To Build or Not to Build? Trans Mountain’s Case for What Comes Next
With a new Liberal government in Ottawa pledging to “Build Big, Build Bold, Build Now”, Ottawa has opened the door to new oil pipelines being included in its ‘nation-building’ projects list. However, the messaging has shifted over the past few months – leaving industry watching for a clear signal.
It started with early hesitancy back in May – with Prime Minister Mark Carney offering only conditional support – coupling his government’s approval of pipelines with requirements of environmental investments like carbon capture and garnering the support of all affected provinces. In June, the Liberals passed Bill C-5, the One Canadian Economy Act, giving him and his Cabinet new powers to fast-track projects deemed in the national interest. Then in July, during scrums with reporters at Stampede, Carney said it is “highly likely” that a pipeline project would be supported under the new legislative regime.
The absence of a consistent and clear narrative from the Liberals towards private business has, to date, prevented any energy industry proponent from coming forward to build a new inter-provincial pipeline. This contrasts with the Alberta government’s persistent advocacy for increased oil production, export capacity, market diversification, and the removal of perceived regulatory and legislative barriers preventing more projects from being built. Many companies have spoken out in support of Bill C-5 as a good first step, but the existing regulatory and legislative environment still prevents them from making large investments.
This is where a recent report by Alberta Central, a financial group, might sway the debate. The report builds an economic case that could persuade Carney and his Natural Resources Minister, Tim Hodgson, as to what projects get the green light. The report captures the significant economic benefits of the Trans Mountain Pipeline (TMX) and why more pipelines might be part of the fiscal solution to funding Carney’s ambitious spending plans.
In its first year of full operation, the expanded Trans Mountain Pipeline has delivered significant economic benefits to Alberta and Canada as a whole. The report’s findings show an impressive uptick in export diversification, a narrower oil price discount, and roughly CAD$13 billion in additional revenue. To put that into perspective, just one year of the pipeline’s impact to government revenues has paid off almost half of its ballooned $34 billion project cost.
Highlights from the Report’s Analysis
Export diversification soared, with the share of oil exports to non‑U.S. markets tripling and shipments to U.S. West Coast refineries rose by nearly 40%.
The price differential between Western Canada Select (WCS) and West Texas Intermediate (WTI) narrowed by roughly US$8 per barrel, far tighter than historical norms.
The fiscal windfall includes about CAD$4.4 billion in added oil royalty revenues for Alberta, with expectations of CAD$5.3 billion in royalties next year – offsetting weaker WTI prices and a stronger Canadian dollar.
Corporate tax revenues from oil producers are also up, with estimated tax revenues at CAD$2 billion federally and CAD$1 billion for the Alberta government.
Other Aspects to Consider
While the figures from the Alberta Central report show strong fiscal gains, new oil infrastructure also brings environmental and policy challenges. Any proposal would, under the current regulatory and legislative frameworks, need to fit Canada’s legislated net-zero targets, address lifecycle emissions, and compete for investment in a world rapidly shifting energy sources. In addition, it has to be reasoned that any new pipeline(s) could have a lower economic return on investment than TMX as changes in WCS and WTI price differentials could be less evident. Not to mention, the foreign policy impacts of diversifying Canada’s oil exports could lead to ‘more cards in hand’ during negotiations with Trump and the upcoming Canada-United States-Mexico Agreement (CUSMA) review happening in 2026.
What Comes Next?
TMX’s results present a clear fiscal case for additional pipeline capacity – but made clear through Carney’s calculated choice of words – his and his government’s decisions hinge on more than economics.
For Ottawa, the challenge has become weighing immediate fiscal gains against their long-term environmental and policy commitments. This is compounded by the reality of Ottawa having to compete against lower risk (and arguably higher reward) jurisdictions elsewhere for private investment and human capital. At the same time, proponents will need to address Indigenous rights, local environmental impacts on land and water, and opportunities for co-ownership or benefit-sharing agreements that strengthen community support.
The broader balancing act remains. The question for the Carney government is whether to double down on proven revenue generators like TMX, or to pursue other projects that more closely match its climate objectives and energy strategy.