Alberta’s pipeline pitch is heavy on public, light on private investment — so who benefits?

Alberta’s latest attempt to get a new oil pipeline approved has both the federal and provincial governments promising heavy public investment to move heavy crude oil, all in search of heavy economic benefits.

And despite a price tag that may only begin at more than $35 billion, government money may be both a worthwhile and necessary investment, say economists and industry analysts.

While technically the proposed pipeline to the southwest coast of B.C. is a public-private partnership, only 10 per cent will be in the hands of Calgary-based Pembina Pipeline Corporation.

The federal government, through its ownership of the Trans Mountain Corporation, and the Alberta government through its Alberta Petroleum Marketing Commission, will control 90 per cent of the project at first.

The benefits to the broader population are a key draw for governments, says University of Calgary economist Kent Fellows, who points out pipelines individually may not be a deeply profitable investment on their own. They aren't exactly revenue gushers in this country.

"Pipelines do make money, but the amount of money that they make is limited by regulation and legislation," said Fellows, an associate professor at the university's School of Public Policy.

Fellows pointed out that increased employment, plus higher royalties and revenues to governments are the broad, aggregate benefits — and they spill over to other parts of the Canadian and provincial economies.

The benefits economists and analysts project include jobs from the construction of a pipeline, the extraction work to fill the pipeline with product, and the ongoing sale of oil or gas through the network.

But there are jobs unrelated to the pipeline, point out economists and business leaders, as communities are gaining workers who need to live and shop where they work.

In Bruderheim, Alta., citizens are already hoping jobs may come to their community northeast of Edmonton. If the new pipeline is approved, it would begin in the small town of less than 1,500 people.

"As a town that had very little growth in the last 20 years, any, you know, positive growth would be a great thing," said Mayor Ron Ewasiuk.

"We're going to have more people come to our store and then our business will grow too," said Bruderheim store owner Kim Chin Young.

And while those spillover effects described by economists like Fellows aren't just for the oil and gas industry, it would see higher revenues too.

Jackie Forrest of the ARC Energy Research Institute in Calgary points out that when additional pipelines that provide alternatives to U.S.-based customers for Canadian energy open up, producers here don't just sell more, they can sell for more money.

"As soon as Trans Mountain started up, the Americans had to pay us a better price for our crude because we had options," said Forrest, who points out that a majority of Canadian pipeline capacity still goes to the United States.

Selling more energy to non-American customers has been openly discussed as a priority for federal politicians, including the prime minister, with Forrest pointing out there's strategic importance to additional shipping capacity to the Pacific Ocean.

It's also not unusual for Canada's public sector to back major capital investments in infrastructure, as Martha Hall Findlay, director of the University of Calgary’s School of Public Policy, points out.

“If you look at Canadian history, nothing we've done that has been really big has been purely private,” she said.

Findlay listed railways, port infrastructure and the St. Lawrence Seaway as major projects that were built either on government funding or a hybrid public-private partnership. None of those projects would exist with private investment alone.

Fellows echoed that message, saying before the 1980s, it was very common for federal and provincial governments to get involved in infrastructure funding.

Fellows said “if we view infrastructure as sort of this … base or foundation for well-functioning markets, there is an argument that government intervention here does make a little bit of sense.”

That doesn't mean he sees this as the perfect solution, to be fair.

"As a fundamentalist free market economist, I am a little bit disappointed that we can't let the market take care of this one," said Fellows.

It's a sentiment shared by others, despite cautious optimism for a publicly backed pipeline.

"You want to have that private involvement," said Heather Exner-Pirot, director of natural resources, energy and environment at the Macdonald-Laurier Institute.

In an interview with CBC News Network, she pointed out that different governments, both federal and provincial, "bedeviled a lot of pipeline development" in the past.

But the high cost and high risk is a barrier for any private company, she added.

"This is an enormously expensive nation-building project, very difficult for any private proponent to accept it all on their balance sheet."

Forrest said essentially the same thing. The reason governments have to back a pipeline today is because Canadian projects haven't been approved otherwise.

"We have proven over the last decade that private companies can come here, spend hundreds of millions, if not a billion dollars, advancing a project only to get rejected," said Forrest.

