Alberta proposes new pipeline, but hurdles to construction, profitability remain

Alberta Premier Danielle Smith and Prime Minister Mark Carney have submitted a proposal for a new oil pipeline to the federal government's Major Projects Office. They champion the project as a "project in the national interest" that will create "transformational wealth" and tens of thousands of jobs.

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Are they going to have actual customers? Are the major oil sands producer is going to commit to it, to ultimately produce the incremental oil, as much as a million barrels a day, to fill up this pipeline? Do they have the competitive conditions that are available to them to make those investments so they can take on the long-term commitment to use this pipeline?

The proposed pipeline would run alongside the existing Trans Mountain pipeline, aiming to pump over a million barrels of oil daily for export to Asian markets. Carney stated it would "unlock Alberta’s energy for the world," potentially attracting billions in investment.

However, the project faces considerable skepticism. "Are they going to have actual customers? Are the major oil sands producers going to commit to it?" questioned Dennis McConaghy, a retired energy executive. He highlighted unresolved issues regarding producer commitments and competitive investment conditions.

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My rough calculation says the toll might be 50 to 60 per cent higher than the existing Trans Mountain system.

Concerns about cost and profitability are also prominent. The Trans Mountain expansion cost taxpayers over $34 billion. Richard Masson, former CEO of the Alberta Petroleum Marketing Commission, estimates the new pipeline's tolls could be 50-60% higher than the existing system. He pointed to other pipeline expansions already underway, such as Trans Mountain's expansion, Enbridge's system, and the resurrected Keystone XL, which collectively offer over a million barrels per day capacity with potentially lower risk and quicker timelines.

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We have Trans Mountain expanding the existing pipeline (by) 300,000 barrels a day, Enbridge 400,000, barrels a day on its system, South Bow 500-plus-thousand barrels a day resurrecting the Keystone XL, so that’s over a million barrels a day right now. That is lower risk and probably quicker and cheaper than this big new proposal.