Pipe for the Trans Mountain pipeline is unloaded in Edson, Alta., in 2019. The provincial government earned an extra $4.4-billion in the first year of the pipeline’s operations.JASON FRANSON/The Canadian Press
Alberta, you owe Justin Trudeau a thank-you card. Maybe some flowers. You could interrupt his dinner with Katy Perry to say you’re sorry. Or track him down in the kitchen aisle at Canadian Tire and give him a hug.
In its first year of operation, the Trans Mountain pipeline expansion lowered the spread, or price gap, between Western Canadian Select and the West Texas Intermediate oil price benchmark to such an extent that it increased Canadian oil revenues by $13-billion, according to an analysis by Alberta Central chief economist Charles St-Arnaud. That’s like the oil patch getting 13 months of revenues for 12 months of production.
The government of Alberta was also a big winner, earning an extra $4.4-billion in the first year of the TMX pipeline’s operations. Mr. St-Arnaud estimates that in 2025-26, the smaller price gap is on track to deliver an extra $5.3-billion in royalties to the provincial treasury.
And higher earnings for oil producers also translate into higher corporate tax revenues: Ottawa collected an extra $2-billion over the past year, and Alberta got an extra $1-billion.
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Though the Trudeau government is ultimately responsible for all this, it never much wanted to take credit – TMX was behind schedule, massively over budget and, most embarrassingly, an oil pipeline. As for Alberta Premier Danielle Smith, her praise for the project has been less than constant. She makes her political hay attacking Ottawa, not giving it credit. Like a character in Monty Python’s Life of Brian, she’s always asking, “What has Ottawa ever done for us?”
That leaves TMX as a success that dare not speak its name. But though the pipeline may be politically inconvenient for some, the rest of us should appreciate it as a rare act of economic sanity. And the government of Prime Minister Mark Carney, as it ponders which national projects to back and possibly finance, should take it as a model.
A lot of things that governments categorize as investments are better described as “investments.” They’re not so much about spending money to earn financial returns as spending to win votes, mollify supporters, firm up a government’s brand, whatever. They are not a dollar put into something today with the aim of having two dollars tomorrow. They’re investments in political outcomes, not economic payoffs.
TMX, in contrast, is returning real dollars and cents to its investors – that’s us – and is likely to continue to do so for decades to come. It has pumped up the economy, while delivering a fiscal payoff to two levels of government.
The expanded pipeline is also contributing to the goal of lessening our dependence on the United States, while increasing our ability to export to the rest of the world. Mr. St-Arnaud says that TMX has allowed the share of Canadian oil exported to non-U.S. markets to more than triple.
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Mark Maki, the chief executive officer of Trans Mountain Corp., has been talking about possible further investments to raise the capacity of the line. The initial expansion tripled throughput to 890,000 barrels a day; additional work could increase the flow by as much as 300,000 additional barrels.
Mr. St-Arnaud notes that while the great benefit of TMX is that it raised the prices obtained by Alberta oil producers, that’s a trick that can’t be repeated immediately. The trouble was that landlocked Alberta oil was being subjected to a pricing discount relative to the WTI benchmark, but now that the discount is mostly gone, more free money is not currently on the table. However, to the extent that Canadian oil production rises, the price gap could reappear – creating a need for new pipeline capacity to once again profitably narrow the gap.
Earlier this year, I wrote a column about how quickly Canada used to build things. One of my examples was Expo 67, which I wrote went “from conception to completion” in just 4½ years. In a speech a few days later, Mr. Carney picked that up and improved my line, changing it to “concept to completion.”
But Expo 67, for all its wonders, doesn’t really qualify as investing. Most of the facilities created for that amazing world’s fair are long gone. It was a wonderful project for the Centennial year – but it wasn’t infrastructure investment.
As the Carney government and the provinces think about projects in the national interest, and possible big investments in infrastructure, this should be their watchword: investment.
Whatever the project – pipeline, port, railway or even, say, an AI research institute – what makes something an investment is not how much money goes in. It’s what can reasonably be expected to come out.
Don’t just build, baby, build. Invest, baby, invest.