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Alberta has authorized the province’s commercial oil and gas agency to borrow nearly $1 billion for market investments, a move which could attract a private proponent to invest in a pipeline to the B.C. coast, according to one expert.
The authorization acts as a line of credit for the province’s Bitumen Royalty-In-Kind (BRIK) program, announced last March. It allows the Alberta Petroleum Marketing Commission (APMC) to borrow up to $900 million for what the province calls “hydrocarbon marketing activities.”
Richard Masson, a former CEO of the commission, said these activities include purchasing shares, providing loans, entering joint ventures, guarantee obligations and incorporating subsidiary corporations.
“That all looks very much like it’s setting APMC up to be the proponent for a northwest coast pipeline,” said Masson, who is now an executive fellow at the University of Calgary’s School of Public Policy.
But a spokesperson for the province’s department of energy and minerals said in a statement to CBC News that the line of credit “has nothing to do with any future or any present pipeline.”
“This line of credit doesn’t represent actual funds that have been or will be lent to APMC but rather funds that are available if needed,” the statement said.
Building a privately-funded pipeline to the B.C. coast was a key part of the landmark energy deal the province signed with the federal government last year, but so far no company has stepped up to build it.
Masson said this is because pipeline projects are inherently risky, and challenges, such as the oil tanker ban in B.C. and opposition from Coastal First Nations, mean few companies are willing to take on the major project alone.
One cautionary tale for the industry, Masson said, is the $600 million Enbridge spent on developing the Northern Gateway pipeline, only to have it cancelled.
Through the order, the province’s finance minister can raise money via government securities and transfer those funds to APMC.
Masson said APMC’s borrowing authority would allow the commission to backstop a private investor while limiting that investor’s financial risk.
“You could get a private industry proponent if you guaranteed that they wouldn’t lose any money, which is something you could do with this kind of authority,” Masson told CBC Radio’s Calgary Eyeopener on Monday.
Masson said it is important to note that according to the energy deal, the pipeline would have to be privately financed, meaning as a government-run organization, APMC could not fund the pipeline’s construction.
Former Alberta minister of energy Sonya Savage says U.S. plans for Venezuelan oil make it politically crucial for Canada build a pipeline to the West Coast — but that while the Ottawa-Alberta MOU has helped reduce the regulatory risks, Ottawa will need to provide some form of commercial backstop to bring a private proponent forward.
Meanwhile, Robert Johnston, director of energy and natural resources policy with the University of Calgary’s School of Public Policy, said the line of credit has no bearing on a potential pipeline project.
Instead, the measures are “more about developing marketing capacity in the U.S. or Asia” through existing pipelines and infrastructure.
Royalties collected in barrels, not cash
Alberta’s bitumen production previously used a cash royalty program where each producer sold the bitumen to refineries themselves, then paid a royalty to the province.
BRIK enables the provincial government to collect its share of the bitumen in barrels and sell it direct-to-market through APMC, similar to how it collects royalties for conventional crude oil.
The bitumen royalty program could allow the province to better negotiate with refineries in Asia, Johnston said, as many are government-owned and prefer to operate “government-to-government.”
“The provincial program like APMC has some advantages over the private sector in the Asian market because they’re also kind of representing the sovereign — in this case, the provincial government,” Johnston said.
Masson said a version of the program was floated when he was in charge of APMC from 2012 to 2017, but they decided it would only add more complexity as producers would have to go through the commission instead of selling direct-to-market themselves.
Calgary Eyeopener8:08The Bitumen Royalty in Kind program
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He said the reason the province might be bringing it in now is because it wants to increase oil volumes in its current pipelines to ensure planned expansions take place. Several expansions are currently underway on Enbridge’s pipeline system and on the Trans Mountain pipeline.
Still, capacity increases don’t require changes to how bitumen royalties are collected, Masson said.
“They can do that just by buying oil and putting it on the pipeline.”
