Officials have indicated that the government-owned Trans Mountain Corp. (TMX) may remain under federal control for an extended period, with arguments for permanent ownership emerging amid global energy security concerns.
No rush to privatize
Elizabeth Wademan, head of the government body that owns Trans Mountain, stated at an event in Toronto on Monday that the prior narrative of returning the pipeline to private hands belonged to a different market and time. She emphasized that Trans Mountain is a strategically important asset that can continue to add value for Canadians through energy corridors and growth opportunities.
“Let’s look where we are, and look how important energy security is, and look how incredibly profitable this asset is; there’s a lot of merit to holding onto it and realizing that full value,” Wademan said.
Background of government acquisition
The federal government purchased the pipeline and expansion project from Houston-based Kinder Morgan Inc. in 2018 after the company threatened to cancel the project due to opposition from British Columbia’s NDP government. Initially, the government stated it did not intend to be a long-term owner, but construction costs ballooned to approximately $34 billion—more than six times the original estimate of $5.4 billion in 2013.
Mark Maki, CEO of Trans Mountain, attributed the cost overrun to factors including the pandemic, flooding, and multiple layers of regulation. “We made it incredibly hard to get anything done. That needs to be fixed,” he said at the same event.
Optimization and economic impact
Maki noted that the Major Projects Office, formed by Prime Minister Mark Carney to accelerate key energy projects and reduce reliance on the United States, is addressing regulatory issues. “We talked to them a lot about what we learned from the project, and it’s being picked up in either legislation or changes of rules,” he said.
Trans Mountain’s next goal is to optimize the pipeline and increase its transport capacity by 30 percent. In April, the pipeline transported about 850,000 barrels per day. “We need to have more room, and the reason for that is flexibility to markets and so we get a better price for our oil,” Maki explained.
The expanded pipeline has already made a significant impact. Canadian crude traded at a discount for years due to limited global market access, costing Canada about $50 billion over 15 years. In the first year of Trans Mountain’s expanded operations, $13 billion in value was created through a narrowing of the price differential between Canadian Heavy Crude and West Texas Intermediate oil.
Wademan highlighted that the Bank of Canada estimates Trans Mountain contributes roughly a quarter of a percentage point to GDP growth. “These are no marginal effects. They are economically material,” she said.
Future prospects
Wademan suggested that a case can be made for permanent ownership of the pipeline company in partnership with Indigenous groups. The pipeline system currently has the capacity to transport 890,000 barrels of petroleum products daily from Alberta to British Columbia and into Washington State.
The officials’ remarks indicate a shift from earlier plans to divest the asset, reflecting the current geopolitical landscape and the pipeline’s profitability.
