5 questions about Trans Mountain

Large crowd marching with signs and banners opposing Trans Mountain

Today Trans Mountain commenced operations on its new expanded oil pipeline system (TMX). It is a solemn day for us at West Coast Environmental Law, as we have been part of the massive social movement opposing this megaproject for more than 10 years, fighting for climate action, land and water protection, and Indigenous self-determination. 

This social movement has over time encompassed intertwined campaigns to address the now defunct Enbridge Northern Gateway, Energy East and Keystone XL oil infrastructure projects, creating momentum for stronger climate policy, more robust Canadian environmental laws, a north Pacific coast oil tanker ban, and greater recognition of Indigenous rights along the way. We honour the leadership of our long-standing client the Tsleil-Waututh Nation within this movement, alongside so many other Nations, local communities, civil society groups and people of all walks of life.

Today though, we are grieving TMX. This costly white elephant, designed to facilitate the production and export of tar sands oil, is commencing operations without the consent of Tsleil-Waututh (whose territories encompass the pipeline and tanker terminus in Burrard Inlet) and ultimately at taxpayers’ expense. In a rapidly warming world, TMX lays bare how far the gap between talk and action can be, and belies Canada’s commitments to climate action and the United Nations Declaration on the Rights of Indigenous Peoples. 

It hurts my heart to think about all the increased risks that my hometown of Burnaby and the province of BC now face with TMX coming online. The sevenfold increase in tanker traffic will dramatically increase the likelihood of a catastrophic oil spill that would devastate Burrard Inlet and release clouds of toxic gases that would instantly make the residents of the Lower Mainland sick. 

This is not a theoretical thought experiment. Just a few months ago, Metro Vancouver residents experienced the disorienting and nauseating impacts of the Parkland refinery’s accidental release of gases that was experienced from Coquitlam to Kitsilano, resulting in a Public Safety Advisory and a Special Air Quality Warning.

In short, most of the TMX-related risks that had been identified over the past decade have not been meaningfully addressed. This includes obvious risks like the increased likelihood of an oil spill on land or water, as well as other important safety concerns – like whether the design of the Burnaby Mountain tank farm can withstand an earthquake, and the difficulty of responding to a potential catastrophic fire, as the Burnaby Fire Chief has warned.

There are still a number of important questions to be answered about the Trans Mountain pipeline that will determine its historic legacy. These include:

1. What will the final construction cost be? 

The initial cost estimate in 2013 was $5.4 billion. Today it is roughly $35 billion. We should find out the total cost in the next year or so.

2. Who will pay for the $35+ billion pipeline?

Trans Mountain has borrowed $17 billion from Canadian taxpayers and another $18 billion from a syndicate of banks, backed by a federal government loan guarantee.

Trans Mountain has applied to the Canada Energy Regulator (CER) for approval of an interim toll that would recover less than half of the construction cost, leaving the rest for its owners, the Canadian public, to absorb.   
This either means that the oil companies pay more for the pipeline via higher tolls (oil companies are the pipeline’s only customers), or the owners (the Canadian public) eat $15-20 billion in losses or write downs.

In 2022 we released a report that analyzed Trans Mountain’s financial statements and predicted that Finance Minister Chrystia Freeland would write off $17 billion in debt owed by Trans Mountain back to the Canadian public. The report also found that the Crown corporation was distorting its full financial picture by using shell companies and accounting magic.

Expect any write down by Minister Freeland or Prime Minister Trudeau to be spun as some sort of “economic reconciliation” if they sell it to an Indigenous-led group. But let’s be clear: this would be a massive subsidy to the oil industry.

3. Can the Canada Energy Regulator (CER) credibly approve a toll that covers less than half of the cost of construction without distorting the oil transportation market?

The oil company shippers are already complaining that Trans Mountain’s tolls are too high, even though they represent a more than 50% discount. The CER’s interim toll hearing will continue into 2025. Among the list of issues under consideration by the CER is whether the tolling methodology that was approved in 2013 still produces just and reasonable rates with a construction cost that is more than six times the original estimate. If they determine that the tolls are no longer just and reasonable, then Trans Mountain will have to renegotiate a toll methodology with its oil company customers.

4. How long before Trans Mountain becomes a stranded asset?

The climate crisis requires a reduction in oil production and consumption. The CER, as well as the International Energy Agency have forecasted that oil demand will decline as a result of the climate crisis and corresponding policies. Generally speaking, it will be the lowest quality and most expensive oil that will be the least desired – and the diluted bitumen that is meant to flow through Trans Mountain is among the most expensive and poorest quality in the world.

5. Will Trans Mountain go down in history as Prime Minister Trudeau’s most expensive mistake?

Approving Trans Mountain was supposed to bolster the federal government’s support in Alberta and secure stronger climate policies. How did that go?

In addition to the massive amounts of money spent to build the pipeline, the government also expended reams of political capital to push it through. It is interesting to note that most of the Cabinet ministers who oversaw the Trans Mountain file – from Jim Carr to Bill Morneau to Amarjeet Sohi – are no longer in federal politics.

It is still unknown what the political cost to Minister Freeland or Prime Minister Trudeau will be for writing off $15-20 billion of debt owed back to taxpayers. A national poll by Nanos research in October 2023 found that 68% of Canadians oppose writing off Trans Mountain’s debt, while 60% said oil companies should pay for most of TMX. The average subsidy that was acceptable to Canadians was 16%, or $5.6 billion, based on the $35 billion budget.

Reflecting on these questions leaves us with little doubt that history will not remember this moment kindly. For our supporters who have been with us along the journey so far: thank you. Please take a pause to grieve and rest up, because we have a lot more work to do to fight for a clean, safe and just planet.

Top photo: Ian MacKenzie

Eugene Kung, Staff Lawyer