Alberta has granted permission for the provincial commercial oil and gas agency to secure a loan of close to $1 billion for investment purposes, potentially enticing a private entity to support a pipeline project to the British Columbia coast, as per an industry expert.
The authorization serves as a credit line for Alberta’s Bitumen Royalty-In-Kind (BRIK) program, which was introduced in March. This enables the Alberta Petroleum Marketing Commission (APMC) to borrow up to $900 million for various hydrocarbon marketing activities, including buying shares, offering loans, forming joint ventures, assuming guarantee obligations, and setting up subsidiary companies.
Richard Masson, a former CEO of the commission and current executive fellow at the University of Calgary’s School of Public Policy, interprets these activities as positioning APMC to spearhead a pipeline project to the northwest coast. However, a statement from the province’s energy and minerals department to CBC News clarifies that the credit line does not directly relate to any existing or forthcoming pipeline endeavors.
The initiative to construct a privately-funded pipeline to the B.C. coast was a significant aspect of the energy deal signed between Alberta and the federal government last year. Yet, no company has committed to undertaking the project so far, predominantly due to the inherent risks associated with pipeline ventures and obstacles such as the B.C. oil tanker ban and opposition from Coastal First Nations.
This move by Alberta aims to improve the province’s negotiation leverage with Asian refineries by collecting and selling its share of bitumen directly through APMC, aligning with its existing conventional crude oil royalty collection process. The program could facilitate interactions with government-owned Asian refineries that prefer government-to-government dealings.
The borrowing authority granted to APMC serves the purpose of providing a safety net for potential private investors while minimizing their financial risks, as explained by Masson. This setup could attract private industry proponents, ensuring they face minimal financial exposure. It is emphasized that the pipeline construction must be privately financed under the energy deal, meaning APMC, as a government entity, cannot finance the project.
The recent steps taken by Alberta regarding the borrowing authority are not directly linked to a prospective pipeline project, according to Robert Johnston, director of energy and natural resources policy at the University of Calgary’s School of Public Policy. The focus is more on enhancing marketing capabilities in the U.S. and Asia through existing infrastructure, rather than solely on a pipeline initiative.
Overall, the province’s shift from a cash-based royalty program to the Bitumen Royalty-In-Kind program is strategic in optimizing oil volumes in current pipelines to support ongoing expansions. These expansions, including those on Enbridge’s pipeline system and the Trans Mountain pipeline, are essential for meeting future capacity demands without altering the fundamental way bitumen royalties are collected.
