Trans Mountain Expansion Project

Background: The Trans Mountain Expansion Project has been one of the most controversial crude oil pipeline projects in Canadian history. Since 2013, it has been the target of numerous legal challenges, intense public protests and two major regulatory reviews at Canada’s National Energy Board (NEB). In 2013, Kinder Morgan filed an application with the NEB to expand the capacity of the existing Trans Mountain pipeline, which transports up to 300,000 barrels per day from Alberta through British Columbia (BC) and Washington State to refineries and ports on the West Coast. The C$7.4 billion expansion (estimated at C$12.6 billion in late 2020) would more than triple the capacity of the existing pipeline (to 890,000 barrels per day). The increased capacity would be provided by a second line, roughly parallel to the existing pipeline. This second line would be largely used to transport more tar sands dilbit for export markets (US West Coast and Asia).

TGG and TMX: In Autumn 2014, TGG released a highly publicized expert report, Economic Costs and Benefits of the Trans Mountain Expansion Project (TMX) for BC and Metro Vancouver, in collaboration with Simon Fraser University’s Centre for Public Policy Research. The report, published in November 2014 and re-released in February 2015, refuted Kinder Morgan’s claims regarding positive economic development benefits of its controversial pipeline project (TMX). Goodman and Rowan of TGG estimated the economic benefits of TMX for BC and Metro Vancouver and compared these benefits to a range of potential costs of bad to worst-case scenarios. TGG demonstrated that the economic benefits of the pipeline were very small and had been significantly overstated by Kinder Morgan, whereas the worst-case costs of a catastrophic spill were very large and had been vastly understated.

In light of the TGG’s evaluation of the costs and benefits of TMX, we concluded that the pipeline project was not in the economic or public interest of the citizens of BC and, in particular, the citizens of Metro Vancouver. TGG therefore strongly recommended that the citizens and decision-makers of BC and Metro Vancouver reject this pipeline, which was neither in the economic nor public interest of BC and Metro Vancouver.

In July 21, 2015, TGG’s expert report on TMX was filed as evidence before Canada’s National Energy Board (NEB) on behalf of North Shore No Pipeline Expansion (NSNOPE).

Update: In May 2016, the NEB issued its Trans Mountain Expansion Project Report, which recommended that the Governor in Council (i.e. the Cabinet) approve the project with 157 conditions. TGG’s expert report was cited in the NEB decision. Our analysis influenced the NEB Condition 121: the requirement for the Financial Assurances Plan to ensure that Kinder Morgan had sufficient resources in the case of a worst-case spill on TMX. The Board also agreed with TGG’s approach for the calculation of the worst-case spill scenario by multiplying the per barrel cost of damage and cleanup by the volume spilled. The NEB also agreed with TGG that it is not useful to evaluate the probability of a large spill in determining the financial assurances if there is sufficient evidence that such a spill could occur.

In November 2016, the Governor in Council accepted the NEB’s recommendation, and approved TMX, subject to the 157 conditions. This approval was overturned in August 2018 by Canada’s Federal Court of Appeal because of failure to adequately consult First Nations and take certain environmental impacts into consideration.

In early 2018, controversy around TMX intensified with trade disputes erupting between Alberta and BC and continued public protests. Many of the protests were led by Indigenous Peoples in BC. Many, but not all, Indigenous communites vigourously oppose the project. The BC government also opposed TMX.

In April 2018, Kinder Morgan suspended all non-essential activities (and related spending) on TMX, citing opposition from BC. The company issued an ultimatum that it would withdraw from the project unless an agreement could be reached with BC and the Canadian federal government to allow the pipeline to proceed. Just before the May 31, 2018 ultimatum deadline, the federal government announced plans to purchase the Trans Mountain pipeline for C$4.5 billion. Purchase of the existing pipeline, expansion project and related infrastructure was finalized in August 2018.

Many Canadians (including environmentalists and Indigenous groups) opposed this extraordinary purchase. The Liberal government had come to power in 2015 with promises of addressing climate change and reconciliation with Indigenous Peoples. TMX opponents emphasized the inconsistency of the federal government’s purchase of the pipeline project (which would enable tar sands expansion) with its self-proclaimed positioning as a climate leader.

As of early 2021, TMX was only 20% complete and remains highly controversial as tar sands producers face increasingly challenging economic prospects. Moreover, in February 2020, the federal government announced that the estimated cost for the project had increased by 70% (from C$7.4 billlion to C$12.6 billion – or $5.2 billion more than the original estimate). In addition to the significant cost overruns, public opposition and legal challenges, construction of the project has also been characterized by major delays and safety problems.

Since TGG released our expert report on TMX, the economic case for the project has worsened due to project cost overruns, as well as evolving market conditions identified in our report as major factors affecting TMX . Since 2014, crude prices have been significantly lower and tar sands production growth has slowed and continues to be much lower than forecast. See also Keystone XL Market Analysis for more discussion of the shifting and challenging market conditions for Alberta tar sands.

It is especially notable that Kinder Morgan was unwilling to proceed with the project in 2018, nor could the project be sold to another private sector company. TGG concludes that the only reason the project is now going forward is because the federal government bought the pipeline and is proceeding with TMX despite cost overruns and other problems.

In September 2020, over 100 economists and other experts signed a letter to the federal government, questioning the economic fundamentals of the project in a decarbonizing world. They urged the federal government to undertake an up-to-date cost-benefit analysis of TMX. TGG was a signatory of the letter. We have been warning about the weak (and worsening) economic fundamentals of TMX since 2014.

Given that the federal government did not undertake such an analysis, Thomas Gunton and researchers from Simon Fraser University published their own updated cost-benefit study in March 2021: Evaluation of the Trans Mountain Expansion Project. The study validated TGG’s conclusions from 2014 that TMX is neither in the economic nor public interest of BC. In light of the weakening economic case for TMX, the study concluded that Canada could lose between C$3.2-billion and C$18.5-billion. Moreover, according to the SFU analysis, there is no likely scenario in which the project could yield a net benefit for Canada.

The Canada Energy Regulator (CER, the NEB’s successor for energy regulation) has also provided further validation of the weakening economic case for TMX. The CER released a report in late November 2020 projecting that if Canada strengthens its climate policies, there will be no need for Keystone XL or the Trans Mountain Expansion Project to export tar sands crude.

Over six years after the original release of TGG’s expert report on TMX, our conclusions continue to be relevant: the economic benefits of the pipeline remain very small for BC and Vancouver, whereas the worst-case costs of a catastrophic spill remain very large. TMX is now owned by the federal government, and the weak economic case for Canada (and taxpayers) has worsened due to:

significant cost overruns and delays in the construction of TMX, and
lower crude prices and reduced growth in Canadian tar sands, buttressed by climate concerns and ongoing impacts relating to the COVID-19 pandemic.