TMX’s C$3B/Year Oil & Gas Subsidy Lesson: Design Energy Corridor For Electrons Not Oil

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Canada is as soon as once more flirting with the thought of an east-west vitality hall. The imaginative and prescient sounds large and daring: a delegated path throughout the nation to hold all the things from crude oil to pure gasoline, hydrogen to electrical energy. On this speedy, Trump-inflected election cycle, political leaders are lining up behind the thought, polling suggests the general public is receptive, and infrastructure gamers are circling the idea prefer it’s a long-lost gold vein. The inclusion of hydrogen ought to inform you one thing.

However earlier than the nation begins clearing right-of-ways and pouring concrete, it’s value asking what occurred the final time Canada launched into a nation-building vitality infrastructure venture with this a lot ambition. The cautionary story isn’t buried in historical past—it’s recent, totally constructed, and already bleeding purple ink. It’s the Trans Mountain Growth.

TMX was alleged to be simple. Add a twinned pipeline beside an present one. Transfer extra oil to the West Coast. Entry worldwide markets. The personal sector, particularly Kinder Morgan, initially carried the torch. Then the delays began. Authorized challenges. Allowing battles. Public resistance. Indigenous session gaps. By 2018, the federal authorities stepped in to purchase the whole venture—pipe, plans, liabilities, and all—for C$4.5 billion, with an growth nonetheless to construct. That growth, pegged at round C$7 billion on the time, finally value C$34 billion. The road got here on-line in 2024. Crude is flowing. However so are the questions.

The financial case for TMX was all the time extra political than monetary. It was framed as a vital path to market diversification. And in that slim sense, it has delivered: for the primary time, a considerable quantity of Canadian oil is being loaded onto tankers certain for South Korea, California, and infrequently India or China. The oil sands have their tidewater outlet. However what did it value? The tolls that shippers pay are set by long-term contracts signed years in the past.

For many of the line’s capability, dedicated tolls are round C$11.46 per barrel. In accordance with economists who’ve run the maths, the break-even toll to get well the complete capital value of the growth is someplace between C$22 and C$25. That leaves a niche of over C$10 per barrel. Multiply that by the volumes transferring via TMX—round 700,000 barrels per day at 80% utilization—and the general public is implicitly subsidizing the venture to the tune of almost C$3 billion per yr. At full capability, the subsidy would exceed C$3.6 billion yearly. I’m on document as believing it can by no means replenish, will see declining volumes in a decade and be bankrupt in 2040 as oil demand drops and Alberta’s heavy, bitter, low-quality product is first off the marketso we’ll by no means possible get to the C$3.6 billion, however C$3 isn’t precisely change you discover in your automotive seats.

That’s not a rounding error. It’s not simply the standard slippage that comes with megaprojects. It’s a systemic underpricing of fossil infrastructure, backed by taxpayer {dollars}. It’s precisely the sort of factor the nation must reckon with earlier than charging forward with one other grand hall scheme. No matter kind this vitality hall takes—whether or not it carries bitumen, gasoline, electrons, or some mixture—the identical dangers loom. Price overruns. Weak business ensures. Political interference. Underpriced entry. And finally, the quiet assumption that when the economics don’t pencil out, the general public will make up the distinction.

TMX reveals what occurs when governments tackle danger that the market received’t. It demonstrates how strategic infrastructure can mutate into fiscal liabilities when value controls are gentle and pricing self-discipline evaporates. It additionally reveals how tough it’s to cost market charges as soon as long-term contracts are signed at political moments of urgency. Shippers don’t renegotiate. Regulators get boxed in. Taxpayers are left holding the bag. For all of the political speak of market entry and worldwide leverage, what TMX turned was a really costly option to transfer Canadian bitumen to international markets at a worth that’s not remotely financial for the general public that constructed it.

The gamers who construct and function pipelines in Canada are dwindling. Kinder Morgan bought their to-be-stranded TMX asset to Canada, who created a Crown company to carry it. TC Power is out of the pipeline enterprise, having divested its belongings. That leaves Enbridge, who hasn’t precisely been presenting totally costed pitches for an vitality hall that can possible value C$20 billion plus when all of the mud settles. In spite of everything, as badly because the TMX tripling was managed and as difficult as going via the Rockies is, the vitality hall can be 4 instances longer.

And but, there’s a case—if a reluctant one—to be made for a hall. If a pipeline needs to be constructed, for political causes or as a part of a transitional cut price, then let it include one thing extra priceless. Let it carry the electrons that can outline Canada’s future. If a nationwide hall goes to be pushed via, it must be designed as a multi-use spine—with HVDC transmission strains because the central backbone and molecule infrastructure as a brief passenger. The hall ought to join Alberta wind, BC hydro, prairie photo voltaic, and Quebec hydroelectricity. It ought to facilitate two-way clear vitality commerce between provinces and allow deep electrification throughout sectors. If oil and gasoline pipelines are the excuse, advantageous—however the HVDC should be the legacy.

Canada wants a continental-scale transmission spine. It wants a option to transfer renewable vitality from surplus to deficit, to combine provincial grids, to deal with seasonal peaks and long-duration storage. The sort of system that doesn’t simply meet in the present day’s wants however creates tomorrow’s capability. That’s the infrastructure value underwriting. If the political capital to construct a hall exists, it should be spent on electrons first. Molecules can hitch a experience—however they shouldn’t outline the route or the return.

TMX additionally teaches a subtler lesson about fiscal design. If a future pipeline or hall is to be publicly facilitated, the toll construction should be strong, clear, and tethered to value restoration. Dedicated shippers should pay charges that mirror full lifecycle prices. There can’t be one other spherical of underpriced entry justified by short-term market politics. As a result of as soon as the toll is ready, it’s set. If it’s flawed, the injury compounds for many years. Infrastructure finance is brutal that method: the maths is detached to rhetoric. Subsidizing fossil fuels out of the general public purse has to cease.

There’s additionally the matter of stranded danger. TMX could find yourself being the final main oil pipeline in-built Canada. It arrived simply as peak international oil demand began to really feel actual, simply as capital markets started pivoting, and simply as worldwide local weather commitments began biting. The identical pressures that made TMX a tough promote will make the following pipeline even tougher. If Canada commits to constructing a hall within the 2020s and it seems the 2030s carry declining oil volumes, then the general public may as soon as once more be left with a stranded asset—or worse, a stranded hall.

So what does a sensible hall appear like? It begins with self-discipline: clear standards for public funding, enforced toll restoration fashions, Indigenous possession from day one, and a modular buildout that prioritizes electrical energy transmission. It should be resilient, not simply bodily however economically. It should accommodate future decarbonization trajectories, not battle them. And it should be designed to ship long-term public worth, not simply short-term political credit score.

If TMX is the worth of studying that lesson, then at the very least the schooling was paid. What Canada can’t afford is to deal with it as a blueprint. The following hall should carry greater than oil. It should carry the grid. If we get that half proper, we’d simply flip one of many costliest pipeline errors in historical past into the spark that powers a wiser, cleaner future.