At this point, the pipeline is functionally “a government project," said Grant Sprague, former two-time deputy minister of energy in Alberta, adding some federal systems aren't setting the right conditions to attract private investment.

Speaking on CBC Radio’s Calgary Eyeopener on Friday, he said “it seems like that's the way we're going to build big projects in this country: with government money in the case of a pipeline."

While some major projects can be approved more quickly by the federal government, they may need to pass a “national interest test,” which can add an additional layer of work and uncertainty for private investors.

“We haven't fixed the regulatory process that would really unleash private capital and allow private businesses to carry on with the important business of building the country,” said Sprague.

Pembina Pipeline Corporation has said it could potentially double its stake in the project once the pipeline is operational.

In a statement issued Thursday night, the company added it will have full discretion over any final investment decision for its interest and will not risk any of its own capital before those choices are made.

Both Prime Minister Mark Carney and Alberta Premier Danielle Smith have said they believe more private investment will come later. Carney called both governments "catalysts ... for private investment as the project advances."

It's also unclear whether the cliché of if you build it, they will come applies yet, as the potential pipeline does not have any confirmed customers yet, though Smith has said discussions continue with the Oil Sands Alliance — a group of five major companies.

Smith also said on Thursday detailed funding plans for the project, along with the cost to taxpayers, is still "to be negotiated."

The proposed pipeline would largely follow the path of the existing Trans Mountain pipeline that runs from the Edmonton area to the B.C. Lower Mainland, but that project's struggle to successfully expand could prove a cautionary tale as well.

In 2018, the federal government under Justin Trudeau bought the Trans Mountain pipeline for $4.5 billion after its U.S. owner Kinder Morgan walked away.

Costs were ballooning, and the project got snarled in court delays.

In the end, the Trans Mountain expansion ended up costing $34 billion, a stark increase from an estimated $7.4 billion back in 2017.

“[Trans Mountain] was constructed with really significant cost overruns, almost unprecedented,” said Fellows, who said it's still unclear in 2026 how those higher costs could translate into higher tolls paid by energy producers who use the pipeline.

But listening to the press conference on Thursday, Fellows noted that Carney emphasized Pembina as a knowledgeable private sector participant, and that could help with public perception of the project.

“I do think it will help with the cost overrun side of things. I think they're going to have to be really careful," because it's predominantly public money being invested, Fellows said.

“But I think having a private sector partner that has some skin in the game also helps that because it gives them an incentive to keep costs low as well."

For Hall Findlay, a challenge for this project is an oil and gas industry that is seen as a “liability” in Canada, and an industry that must be managed through measures that reduce emissions.

That includes the condition that a pipeline can only be built if a carbon capture project also goes ahead; in this case, a project called Pathways.

It's a multibillion-dollar project to reduce carbon emissions proposed by the Oil Sands Alliance (formerly the Pathways Alliance), made up of energy producers Canadian Natural, Cenovus Energy, ConocoPhillips Canada, Imperial Oil and Suncor.

Pathways members would be responsible for installing carbon capture equipment at their own oilsands production sites.

According to Findlay, private sector companies could have concerns over those additional costs because they'd have to pay them in addition to tolls required on a pipeline, so she calls the public investments "really good news."

While Pathways had appeared to be in limbo for years, on Thursday the Oil Sands Alliance, along with the federal and provincial governments, said they'd agreed on terms to launch it.

“We believe we’ve achieved a framework where ... the governments are providing the necessary conditions for our companies to both grow production and to build the Pathways Project," wrote the Oil Sands Alliance in a press release issued by the Alberta government.

However, details are scarce on exactly what that framework includes, with the province promising more information "in the coming days."

Regardless of those details, industry watchers say if this pipeline works, it could change how Canada is perceived for investors around the world.

"I think it may open us up to more investment in general in this country," said Forrest, who said she thinks this project may be a turning point to demonstrate whether Canada can complete projects quickly — or at all.

She also mentioned that there's a "window of opportunity" for Canada after a significant portion of oil supplies to Asia were blocked at the Strait of Hormuz near Iran, so international trade partners looking for energy alternatives are watching Canada.

"They've seen our track record" of failed projects, she said.

"We have to prove to them we can get things done in a reasonable amount of time."