale export of Canadian heavy crude from U.S. Gulf Coast ports.
It is anyone's guess whether the U.S. would approve direct, large-scale export of Canadian heavy crude from U.S. Gulf Coast ports or to build the pipelines to facilitate such exports.
The powerful U.S. oil industry is likely to object while environmentalists are sure to object. A Democratic administration may very well be in opposition to Keystone XL, again, or even cancel it in mid-construction, while a Republican administration may very well ask for something significant in return, invoke restrictive oil export clauses in NAFTA or the USMCA, threaten retaliative economic measures, or, rightly or wrongly, invoke North American energy security.
This makes Alberta’s $7.5 billion liability in Keystone XL a very risky investment for Alberta taxpayers.
Enbridge’s Line 3 expansion will primarily serve U.S. Midwest refineries and is the only export pipeline being built without political interference.
Keystone XL, TMX and Line 3 are what happen when incompetent, self-serving politicians with no national vision get, or permit, pipelines to be built for political expediency and not for the benefit of Canadians — especially Albertans, the resource owners.
Keystone XL, TMX and Line 3 are what happen when incompetent, self-serving politicians with no business sense whatsoever get, or permit, pipelines to be built for political expediency to the same, highly-discounted, limited market where about 96% of Canada's crude exports already go.
Keystone XL, TMX and Line 3 are what happens when incompetent, self-serving politicians with no national vision stand in the way of efficient, high-capacity, multi-pipeline, multi-energy corridors (Energy East and Eagle Spirit) to the safest ports by far on Canada's east and west coasts — to the detriment of all Canadians.