Enbridge’s mainline system is the largest oil transportation system in Canada and carries around 3.2 million barrels a day. A storage tank looms over a freeway at the Enbridge Edmonton terminal in Edmonton on Aug. 4, 2012.Dan Riedlhuber/Reuters
Alberta is dangling the prospect of guaranteeing a “significant” volume of oil and gas for new or expanded pipelines in the hope of encouraging Enbridge Inc. ENB-T to increase its transport capacity to the United States.
A deal is still very much in its early days. For now, it’s simply a letter of intent between the government, the Alberta Petroleum Marketing Commission and the company to figure out ways to add transport capacity across more than 29,000 kilometres of pipelines in the Enbridge network.
Premier Danielle Smith has long said she wants to see oil and gas production double in Alberta. On Monday, she said that guaranteeing barrels would give Enbridge and other companies the impetus to expand pipeline capacity, thereby encouraging producers to increase their output.
She said her United Conservative government is also in discussions with other pipeline companies to reach similar agreements.
“We’re quite happy to negotiate with Enbridge a significant amount of barrels,” she said. “Our intention would be to provide that guarantee as a mechanism to show how serious we are about getting these lines built.”
Enbridge’s mainline system, the largest oil transportation system in Canada, runs from Alberta to the U.S. Midwest and Eastern Canada. It has expanded significantly over the past decade and now carries around 3.2 million barrels a day, up from 1.5 million.
Company president and chief executive Greg Ebel said Monday that Enbridge is already eyeing several hundred thousand barrels of capacity additions, mainly through pipes that are already in the ground and in existing rights of way, as opposed to large new greenfield projects.
Mr. Ebel said it’s too early to give specifics, but he expects the plans to encourage significant production growth.
“We’re not asking for dollars and cents from the government. It’s about them utilizing the pipeline systems to get the best value for Alberta,” he said.
Ms. Smith said the move would “send the signal to the rest of the marketplace” that the government supports pipelines and is willing to commit barrels to encourage project development.
Monday’s announcement comes under the looming shadow of U.S. president-elect Donald Trump’s pledge to slap 25-per-cent tariffs on all imports from Canada and Mexico – including oil and gas.
Given that Enbridge operates pipelines south of the border, Ms. Smith said encouraging investment in oil and gas transportation would strengthen the bonds with the United States and demonstrate support for the country’s energy market via an integrated pipeline network.
Ms. Smith didn’t explicitly take taxpayer funding off the table, but said that the way her government intends to support pipelines is a long way from the Keystone XL deal inked by her predecessor, Jason Kenney, in 2020.
Mr. Kenney’s government backed that pipeline project via a $1.5-billion ownership stake and a contractual commitment to $6-billion more in loan guarantees. But Calgary-based TC Energy Corp., which first proposed the massive project in 2008, scrapped it in 2021 after Joe Biden revoked a presidential permit issued by the previous administration under Mr. Trump.
Mr. Trump has raised the prospect of restoring his approval for the oil pipeline as he pushes his agenda of promoting more fossil fuel use in the U.S., despite the fact no companies are interested in pursuing Keystone XL.
The plan announced Monday echoes that of the 2015-19 Alberta government under NDP premier Rachel Notley.
Back in 2018, Alberta stepped in to support Keystone XL by guaranteeing to feed 50,000 barrels a day of provincially-owned crude to the line.
But Alberta has not always had a great track record with deals that guarantee oil to private companies.
The most glaring example is the Sturgeon Refinery, now 50-per-cent owned by the province. The subject of many auditor-general’s reports, even former energy minister Sonya Savage has acknowledged that the $26-billion contract penned by the province to supply bitumen to the refinery over 30 years was a bad deal; in 2021, the government was bleeding a loss to the refinery to the tune of $28-million a month.
In a 2018 report, Alberta’s then auditor-general also took aim at a $4.6-billion deal the government inked to have oil transported to the East Coast via the Energy East pipeline, which was subsequently cancelled.