Study finds ‘no likely scenario’ in which TMX generates net benefits for Canada

Money would be better spent on alternative energy or well rehabilitation to create jobs, says researcher
Photo: Tanker passing under the Lions Gate Bridge in Vancouver. (Ross / Flickr)
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Shelving the Trans Mountain Expansion project should be a no-brainer, according to a team of researchers from B.C. A new study from Simon Fraser University predicts that completion of TMX would likely create a net cost to the federal government of $11.9 billion, and that could rise as high as $18.5 billion under different scenarios.

“We could find no likely scenario [under] which this project would generate net benefits for Canada,” said Dr. Tom Gunton, the study’s lead author and director of SFU’s Resource and Environmental Planning Program.

For Gunton, the figure is not surprising.

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The TMX project would twin the existing Alberta-B.C. Trans Mountain pipeline and almost triple its delivery capacity to 890,000 barrels of oil a day. But Gunton pointed out that market conditions have changed since the project’s announcement in 2012, with the implementation of climate policies in Canada and around the world reducing the demand for oil.

“The government is better off shelving the project.”

The project’s cost has also jumped from $5.4 billion to at least $12.6 billion. Gunton noted this would make it difficult to fully recover the investment on TMX because the approved tolls to use the pipeline were based on the $7.4 billion cost estimate in 2017.

And with TMX expected to increase tanker traffic sevenfold, he said there are plenty of environmental risks. The study puts the probability of a tanker spill over a 50-year operating period between 43 and 75 per cent — and that could cost as much as $2.6 billion.

“The government is better off shelving the project,” Gunton said.

“It could take that money and use it for more useful investments. For example, to help Alberta’s economy recover, it could invest in growth sectors like hydrogen or use it to rehabilitate oil wells, which would create jobs.”

Trans Mountain said in a statement to Ricochet that the project rationale remains as “compelling” as when TMX was announced. The company added that 80 per cent of the pipeline capacity has been secured in take-or-pay contracts for the next 15 to 20 years, and the expansion could create a net cash flow of at least $1.3 billion per year.

Its statement also notes that despite a voluntary work stoppage from December 2020 to February 2021 due to one worker’s death and serious injuries to another, there is no change to the $12.6 billion cost and the December 2022 in-service date.

Their persistence to pour more money into an oil pipeline when the world is shifting away from fossil fuels, it really does not make a lot of sense.”

Meanwhile, the federal government — which bought TMX in 2018 — is confident that the project is “a responsible investment for Canadians,” Katherine Cuplinskas, press secretary for Finance Minister Chrystia Freeland, said in a statement to Ricochet.

Cuplinskas reiterated that Ottawa does not plan to be the pipeline’s long-term owner and would sell it once it is “further de-risked and after engagement with Indigenous groups has concluded.”

Growing wave of direct action

But while some Indigenous groups are in talks to buy the pipeline, there has also long been fierce Indigenous-led resistance to TMX. Even with no more options for a legal challenge, there has been a growing wave of direct action by Indigenous land defenders and environmental groups in the Lower Mainland in recent weeks. Some have faced violent arrests.

And the SFU study is not the first report to question TMX’s viability.

In late 2020, a Canadian Energy Regulator report said that neither Keystone XL nor TMX would be needed if Canada implemented more aggressive climate policies.

The Office of the Parliamentary Budget Officer has also raised concerns about the TMX pipeline’s profitability, especially if more climate actions are implemented to reach Canada’s net-zero emissions target by 2050. If the pipeline system is no longer in operation by 2050, it could mean a $1.5 billion loss.

“Governments are reluctant to admit mistakes and they’re reluctant to change course,” Gunton said.

“But the circumstances have changed so much — and the government itself, by adopting climate change policies and the carbon tax, has shifted direction. Their persistence to pour more money into an oil pipeline when the world is shifting away from fossil fuels, it really does not make a lot of sense.”

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