Canada’s Oil Gamble in a World That’s Changing Fast: The Trans Mountain Pipeline Expansion

Canada’s Oil Production Landscape

The world’s fourth-largest oil producer, Canada, has historically counted the United States as its main market, exporting an astounding 98 percent of its crude oil southward. This reliance has not only directed Canada’s energy industry but has also propped up a crude production model that has otherwise come under severe scrutiny. The U.S. market is, and may always be, a necessity for the Canadian oil sector; however, hopes now rest on the Trans Mountain Pipeline expansion delivering more dollars to the oil patch by targeting new (Asian) markets and achieving what proponents call “diversification.”

The Controversial Trans Mountain Expansion

In this article, we argue that the Trans Mountain Pipeline expansion is a historic opportunity for Canada to start taking its place in the global oil market. Canadian and world demand for oil continues to grow, and Canada has the resources to satisfy not only its domestic needs but the overwhelming bulk of that world demand. At the same time, we believe the project poses significant risks—not just to community safety and the environment but also to the long-term economic health of the Canadian economy—because it could saddle Canadian taxpayers with huge insurance premiums and the prospects of guarantees that could total in the billions of dollars.

Economic Implications for Canada and the U.S.

Canada’s oil and gas industry is one of the few sectors still showing economic growth. But when Finance Minister Bill Morneau presented his latest ill-fated budget to Parliament, the industry was nowhere to be seen in the projections. Why? Because it is not just a question of royalties; it is a live policy area with major ramifications for the federal treasury, both in terms of what it might have to pay out and what it is likely to lose in terms of tax revenues. The problem is that the Trans Mountain expansion project has ballooned in cost from $4 billion to $25 billion. That sobering figure is one reason the decision to proceed with the project is controversial. Yet the stakes for Ottawa are such that the feds do not want to see the project cancelled. To assist with that end, they appear set to underwrite a substantial part of the cost. Ottawa’s hope is that if the project succeeds in the end, it will deliver a substantial amount of tax revenue that will help pay for other government priorities.

Environmental Concerns and Future Projections

The pipeline carrying crude oil from Canada to the west coast is in the midst of a major expansion. Originally built in 1953 and upgraded in 1973, the Trans Mountain Pipeline system already had a significant impact on the economy and on environmental concerns. For years, the system was the only conduit for getting Alberta oil to the west coast. In response to the growing demand for Canadian oil, the company that now operates the pipeline, Kinder Morgan, announced in 2013 that it would expand the system. Faced with years of opposition from environmental and Indigenous groups, the Canadian government, in 2018, intervened. It purchased the pipeline and engaged its own construction crews to ensure that the expansion—hugely controversial in many respects—would be completed.

Canada faces a larger dilemma over the Trans Mountain expansion: the apparent conflict between environmental sustainability and economic growth. Critics argue that the increased oil pipeline means more greenhouse gases and negate Canada’s international commitments to reduce climate change. Proponents, however, argue that the economic benefits far outweigh the serious concerns. They maintain that not only is the project essential to the immediate and long-term economic health of this country, but it’s also vital in terms of international relations, increasing by an enormous amount the geopolitical “leverage” Canada has as a country that produces oil. But can we really afford the project? Can we really justify the increased oil production, the increased greenhouse gases, and the increased danger to far-too-many ecosystems (the pipeline promises to go right through several of them) and species (including endangered ones, like orcas) that live right along the route?

Those in favor of the Trans Mountain expansion assert that Canada must exploit its rich oil reserves while there’s still a market for them, particularly among the developing world. They argue that a shift to renewable energy is still a long way off, and in the meantime, oil will remain an important part of the global energy mix. They point to the potential for job growth and economic stimulation, in Alberta and beyond. But this seems to ignore the prospect of climate change, the shift toward global energy solutions, and investment flows that are increasingly favoring sustainable (and likely far more sustainable) projects.

For the average person in Canada, the Trans Mountain expansion is about much more than just money and oil. It goes to the very heart of our sense of ourselves as a country. Do we want to be an economy in which the fossil fuel industry is central to our prosperity? Or do we want to be something else—whatever that is? Because let’s face it, no one in a position of leadership has stepped forward with a vision of something else that we can comprehend, let alone buy into. The expansion and, by extension, the whole pipeline project are us—averaging a billion bucks a year in our Steuer and a boatload of social justice issues along the way.

More than just an infrastructure project, the Trans Mountain Pipeline expansion embodies everything Canada hopes to achieve — and the challenges it must overcome — in a fast-seeming world. Here, at this pivotal moment, Canada must take stock. It must reckon with its enduring oil dependency, the environmental consequences of its choices, and the geopolitical dynamics at play. These are not just questions of appearance; they go to Canada’s national identity. In an era where the appearance of sustainability is increasingly sought, is Canada’s investment in fossil fuels a prudent one, or a highly risky gamble? Will the pipeline, and Canada’s growth in general, pay off in sustainable return, or will they become part of a cautionary tale of missed opportunities and environmental negligence?