For the last decade, the Trans Mountain pipeline has been like the kid that just keeps asking their parents for more money. Today, it finally has something to show for all that cash.
What happened: The Trans Mountain pipeline expansion (TMX) officially launches operations today, a long-awaited feat that promises to boost Canadian oil exports and marks the finish of Canada’s most expensive — and frequently delayed — infrastructure project.
- Crude exports to oil refineries in Western U.S. states and Asia are expected to nearly triple once the pipeline is fully operational.
- The now-government-owned pipeline comes into the picture during a year when Canadian oil production is expected to hit a record high.
Catch-up: After initially breaking ground as a private venture, the pipeline expansion faced a litany of regulatory and financial stumbles and was ultimately bought by the feds in 2018 for $4.5 billion.
- That didn’t save the project from more setbacks. Beset by forest fires, difficult terrain, and alleged mismanagement, the final price tag has now more than quadrupled to $34 billion.
Why it matters: Despite all that, the new pipeline is still expected to be a net winner for Canada’s economy. University of Calgary economist Trevor Tombe estimates the project will be profitable to the tune of $4.2 billion to $8.6 billion over the next 20 years.
- More broadly, TMX is expected to add $9.2 billion to Canada’s GDP and generate $2.8 billion in tax revenue over the next 20 years.
Yes, but: Some critics worry that when overall oil demand falls, the lower-quality Canadian crude will become less attractive in global markets, and TMX could become a “stranded asset” — a costly piece of infrastructure that loses much of its value.
Bottom line: The pipeline expansion will be a nice buoy for Canada’s economy in the short term, but the real question of if it was a worthwhile investment will take years to answer.—LA