Alberta trying to find route more ‘economically viable’: analyst on Ottawa’s proposed pipeline report

Richard Masson, former CEO of the Alberta Petroleum Marketing Commission, on Alberta Primetime discussing potential routes for a new pipeline.

A report by the Globe and Mail suggests Ottawa prefers a southern route for a proposed pipeline at the heart of the memorandum of understanding (MOU) with Alberta. Richard Masson, former CEO of the Alberta Petroleum Marketing Commission joins Alberta Primetime’s Michael Higgins to discuss how this could impact the federal government’s relationship with the United Conservative Party.

This interview has been edited for clarity and length.

Michael Higgins: The Globe and Mail based its coverage on information from a pair of unnamed federal sources, but was it surprising to see the emergence of this particular messaging around Ottawa eyeing a southern route?

Richard Masson: Not very surprised. We’ve been having some conversations about this for a few months now. There have been a number of folks saying that maybe this is a better way to go. Trying to remove the tanker ban probably presents lots of uncertainty. It could easily get tied up in court by those Indigenous groups that have some traditional rights in that area and that doesn’t help move a pipeline forward.

So people have been looking at the southern route along the existing trans mountain corridor potentially with a different terminus, maybe at Roberts Bank, to be an alternative route. Something that could get done with less conflict and maybe quicker.

MH: How do you see this changing dynamics around the MOU and the work the Smith government is already in the process of doing and pursuing with the pipeline pitch?

RM: I think the MOU said that the West Coast pipeline could require the tanker ban to be amended, but it didn’t say it would be amended because, if left open, where’s the actual pipe going to be? We haven’t heard any proposal yet from a private company or from anybody about where it would go.

I think that what Alberta is trying to do is find a route that could be viable, right? It needs to be economically viable meaning that cost has to be reasonable, the tariff has to be competitive with other pipelines, like the existing Trans Mountain and the expansion of it. It needs to have producer support as shippers, it needs to have Indigenous support, it needs to have regulatory certainty to allow it to happen on a reasonable timeframe, and you have to look at the pros and cons of all those things.

The amount of money Alberta’s put in I think is $14 million which is a very high level scoping study. To this point, it’s not anywhere close to a full application for a pipeline, so we’ll just have to see what happens as we move forward here.

MH: Much of the discussion to this point seems to be focused on a pipeline that would go up to the northwest coast. Is that a preferable option from where the energy industry is concerned, even where the Alberta government is concerned? Or is it up in the air?

RM: On paper, the northern route looks good because it’s got a deep water port, it’s relatively open water to get to Asia, you can take very large Crude Carriers, two-million barrel tankers in there, so on paper it looks good. But the route to get there is very difficult. You have to go through some very challenging mountain terrain, the river is very wide, it’s hard to get past.

When Enbridge looked at Gateway, they chose not to go to Prince Rupert. They chose to go to Kitimat, which is on a long channel. That created a whole bunch of concerns for Indigenous groups in that area. They were afraid and thinking “what happens if a tanker runs aground in one of these channels and the oil follows that channel?”

Now Alberta, I think, is looking at Prince Rupert as well as two channels that are north of Prince Rupert. I’m sure there’s pros and cons to all of those. I haven’t got any particular information, but it does make a challenging pipeline construction if you’re going to go to any of those places.

MH: If it is a southern route, how straightforward is building another pipeline along, say, the current TMX route?

RM: That’s the potential. The trans mountain pipelines operated safely since the 50s. We expanded it by twinning it with a bigger piece of pipe next to it over the last number of years. Of course, it took too long and cost too much, but we had relationships put in place with many Indigenous groups and local communities. “Impacted Benefit Agreements” they call it, where now they’re earning revenue for hosting that pipeline.

So there’s a lot of work that’s already done, environmental work, studies, all those kinds of things that could help the new pipeline move quicker. That’s one of the benefits. When people are more familiar with it and used to something, it’s less scary and I think that could be one of the reasons the southern route starts to gain more traction.

MH: Given the Eby government has long maintained a no-go stance for a pipeline to the northwest coast. What strikes you about the comments we heard from Adrian Dix?

RM: The B.C. government has been pretty consistent on this. They view what’s going on in the northern coast; the Prince Rupert area, LNG Canada expansion, the other Cedar LNG; they look at that and say, “there’s a lot of projects happening up there already and we don’t want to upset the apple cart and we don’t want a big fight with Indigenous communities that would make existing billions of dollars of investment stall.” I think they’ve been much more open to a southern route and we’ll just have to see if Alberta is willing to buy into that.

MH: How much do you expect more in the Middle East and the degree of impact that’s having on energy markets and the flow of oil and gas to accelerate private sector embrace now of the Premier’s push for an added pipeline? Do you see dynamics around viability changing regardless of route?

RM: There’s certainly more need for Canada to provide oil to the world. That’s going to carry on for decades following this war, and there’s more value coming to the oil and so companies are going to have more money to spend growing production. Our bottleneck has always been market access and the question becomes, “Can we get a pipeline built?”

These pipelines we’re talking about probably can’t be built in much under 10 years, so they’re not helping the immediate problem. What’s going to help is trans mountain, de-bottlenecking, maybe 250,000 or 300,000 barrels a day and we just got 400,000 barrels a day de-bottlenecking planned, and there’s resurrecting Keystone XL in some form that might add another half a million barrels a day.

Any new pipeline has to compete with all of those things and there has to be enough volume to fill them all for a new pipeline to be viable. I think we’re going to see a lot of new investment coming into the oil industry, a lot of cash flow generated from the higher prices, and we’re going to continue to be talking about market access issues for the coming decade because that’s the bottleneck.

MH: The Alberta government just recently announced new deals involving South Korea, a country which is waiving a three per cent tariff on Canadian oil. What do you see that signaling about expanded demand from Asia, even interest in investment here?

RM: I think the countries in Asia are going to be very desperate to get Canadian oil. Korea is taking off that three per cent tariff, effectively on one-hundred dollar barrel oil, that’s three dollars a barrel. In normal times, shipping oil on the tanker from Canada to Korea is less than three dollars a barrel, so it’s a big deal to take that tariff off. It just shows that they felt that they couldn’t compete well enough against China, who’s become the predominant buyer of oil off the trans mountain pipeline.

They’re changing their system to make sure that they’re more competitive. I think they see us as a reliable, long-term supplier, which we are, and we just need to make sure we work with them and welcome their investment to help make sure we can get our resources to market to help this global need.