Carney says oilsands producers will likely invest to fill proposed Pacific Link pipeline

The Story

Prime Minister Mark Carney said Thursday that oilsands producers are likely to be interested in spending to help fill the proposed Pacific Link pipeline.

Speaking at a news conference in the oilsands epicentre of Fort McMurray, Alta., Carney said Pacific Link would be a “tremendous opportunity” for producers by giving additional access to Asian markets that could pay higher prices for Canadian crude.

Carney said narrowing the price gap between Alberta heavy crude and globally traded light crude would amount to a $6-billion annual boost to industry, according to his remarks.

He pointed to measures his government has taken to encourage investment, including streamlining regulatory reviews so projects can reach “the right answer on time,” and expanding business tax incentives to allow companies to recoup costs on a broader array of investments.

Carney also noted that the five largest oilsands producers are planning to build the Pathways carbon storage project in Alberta, describing it as a condition for the pipeline moving forward and vice versa.

Details provided with the pipeline designation say Alberta submitted its application in July to Ottawa’s major projects office, which was created last year to speed up infrastructure identified as being in Canada’s national interest.

The pipeline is estimated to cost between $35.2 billion and $43.7 billion, with Alberta and the federal government splitting 90 per cent of the project and Pembina Pipeline Corp. holding the rest, according to the materials referenced.

If built, the line would run from Bruderheim, Alta., to a marine export terminal planned for Delta, B.C., and an explanatory note accompanying the designation says producers have the financial wherewithal to fund a “significant share” of the growth needed to fill it.

The note also says demand on the other end of the pipeline is expected to be “resilient,” citing continued interest from markets such as China, India, South Korea and Japan in reliable heavy crude supplies, and adding that long-term contracts would be needed for certainty.

The project partners said in the spring they aim to hold an “open season” to solicit bids from customers for service and allocate space on the pipeline accordingly.

The federal cabinet order and explanatory materials were described as concluding that companies and government partners support meaningful demand exists.

Lance Mortlock, managing partner at EY Canada, said there is a “chicken and egg” challenge involving building the pipeline while growing oilsands production that would fill it, adding that producers have shied away from big-ticket investments in recent years in part due to pipeline capacity constraints.

Mortlock said industry is now starting work to determine what assets to develop, their likely scale and the sequence of those assets.

Environmental Defence characterized the pipeline as “a reckless waste of Canadians’ money,” and said it could not be in service until well beyond the peak of global oil demand.

Emilia Belliveau, Environmental Defence’s energy transition program manager, said the group believes no new buyers will emerge for more Canadian oil and criticized the pipeline as contributing to further climate change costs.

Stand.earth described the pipeline as a “money pit pipeline,” and the Pembina Institute called it an “expensive gamble on a single export product with a doubtful future.”