Providing coverage of Alaska and northern Canada's oil and gas industry
December 2019

Vol. 24, No.50 Week of December 15, 2019

Horgan: Province’s legal fight with TM expansion has "run its course"

Gary Park

for Petroleum News

British Columbia Premier John Horgan sent the clearest message yet to the backers of the Trans Mountain pipeline expansion that they can go ahead with their C$7.4 billion project to ship crude bitumen from Alberta across his province to a tanker terminal in Vancouver.

“We believe that the court cases, our participation in the litigation, has run its course, save and except for our case” to determine whether B.C. has the authority to regulate increased interprovincial shipments of heavy crude through pipelines, he told a national news conference on Dec. 4.

That concession made it clear that B.C. has run up its surrender flag, regardless of a pending Supreme Court of Canada ruling expected early in 2020 that is likely to leave only some indigenous communities and environmentalists to continue the battle.

However, Horgan appears to have backed away from his earlier pledge to “use every tool in our toolbox” to litigate against TMX, effectively blaming the previous B.C. government for dragging his New Democratic Party administration into the legal arena.

“We entered into (those existing actions). Most of them have run their course. Now there are indigenous peoples who are still in court with Trans Mountain. We’re not participating in those cases,” he said.

For TMX that retreat was taken as a green light to make an official start on laying pipe in Alberta in anticipation of construction work extending into B.C. next spring.

“If everything goes according to plan, and nothing has for 10 years ... we will be finished in mid- to third quarter of 2022,” said Trans Mountain Chief Executive Officer Ian Anderson.

Positive news for TC Energy

At the same time, there was positive news on TC Energy’s C$6.6 billion Coastal GasLink from northeastern British Columbia’s Montney shale formation to the C$40 billion LNG Canada liquefaction facility and tanker terminal at Kitimat.

Coastal President David Pfeiffer said the project was about to start taking delivery of pipe from Japan, India and Saskatchewan for the 500-mile link that is targeted for an in-service date by the end of 2023, allowing LNG Canada to start exporting LNG to Asia in early 2025.

The consortium led by Royal Dutch Shell expects to have initial capacity of 2.1 billion cubic feet per day, with potential expansion to 5 bcf per day.

The undertaking expects to employ 2,500 construction workers and has the support of all 20 elected First Nations along the route, leaving only hereditary chiefs of the Wet’suwet’en opposed.

Undeterred, Pfeiffer said Coastal has established a “great milestone” by stockpiling pipe to launching construction next summer and “is progressing on schedule right now.”

TMX a different story

That level of comfort doesn’t extend to TMX, where threats of protest and job-site disruption hang over the project, despite invitations from TMX for First Nations to seek equity stakes in the pipeline.

But the start of work in Alberta was seized on by the Canadian government (which owns Trans Mountain and the expansion) and Alberta.

Seamus O’Regan, Canada’s newly appointed natural resources minister, said that with “more hard work and goodwill and a continued commitment to getting things done the right way, (TMX) will be completed.”

Alberta Energy Minister Sonya Savage said the progress on TMX and the prospect of Enbridge completing its Line 3 top the U.S. Midwest is a “key to bringing back investment (to Alberta) and that’s the key to bringing back jobs.”

The Canada Energy Regulator, CER, reinforced the outlook for crude and LNG exports by unveiling a new long-term outlook showing Canada’s crude production could grow by 50% by 2040 to around 7 million barrels per day, while natural gas could grow by 30%, mostly to fuel thermal oil sands development.

Mark Oberstoetter, of the consulting firm Wood Mackenzie, lowered his forecast to 5.5 million bpd by 2040, highlighting that the resource base is available, although CER’s prediction “does not line up with our most-likely view.”

Neither prediction makes any allowance for the Canadian government’s new pledge to reduce Canada’s net greenhouse gas emissions to zero by 2050.

Measured capital spending

The industry continues taking a measured approach to capital spending, with Husky Energy announcing plans to cut C$500 million to its budget over the next two years, targeting C$3.2 billion in 2020 and C$3.4 billion in 2021, while oil sands giant Suncor Energy set a range of C$5.4 billion-C$6 billion in 2020 (up 11% from 2019), although it is keeping oil-related spending flat next year.

“We do not have a strong oil price environment, in our view, going forward,” said Ian Nieboer, managing director of RS Energy Group. “The ability to grow and the incentive to grow on the oil side is limited.”


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