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by Lennie Kaplan
The Alberta government’s submission on the proposed West Coast Oil Pipeline (WCOP) application to the Major Projects Office (MPO) is now due.
While I am fully supportive of new pipeline development, so long as it is based on a solid business case, I worry about the potential high level of taxpayer support that may be needed to advance the WCOP to a positive financial investment decision (FID).
The Alberta government’s WCOP submission must present a comprehensive business case and risk assessment to evaluate both the benefits and costs of proceeding with the WCOP.
Here is a checklist of critical items that should be included in the Alberta government’s submission to the MPO.
- Identification of private sector companies that are willing to finance the construction and operation of the WCOP, including any fiscal mechanisms being provided by the Government of Alberta to the private sector for de-risking purposes No private company has publicly expressed interest in building a new pipeline, likely because few companies have the risk tolerance to spend up to $30 billion in volatile world oil markets. Pipelines have high capital expenditures (capex) requirements, risks of capital cost overruns, long timelines for construction (3 to 5 years), and, as part of a robust business case, need to clearly show demonstrated oil supply to fill the line. It is estimated that to meet the expanded level of oil production would require a massive wave of new private sector investment, running as high as $150 billion over the next decade, including maintenance and sustaining capital, optimization, and expansions.
- Full business case for utilizing crown agencies such as the Alberta Petroleum Marketing Commission (APMC) and/or the Heritage Fund Opportunities Corporation (HFOC), acting as government-led backstops to rebalance risk and reward, through a combination of a fixed return on capital deployed comparable to prevailing opportunities and shifting cost and schedule risk away from the private sector proponents.For example, in 2013, the APMC signed a transportation services agreement (TSA) with the Energy East Pipeline Limited Partnership to purchase 100,000 barrels per day of firm capacity for a term of 20 years to transport volumes of crude oil, with a take-or-pay obligation to pay $4.6 billion in tolls over the 20-year term. Energy East did not go forward, and the APMC, fortunately, did not incur any financial commitments or liabilities.
- Full business case for utilizing the Alberta Indigenous Opportunities Corporation (AIOC) to backstop Indigenous co-ownership of the bitumen pipeline project. As AIOC is a Crown agent, AIOC’s obligations under any loan guarantee arrangement are effectively underwritten by the Government of Alberta. In the event loan conditions are breached and that breach remains uncured, creditor groups have a right against the Province of Alberta to call on their individual loan guarantees to offset any losses incurred by the creditor groups with respect to amounts loaned to the borrowers by the creditor groups.
- Identification of shippers, including anchor shippers, through a clearly defined open season process that secures shipper commitments, volumes and contracts. Identification of the potential level of tolls required from shippers, including from the APMC if it becomes involved, and an assessment of whether shippers would be willing to pay these tolls. TD Securities has estimated that “a potential toll for the pipeline would range between about US$10.50 per barrel and about US$15.00 per barrel, which compares to existing uncommitted tolls on Enbridge Mainline and South Bow Keystone to the U.S. Gulf Coast of US$9.83 per barrel and US$8.65 per barrel, respectively, as well as US$10.30 per barrel for TMX and rail economics of around US$17 per barrel to around US$18 per barrel.” Note that additional costs are required to ship barrels to Asian markets, whereas both the Mainline and Keystone ship directly to customers. In the past, risks of capital cost overruns were largely dealt with through risk-sharing arrangements between shippers, with pipeline tolls sometimes adjusted higher for all or a portion of the cost overrun. However, the experience with the Trans Mountain Expansion (TMX) cost overruns may make shippers less likely to take on that type of exposure through adjusted tolls. Would the Alberta government, through the APMC, support WCOP by physically taking royalty barrels in kind and committing those volumes to a long-term take-or-pay contract at a toll above current market rates, effectively guaranteeing a return to the pipeline owners? If so, this should be identified in the Alberta government’s submission.
- Clearly showing demonstrated oil sands supply to support expanded pipeline egress. This includes a realistic identification of oil sands producers who have commercially viable projects, including greenfield projects, in the queue to support expanded pipeline egress capacity. Companies will need to bring forward and advance new projects, simultaneously. Currently, oil sands producers appear more focused on sustaining maturing production and maximizing return to shareholders, rather than risking capital in new greenfield developments. This practice may become more pronounced given the uncertainties and volatility prevailing in world oil markets. With potential sub-optimal returns at long-term oil prices between $60.00 and $70.00 U.S. per barrel, the economics for large greenfield oil sands projects could still be challenging and may need to be bolstered by the introduction of new royalty incentives from the Alberta government to support the significant additional pipeline egress. This should be fully identified in the Alberta government’s submission.
- Impact of the WCOP and increased oil production on greenhouse gas (GHG) emission levels, and how this aligns with commitments by the federal and Alberta governments to net zero emissions (NZE) by 2050. Net zero emissions (NZE) could divert investment capital into carbon capture, utilization and storage (CCUS) and other emissions abatement technologies, such as direct air capture (DAC) for existing facilities.
- Releasing all the work of the WCOP Technical Advisory Group (TAG) and the WCOP Advisory Panel (AP). Back in October 2025, the Alberta government established a Technical Advisory Group (TAG), comprised of industry representatives from South Bow, Enbridge and Trans Mountain, to provide initial advice and recommendations on the proposed pipeline, and presumably examining oil sands supply to fill the line. TAG’s work is supervised by a government-appointed Advisory Panel (AP).
A rigorous, evidence-based and private sector-led approach to pipeline development is needed to prevent a repeat of earlier costly pipeline episodes to taxpayers. If Crown agencies, such as the Alberta Petroleum Marketing Commission (APMC), the Alberta Indigenous Opportunities Corporation (AIOC) and the Heritage Fund Opportunities Corporation (HFOC), become involved in the WCOP, there must be a comprehensive business case prepared and presented to Alberta taxpayers.
The pipeline development process must be private sector-driven and private sector-managed and based on the “hard facts on the ground.” It should not be stage-managed by the Alberta government for political purposes.
Lennie Kaplan is a former senior manager in the Fiscal and Economic Policy Division of Alberta’s Ministry of Treasury Board and Finance (TB&F) where, among other duties, he worked on cross-ministry committees dealing with energy issues, including participating on the Clean Energy Strategic Advisory Committee (CESAT) and the 2009-10 Alberta Competitiveness Review. Hi retired from his position as Executive Director of Research for the Canadian Energy Centre in the fall of 2023.
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