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Canadian Prime Minister Justin Trudeau (left), American President-elect Donald Trump. Photo: CBC.

Trans Mountain Expansion, Line 3, Keystone XL, Energy East approved or in play – but will Mr. Grinch spoil the festive mood?

Christmas came early for the Canadian oil and gas industry, which only a few months ago was worried about a looming shortage of pipeline capacity, but now may have more than it needs, thanks to several approvals by Ottawa and the election of Donald Trump.

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Tim McMillan, CAPP president.

The Canadian Association of Petroleum Producers made industry’s case for new pipelines in a late June press release.

“The need to build new energy infrastructure within Canada is clearly urgent,” said CEO Tim McMillan. “Connecting Canadian supply to new and growing markets abroad, safely and competitively, is a top priority.”

Here’s the pipeline math, courtesy of CAPP.

Current capacity is about 4 million b/d and average Canadian production in 2015 is 3.981 million b/d, not leaving any excess room in the system.

Around 850,000 additional b/d of oil sands supply will be be brought on stream by 2021.

Between 2021 and 2030 supply will grow by more than 700,000 b/d.

Include diluent, which makes up about 30 per cent of the volume for transported bitumen, and the total supply by 2030 will be 5.5 million b/d.

If no new pipelines are built, Canada will be short about 1.6 million b/d of capacity only 13 years from now.

Fortunately, things are looking up.

In late Nov., Prime Minister Justin Trudeau announced the green lighting of the Trans Mountain Expansion (525,000 b/d to the West Coast) and the replacement of Line 3 (370,000 b/d of restored capacity).

The Energy East pipelines (1.1 million b/d) began its review by the National Energy Board earlier this year.

And yesterday Trudeau said he has spoken to President-elect Trump, who raised the subject of building the Keystone XL project (830,000 b/d), rejected by President Barack in 2015.

By my reckoning, all that total new pipeline capacity would equal 2.825 million b/d, almost double CAPP’s estimate of what is required by 2030.

Even if Energy East, controversial in Quebec, isn’t approved by the NEB, Canadian oil producers will still be comfortably situated if the other projects proceed.

Now, as critics point out, there is many slip betwixt cup and lip.

Trans Mountain Expansion is expected to be an epic political fight in British Columbia. There are close ties between the Standing Rock Sioux, who attracted over 5,000 supporters to their battle over the Dakota Access pipeline, and Canadian First Nations. A Standing Rock-type opposition to the Kinder Morgan pipeline is anticipated and the  Canadian government has already put activists on alert that it will not tolerate illegal acts.

Keystone XL engendered a huge protest movement in the latter part of last decade, essentially revitalizing the American environmental movement. Eco-activists thought they had won that battle. But during the American election campaign, Republican presidential candidate Trump promised to revisit the project if elected.

It appears he intends to follow through on that promise.

And while Energy East is only just out of the starting gate, already Canadian eco-activists and First Nations are attacking it, supported by Quebec politicians like Montreal Mayor Denis Coderre.

The political battle around these pipelines promises to be loud and angry and long.

You can still be a mean one, Mr. Grinch.

The Canadian government is ready. Canadian Natural Resources Minister Jim Carr says Ottawa has consulted with First Nations and will continue doing so, has brought in climate mitigation policies (e.g. national carbon tax) to support a long-term transition to low-carbon energy, and has the support of a majority of voters.

The Alberta government is ready. NDP Premier Rachel Notley has implemented her own climate agenda (e.g. province-wide carbon tax, 100 mega-tonne oil sands emission cap), in part to earn political legitimacy for more pipelines and expanded oil sands production.

The American government has Trump. The New York real estate developer and reality TV star has stacked his transition team and cabinet with deeply conservative, pro-business nominees. Trump promised on the campaign trail that he would roll back Obama Administration regulations and restrictions on the American oil and gas industry.

He appears to be spoiling for a fight with eco-activists and no doubt he will get it.

So, the table is set.

A betting man would probably handicap the pipeline projects like this:

100%               Trans Mountain Expansion: The Canadian government is too committed to lose.
100%               Line 3: Little public opposition thus far, eco-activist focus will be on other projects.
80-90%          Keystone XL: Does TransCanada still have the stomach for the fight? We’ll see.
75%                 Energy East: With KXL back on the table, does EE still make sense?

As Americans and Canadians prepare to celebrate the New Year, the oil and gas industry on both sides of the border has reason to rejoice more than in the past few years. Particularly the northern partners.

But before oil sands producers are allowed to unwrap Santa’s generous presents, there is plenty of time for bad strategy, disastrous communications stumbles, and clumsy politics – the Mr. Grinch of the Canadian industry.

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