Chamber: TransMountain cancellation and what it would mean for Central Alberta

Last week Kinder Morgan announced they were halting all unnecessary spending on the TransMountain pipeline expansion project in response to ongoing uncertainty caused by the government of British Columbia. If there is not a guarantee of no more government caused delays by May 31st Kinder Morgan will cancel the project altogether.

That would be a disaster economically and incur a constitutional crisis as a federally approved project was allowed to be derailed by the NDP government of B.C. Here in Central Alberta the economic and financial impact will be especially painful and felt for years to come if the pipeline does not get built.

No new pipeline is effectively placing a cap on the amount of oil and gas companies can extract. Without increased pipeline capacity existing energy companies will have little incentive to invest. With the uncertainty this has caused Canada will struggle to attract major projects in the future. Investment will flow to the U.S. where certainty is higher, costs are lower and there are fewer regulations. Exploration and drilling programs will be scaled back and with it, the need for servicing and manufacturing. Rail lines will continue to be dominated by oil cars and the agriculture sector will suffer for it.

The rate of population and economic growth in our region has been directly linked to the prosperity of the oil and gas sector, specifically the service and manufacturing industries. So are the livelihoods of tens of thousands Central Albertans that have pursued highly skilled and well paying careers in the energy industry.

Late in 2016 Finning Canada closed the Centre of Excellence in Red Deer. It was estimated that around 200 jobs would be lost, all highly skilled and well-paid. Much of the work in the facility was focused around the building and refurbishment of equipment used in the oil sands. Fortunately many of the workers were able to be redeployed or found comparable work. While Finning chose not to disclose their reason for its closure, it’s reasonable to infer that the lack of market access and prospect for growth of the Alberta oil sector played a major role in their decision.

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Compounding the problem is the growing production of fossil fuels in the United States. In 2007 the United States produced enough to meet 66% of their consumption needs. In 2017 that number rose to 87%. Many predict that in another 10 years the United States will become a net exporter. In a few short years our biggest customer is quickly becoming our biggest competitor.

This pressure is already being felt as capital expenditures for drilling and exploration programs are being redirected from Alberta to the US. We’re seeing this in rig utilization rates, employment data, as well as hearing directly from local businesses that they seeking greener pastures south of the border where the economy is booming, permitting is faster, regulations are lower and they of course have market access for their goods.

Often neglected is the impact our overcapacity pipelines are having on our agriculture sector.

With energy companies having no option other than rail to get their product to market, a significant portion of rail capacity has been commandeered for that purpose. And unfortunately as many have opined, “you can’t ship grain in a pipeline.” With our rail duopoly already operating at their maximum capacity, this has left many Canadian farmers high and dry as they struggle to get their products out of the bins.

In Q3 grain deliveries were down about 15 per cent from this time last year. As grain risks beginning to rot in the bins, our farmers are left cash-poor as they prepare for the upcoming growing season, striking yet another blow to the economy of Central Alberta.

Our provincial government has taken action in an attempt to resolve this crisis while our federal government says a lot while doing very little. If the TransMountain pipeline is not built it will clearly demonstrate to investors that the Canadian regulatory and approval process is meaningless and we are not open for business – a disgrace that will scare investment away from Canada for years.

So with this much on the line for our region, what can we do? Talk to your friends and family who live in B.C. and federal Liberal ridings. Ask them to contact their MLAs and MPs and share support for action that will see this critical piece of infrastructure built. Our future depends on it.