During the epic journey to complete a nation-building pipeline project, a few pivotal moments have defined the life — and near death — of the Trans Mountain expansion.
Today, a conclusion to its construction is finally at hand after one of those life-affirming moments arrived Tuesday afternoon for the $34-billion megaproject.
The Trans Mountain expansion (TMX) received its final leave to open application from the Canada Energy Regulator, authorizing it to ship crude oil from Alberta to its Westridge Marine Terminal in Burnaby, B.C.
It shifts the project into an important new phase: full commercial operations and mechanical completion.
“I feel relieved and proud for Canada that we got something done that’s pretty magnificent,” Trans Mountain Corp. CEO Dawn Farrell said Tuesday in an interview.
“Despite everything that happened that possibly could have happened — a pipeline that needed to come from Edmonton and go through the mountains, and cross under rivers, and cross under highways and go up steep slopes…Today we landed the plane.”
Premier Danielle Smith said TMX will open up the option of new export markets for Alberta oil producers, shrink the price discount on Western Canadian crude and help governments — including Ottawa — generate additional tax dollars.
“It’s a remarkable achievement,” Smith said in an interview.
“It was almost like everything was thrown at this project and they still managed to get it through.”
For those on the front lines of its development, the takeoff and flight over the past 13 years haven’t always gone so smoothly.
Ian Anderson, who shepherded the project from its inception in 2011 until his retirement 11 years later, remembers the moment in August 2018 when it seemed the obstacles might be too great to overcome.
After signing up shippers, successfully clearing regulatory hurdles and getting federal approval, the project was at a crossroads. Three months earlier, Ottawa had bought the project from operator Kinder Morgan to keep it alive.
Construction on the pipeline twinning had started on Aug. 25, 2018, aiming to nearly triple the capacity of the existing Trans Mountain line, which transported oil and refined products from Alberta to Burnaby for export.
Five days later, shareholders of Kinder Morgan, the Texas-based company that owned Trans Mountain, voted to complete the sale to the Canadian government.
Things were looking up that week — until they weren’t.
The next day, a court ruling stunned onlookers, including federal cabinet ministers and the Alberta government and overturned the project’s approval.
It was the closest Anderson, who had headed up Kinder Morgan Canada — and later Trans Mountain Corp. — came to wondering if the long-standing expansion project might not get done, although that didn’t last for long.
“That was a dreadful day in the life of a project, where a government has just acquired it and now they no longer have a permit. And we got fairly down on ourselves for about 48 hours,” Anderson recalled in an interview last month.
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“My investor left. My permit … was taken away and I had still hundreds of people working on this project in a very uncertain time.”
At the Alberta legislature, the news arrived with a thud. Heading into the case, the courts had ruled 17 straight times in favour of the Trans Mountain project, then-premier Rachel Notley noted at the time.
“It was, for sure, one of the toughest moments,” Notley said this week. “We had had a great deal of confidence in the strength of our case.”
Canada’s natural resources minister, Amarjeet Sohi, who had just moved into the portfolio, was also shocked because federal officials felt assured about the outcome.
Yet, the court decision nullified the project’s permits, partly due to inadequate consultation with Indigenous communities.
“It felt like someone punched me in the gut,” recalled Sohi, now the mayor of Edmonton.
“Going through the Federal Court of Appeal decision, my reaction was … we really screwed up the consultation.”
On Wednesday, the Trans Mountain expansion will have reached the stage of full commercial operations.
The final “golden weld” on the pipeline occurred at 7:10 a.m., April 11, in B.C.’s Lower Mainland region.
Oil has been filling up the system for weeks. The pipeline expansion is now 70 per cent full, Farrell said.
Tankers with oil will be leaving the terminal in Burnaby in mid-month, heading to different markets, including Asia and the United States.
“We’re effectively ready for service,” she said.
The project is expected to help producers fetch a better price for their oil — and higher royalties for the provincial treasury — although it’s way over the initial budget estimate of about $5 billion.
“If you look at that timeline, it was like a whack-a-mole game of dealing with issues that popped up: legal issues, social issues, governmental issues, financial issues,” said author and energy economist Peter Terzakian.
The project first began grabbing business headlines at the start of the last decade, following a period of massive capital investment and expansion in the oilsands.
In 2011, Kinder Morgan Inc. — the parent company of Kinder Morgan Canada, led by Anderson — held an open season to determine the interests of shippers for its plan to expand its existing oil artery to B.C. It was moving about 300,000 barrels per day of oil and refined products to the Pacific coast.
The company developed several scenarios for the expansion, including one that would almost double its size in phases, Anderson said.
“We were quite blown away by the magnitude of the support coming in to take it all the way up to 890,000,” he said.
The price tag was $5.4 billion, the original in-service date was set for 2017, “and even that, I felt, was generous,” he added.
In 2013, Kinder Morgan filed its regulatory application with the National Energy Board (NEB). It faced staunch opposition from environmental groups, some First Nations, the City of Burnaby and, eventually, the B.C. government of Premier John Horgan.
