Trans Mountain expansion has delivered so far on some profitable promises, report suggests

January 23, 2025 Canuck

A recently released report compiled by a local economist suggests the oil sector is already seeing some of the promised benefits from the contentious Trans Mountain Pipeline expansion just six months after its completion.

Calgary-based Charles St-Arnaud, chief economist with Alberta Central, says expanding the pipeline has reduced the price differential between the Canadian price of oil — known as Western Canada Select (WCS) — and the U.S. benchmark price, West Texas Intermediate (WTI).

According to his report, that gap narrowed by about $8 US per barrel at the tail end of 2024. He says this is much lower than previous years, and that narrowing the spread is a good sign for Alberta’s economy.

“When we look at the sum of how much revenue that could be valued, it’s about $10 billion Cdn in extra revenue,” said St-Arnaud.

“It’s like if suddenly we had a 13th month of production in 2024. So it’s a decent increase in revenue, and it matters because we’re in a province where a lot of our fiscal revenues depend on royalties from oil and gas.”

At the end of August, the province’s first-quarter fiscal update showed the Alberta government expects the average WTI price to be $76.50 US, up $2.50 US a barrel from what was originally forecast in its initial budget.

Because Alberta’s economy is relying heavily on the price of oil, St-Arnaud says the Trans Mountain pipeline expansion (TMX) is already proving to be significantly beneficial.

In an email statement to CBC News sent Monday, the office of Alberta’s Minister of Energy and Minerals Brian Jean said this report shows the importance of getting Canadian energy to tidewater to meet global demand and the goal of doubling production.

Asset value

When the federal Liberal government took over the TMX — which was plagued by cost overruns and project delays — some worried it would be a financial disaster and they’d be building a pipeline that would be impossible to sell.

One oil and gas analyst says numbers like those indicated by St-Arnaud’s report have the power to shift that narrative.

Richard Masson, executive fellow with the University of Calgary School of Public Policy and former CEO of the Alberta Petroleum Marketing Commission, says the strong numbers indicated by the report prove the value of an asset like this to potential buyers.

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He explains the strategic arguments behind the Trans Mountain expansion were narrowing the differential and having greater access to international markets, which are both difficult projections to make, but that St-Arnaud’s report indicates have been delivered on to some degree.

That said, Masson says the pipeline’s profitability won’t change the narrative completely.

“Unfortunately, in my mind, the negative experience that came out of all of that with the higher cost and delays means it’s going to be very difficult to get more pipelines built,” he said.

Overall, Masson says that in order for the government to get the full value for the sale of TMX, Canada is going to have to remain competitive in the North American market, which could be challenging with U.S. President Donald Trump in office.

Non-U.S. oil exports

Canada has the world’s third largest oil reserves, but the majority of its exports go to refiners in the United States. The Trans Mountain pipeline expansion promised to allow Canada to diversify oil markets and vastly increase exports to Asia, where it could command a higher price.

Charles St-Arnaud is the chief economist at Alberta Central, a group representing credit unions in the province. (Submitted by Charles St-Arnaud)

St-Arnaud’s report notes that since the expanded TMX came online, there was an increase in non-U.S. oil exports, rising from about 2.5 per cent of total exports to about 6.5 per cent.

According to data from the Canada Energy Regulator (CER) supplied to CBC News, the Trans Mountain expansion has been exporting about 600,000 barrels per day (bpd) of Canadian crude, based on data from June to September.

Once that crude reaches the B.C. Lower Mainland, about 40 per cent of it (235,000 bpd) goes directly to the U.S. through pipeline via the Sumas Delivery Point. Meanwhile, the remaining 60 per cent goes to the Westridge Marine Terminal in Burnaby, B.C., for export aboard oil tankers.

About half of this amount goes to Asia, and the other half to the U.S. West Coast, according to CER figures from June to November. However, the regulator says these numbers vary on a month-to-month basis, and the agency should have a better idea of how much crude is being exported to where after the complete 2024 export data becomes available in the coming months.

TMX and tariffs

Another key aspect of the Alberta Central report is the idea that U.S. imposed tariffs — which Trump has mused would land on Feb. 1 — could reverse the pipeline’s profitable trend.

When asked for a comment on St-Arnaud’s report, Lisa Baiton, president and CEO of the Canadian Association of Petroleum Producers (CAPP), says the greater access to global markets provides producers additional opportunities and enables Canada to play a bigger role in energy security.

“Canada must wake up to the reality that we need to diversify our global customer base to build a more prosperous and resilient economy,” reads the statement.

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