The Past Versus The Future And Pipeline Politics

As powerful as the story might be, for landlocked Alberta getting its hydrocarbons to market is where the historical challenge has been. That’s something Smith and her officials are deeply focused on.

For close to a decade, the federal government in Ottawa under former Liberal party prime minister Justin Trudeau was perceived to be hostile to Alberta monetizing its hydrocarbon riches.

But last year, Trudeau’s political demise, rise of Mark Carney to the PM’s chair and an altered global geopolitical landscape “moved the needle”, according to Smith.

“Canada has a new PM, we now live in a very different geopolitical reality with different demands from our friends, allies and trading partners. So, I would like to believe that there has been a change of heart in Ottawa,” Smith said.

“It’s not an exaggeration to say that under the previous PM [Trudeau], I believe the agenda was to shut in and shut down Alberta’s oil and gas development. But under our relatively new PM, my aspiration remains what it was two years ago which is to double our oil and gas production.”

Smith points to Alberta’s recent memorandum of understanding with the federal government - both as a pathway for improving relations with Ottawa, and the reason for cautious optimism on getting the pipelines approved.

“When we are looking to build pipelines - we are looking East, West and South. Perhaps, even North, should some of those opportunities become available when certain complicated logistical challenges can be overcome. But we really are talking of a multitude of projects to potentially go ahead very soon.”

Smith added: “The past story had been that most of our product was destined for the U.S. as that’s where all of our pipeline capacity goes. With the construction of the TC Energy Coastal Gaslink pipeline and Trans Mountain Pipeline expansion ["TMX"], we can now sell directly to Asian markets, alongside U.S. exports. Perhaps, not at the volumes I want, but that’s part of reason I am talking about additional construction.”

For some in Alberta, the slow pace of progress has become a source of frustration. Following deep dissatisfaction with what many perceive as the federal government shortchanging Alberta for a decade, a historical separatist movement clamoring for an independence referendum to leave Canada now has strong momentum. The signatures gathered in its favor are currently awaiting legal clarity and an official verification process.

Nationally, Conservative party leader Pierre Poilievre, whilst describing premier Smith as a tireless champion for Canada and Alberta’s energy industry, has also criticised the lack of progress on building pipelines.

In response, Canada’s energy minister Tim Hodgson was unavailable for comment, but a government spokesperson reiterated Ottawa’s MoU with Alberta and PM Carney’s global outlook as a blueprint for what may follow.

Smith acknowledged the separation sentiment, and, while she doesn’t support it, said Albertans have a democratic right to express concerns and debate the province’s place in Canada versus its own independent economic prowess.

"But in a socioeconomic context, I’d say that when Trudeau was elected in 2015 our oil production was 3.5 million bpd. We are now up to 5 million bpd. So, even under an anti oil and gas development PM, and, if I may say a lot of forces and policies against Albertans over his tenure - our industry still managed to build resilience and bring about incremental improvements.

“Now, if that’s how we were able to grow under a hostile and constraining government, then all I can say to fellow Albertans, and the world, is that I remain enthusiastic about where we are going to be in the next ten years.”

Three Projects And Robust Partnerships

The holy grail remains a new oil pipeline to the Pacific coast - from Alberta to the northwest coast of British Columbia. It’s a source of considerable political obstacles.

The idea is opposed by the provincial government of BC, environmentalists, various regional indigenous groups and would require PM Carney to dispense with a ban on docking northern coast oil tankers.

Change may take time but it’s on the horizon and not all of it is contingent upon federal approval, Smith noted, meanwhile highlighting three projects of significance.

"The first of these is Enbridge’s Mainline expansion to the U.S. with a 150,000 bpd capacity increment, and presidential permits to do another 250,000 bpd expansion. It’s actually an American decision that will in total bring 400,000 bpd of egress.

“Second is the TMX expansion - which the Federal government appears to be supportive of - for an additional 360,000 bpd. The third is the South Bow-Bridger partnership on the Alberta-to-Wyoming pipeline. We are talking a minimum of 450,000 bpd capacity that could increase Canada’s crude exports to the U.S. by more than 12%. Again, it requires mostly the U.S. to take a decision.”

As for the northwest pipeline to BC, Smith said the project is something both Hodgson and Carney have spoken positively about. "We will be putting a submission forward to the federal major projects office. A reply on that would be the testing ground on where we are heading, and what work we have to do.”

Alberta’s Play On The U.S. And Asia

Smith said those projects to the U.S. and others could increase Alberta’s egress up to 2.5 million bpd, and moves west – should they materialize – may potentially add another 1.5 million bpd.

That potential uptick in export volumes to the U.S. appears to be materializing when relations between the Washington and Ottawa are at an all-time low, marked by trade tariffs and counter-tariffs, and no deal within reach.

However, with over 90% of Alberta’s crude oil exported to the U.S., relations between Smith’s provincial government and president Donald Trump’s administration are pretty cordial.

U.S. assistant secretary of energy for fossil energy and carbon management Kyle Haustveit described premier Smith and Alberta as a valuable partner and ally of American energy consumers, with the sentiments echoed by interior secretary Doug Burgum’s office.

Cooperation with Alberta routinely figures in the plans of president Trump’s National Energy Dominance Council - a body tasked with advising on energy strategies to the White House.

Smith said such cooperation transcends national politics. “We’ve worked very hard on the Alberta-U.S. partnership because $188 billion worth of value goes back and forth between Alberta and the various U.S. states every year. Most of that is oil and gas. We have advocates on both sides helping to keep energy tariff free and I hope it stays that way.”

The heavier Western Canadian Select oil benchmark continues to trade at a discount to the lighter U.S. West Texas Intermediate, something of considerable historical advantage to Gulf Coast refiners geared to process heavy crude.

“Our pitch to the U.S. has always been - take the oil from us, you can do the value add and then use it to provide affordable energy domestically as well as export the excess to your international partners to achieve the goal of energy dominance.”

Smith said the same applies to natural gas exports to the U.S. to power the artificial intelligence / datacentre boom stateside. “There is so much to talk about from a commonality point of view. Overall, our U.S. tariff exposure is only on 2% of Alberta’s products, and that's about as good as it can get in the current circumstance.”

But Smith was keen to stress that a healthy partnership with the U.S. is not an “either/or” scenario.

“Our play is about supporting partners both in the U.S. and Asia. Of course, I am very keen on pipelines being built to the northwest coast for us to tap Asian markets, especially refineries in China and South Korea.”

"But building and approval of additional capacity to the U.S. is not bad for us either. Because, if we can get more of our product down to the Gulf Coast - it can also go out to through the Panama Canal to Asian markets, as well as Europe and refineries on India’s West coast.”

Investor Interest Is Rising

The war in the Middle East has given fresh impetus to investments in Alberta’s oil sands. This is music to Smith’s ears. She actively courted international investment at the World Petroleum Congress - a major international energy event - held in Alberta’s energy capital Calgary in 2023, a year on from taking office.

A recent Reuters report suggests TotalEnergies, ConocoPhillips, Equinor and BP are all sniffing around for assets, after Shell’s recent $16.4 billion agreement to buy ARC Resources.

Meanwhile, Canadian operators are raising their investments levels too. This influx of fresh investment is another source of encouragement to persist with adding pipeline capacity.

"That’s what we are working with the federal government on under our MoU, and how we can fast-track the approval process. By 2030, I hope for an end-of-decade scenario where two projects would be complete and two would be well underway.

“If this then totals up to a potential capacity addition of 4 million bpd within 10 years, that’s going to be a major adjustment to Canada’s place in the energy world with Alberta leading the way. I feel pretty optimistic we’ll get there.”