The regulator approved the project in 2016, subject to 157 conditions. It was later given the green light by the Trudeau government.
“The federal government clearly recognized the economic imperative for the project … but it wasn’t a project they would have asked for,” said Janet Annesley, who served as chief of staff to then-federal Natural Resources Minister Jim Carr.
“It was a lightning rod for a lot of tough issues like climate and Indigenous rights. And the government did an effective job of using the project to advance some of those other priorities.”
In early 2018, a showdown unfolded between Alberta and B.C., with Horgan’s government vowing to use every tool at its disposal to stop Trans Mountain from being built.
Notley’s government announced a ban against B.C. wines and passed legislation to give Alberta the power to turn off the oil taps to its western neighbour — if B.C. proceeded with a proposal to restrict the shipment of more diluted bitumen.
“We were pretty legitimately frustrated with our colleagues to the West,” Notley recalled.
“So we said, ‘Well, if we’re going to play in the realm of things that are questionable in the legal sense … two can play at this game.’”
In April 2018, Kinder Morgan announced it would halt non-essential spending on the project given the uncertainty.
The Trudeau government agreed the next month to buy Trans Mountain and the expansion for $4.4 billion.
“What was the other choice?” said Sohi.
“To not do it was to not move forward at all. I think that would have been so detrimental to the unity of this country, as well as continue to not get the value for Alberta resources.”
Having the pipeline owned by the federal government soon became the best option to get it across the finish line.
“Kinder Morgan ran out of risk tolerance,” said Anderson. “We went to the market and talked to countless potential acquirers, investors and nobody wanted to touch it.”
The federal government pledged to get the development built and then sell it back to the private sector. Ottawa later vowed to ensure Indigenous ownership would be part of the process.
Following the August 2018 court ruling, the federal government completed a new consultation process and the project was approved again the following year.
Construction restarted but the pandemic, supply chain pressures and string of issues led to higher costs.
Anderson retired in 2022, knowing TMX had evolved into more than just a debate over energy infrastructure.
“It became more than just a pipeline. It became a matter of Indigenous reconciliation, it became a matter of local interests, it became a matter of how do the voices of local interests compete with national interests. It became a platform for countless environmental organizations,” he added.
“The story got to be way more than just the pipe going in the ground.”
Farrell, former head of Calgary-based power generator TransAlta, took over as Trans Mountain Corp.’s CEO in August 2022.
She began by driving along the line route for several days with a colleague and began to understand the immensity of the task at hand.
At its peak in March 2023, more than 11,100 contractors and Trans Mountain employees were working on the development.
Through late 2023 and earlier this year, construction difficulties continued on the final leg of the development in the Fraser Valley between Chilliwack and Hope, B.C. It completed the horizontal direction drill for the final segment on March 29.
Today, the final price tag is “still in that $34 billion range,” Farrell said.
Some observers anticipate Ottawa will need to take a sizeable write-down to sell the project. Other industry experts believe the expansion is already reducing the discount facing Western Canadian oil and providing new options for producers, other than sending virtually all exports into the United States.
“We have sovereignty over our exports for the first time … so that we’re not selling at a discount to the benefit of a handful of refineries,” Tertzakian said.
Alberta’s premier said the project will lower the price differential on Western Canada Select heavy oil, create opportunity to increase production and for Indigenous communities to buy an equity stake in TMX.
“I would say those combination of factors makes it absolutely worth it,” Smith said.
Critics aren’t convinced.
“It’s going to go down in history as one of the biggest mistakes — one of the costliest mistakes — of a federal government,” Eugene Kung, a staff lawyer with West Coast Environmental Law, said in a recent interview.
Despite the higher price tag, Farrell insists the expansion will pay off for the country.
She said studies indicate the project will generate about $1 billion annually in federal tax revenues and $4 billion annually to Alberta in more revenue. It will also create greater returns for producers, thanks to a smaller price differential, leading to more industry reinvestment.
“Frankly, if we do the calculation of the benefit of the differential … the pipeline pays for itself in a year,” Farrell said.
Farrell expects a sale likely won’t take place until pipeline tolls are finalized next year for shippers. The next steps are to finance the project and replace short-term debt, such as through bonds, to get a capital structure in place.
Those on the front lines of its development say it’s been an arduous journey, but believe it’s finally landed in the right spot.
“This really is one of the most significant nation-building accomplishments that we’ve seen in Canada over certainly the last couple of decades,” said Notley.
“It’s been a pretty gruelling journey … It was worth the effort,” added Sohi.
On Tuesday, Anderson called the regulatory approval and the long-awaited end of construction — and start-up of commercial operations — gratifying news.
“You’re never done until you’re done,” he added. “But the regulator has said the asset is ready to operate, so that’s a great day.”
Chris Varcoe is a Calgary Herald columnist.
cvarcoe@postmedia.com
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