This week, our guest is Mark Maki, Chief Executive Officer of Trans Mountain Corporation. The original Trans Mountain pipeline was built in 1953, and the Expansion Project was completed just over one year ago, nearly tripling the pipeline’s capacity to 890,000 B/d (from 300,000 B/d).

Here are some of the questions that Jackie and Peter asked Mark: How much do you expect to pay your shareholder (the Canadian Government) in 2025 and 2026? What are the logistics of moving the oil by tanker? Where are the tankers going, and what type of crude is shipped in the pipeline? How has the pipeline improved Canadian oil prices? What is the expected timing for a resolution on the tolls, as a Canadian Energy Regulator (CER) hearing is currently underway that could adjust the cost for shipping oil? What is the potential to increase pipeline flows, and is there potential for a northern leg as proposed in the early days of the expansion? The Federal Government has stated it plans to sell the pipeline; do you have any updates on that and the potential timing? What are your thoughts on Bill C-5 and the potential for this type of legislation to avoid the high costs and many delays faced by the Trans Mountain Expansion?

Content referenced in this podcast:

• Globe and Mail, “Trans Mountain expects to pay federal government $1.25 billion in 2025” (May 2025)
• Financial Post, “Canada must maximize existing pipelines before building more, Guilbeault says” (May 2025)
• Financial Post, “Northern Leg to Trans Mountain pipeline attracts interest amid brewing trade war” (February 2025)

Please review our disclaimer at: https://www.arcenergyinstitute.com/disclaimer/

Check us out on social media:

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LinkedIn: @ARC Energy Research Institute

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Episode 290 transcript

Disclosure:

The information and opinions presented in this ARC Energy Ideas podcast are provided for informational purposes only and are subject to the disclaimer link in the show notes.

Announcer:

This is the ARC Energy Ideas podcast, with Peter Tertzakian and Jackie Forrest, exploring trends that influence the energy business.

Jackie Forrest:

Welcome to the ARC Energy Ideas podcast. I’m Jackie Forrest, and today we’re going to have an interview with Peter Tertzakian and myself with the CEO of Trans Mountain, Mark Maki. But first, a quick update on the situation with Iran and Israel war and what is happening with the oil markets. Iran fired on US military stationed in Qatar on Monday, June 23rd after the Americans hit three nuclear sites in Iran over the weekend. But the latest development is there seems to be hope for a ceasefire, but of course this is highly uncertain. Oil price was remarkably subdued with the escalation over the weekend, only hitting $75 a barrel. And with this talk of a ceasefire as of the time of recording, which is the morning of June 24th, oil prices down to about $65, actually back to where it was pre-conflict before Israel started the war here with Iran.

So we don’t know where this is going to go, but at this point if the ceasefire holds, certainly the markets have downplayed the risk to the oil markets in terms of any outages by having the price come down to $65. Other news, also last Friday, Canada’s House of Commons passed Bill C-5. The bill aims to fast track projects of national importance and should pass in the Senate later this week and be made into a law before Canada Day. And speaking of Canada Day, we’re going to be taking a break next week for the holiday, but we will be back the following week. Now back to today’s podcast.

Peter Tertzakian:

So Jackie, newsflash, the first LNG tanker is apparently arriving in the West Coast-

Jackie Forrest:

Very soon, according to the media reports.

Peter Tertzakian:

When is it? June 29th,

Jackie Forrest:

29th it’s expected. So it’s been a long time waiting for this first commercial shipment from LNG Canada and pretty exciting. And actually this is the timeline, they always said it was going to be mid 2025. They hit the mark exactly, the end of June.

Peter Tertzakian:

I don’t know. I’ve been working on the LNG beat since the early 2000s when we were looking at exporting LNG off the east coast. And then it migrated to importing and then importing off the West Coast. And I don’t know, it was like 12, 14 years ago there was like 14 or 17 projects.

Jackie Forrest:

Yeah, well actually you and I took a trip to visit Kitimat in 2014 and that’s when there were like 14 projects going to be built. Remember we actually got a ride, a helicopter ride over the Douglas Channel. You took some great photos and there was going to be so many projects built. 11 years later-

Peter Tertzakian:

We were just pointing at the old Methanex site at the time, which is where the new facility is now at and this new tanker is expected. So that’s amazing. I think there will be some sort of fanfare, I’m sure when that tanker arrives and departs with its first cargoes to Asia. Speaking of exports off the West Coast, this is part of the building up of infrastructure. Well, we’ve got a new Bill C-5.

Jackie Forrest:

So Bill C-5 I think is an important bill because a lot of the problem and why we haven’t got all those LNG projects built, it just takes a long time and there’s a lot of uncertainty in terms of building major projects in this country. We saw that with the Trans Mountain, the pipeline had to be owned by the government because it was too risky for private capital. So I do think this bill, C-5, and I’m hopeful that will pass soon is going to create the circumstances that private capital can invest in this country.

Peter Tertzakian:

Yeah, well I think it overcomes the first stage gate question that the country has to acknowledge, and that is, “Do we want to build energy infrastructure?” And I think we can agree for the past decade, decade and a half, it was sort of a lukewarm maybe, and there was a lot of rules and regulations and all sorts of other issues that precluded the building up of energy infrastructure. So we’re through the first stage gate and I think C-5 is an important milestone in answering the question, “Do we want to build energy infrastructure?” And the answer now is yes. The next phase is going to be, “Well, what do we want to build and what priority order and what will the federal government and the provincial government’s backstop or otherwise support through regulatory reform?” And then we’re going to move on to the third stage gate, which is, “Okay, well how do we finance and build all this stuff?”

And we’ll have many podcasts on that I am sure. And also many podcasts on the what do we want to build. But I want to go back to the West Coast. I want to go back to building infrastructure because that is going to be topical and no doubt BC will be part of many of the energy projects it built, but I’m holding in my hand a new book, Building a Legacy: The Historic Expansion of the Trans Mountain Pipeline, which is a welcome gift that I just received. And you got a copy too as well, Jackie. And why I love this book is because I have the original one as well that was done when the pipeline was built in the late fifties. So the gift was given to us by none other than the CEO of Trans Mountain, Mark Maki, and we’re delighted to have him in the studio to talk about the expansion and even more expansions potentially as a consequence of Bill C-5. So welcome, Mark.

Mark Maki:

Well, thank you, Peter. I appreciate the opportunity to be here with you and Jackie, looking forward to the conversation.

Jackie Forrest:

Well, we last talked about the Trans Mountain when Dawn Farrell joined us in May, 2024 at the exciting time of the startup of the expansion. And for those listeners that forgot, the original pipeline was 300,000 barrels a day expanded to 890,000 barrels a day. And then not long after that startup, Mark, you were announced as the CEO. So tell us a little bit about your journey to becoming the CEO of Trans Mountain Pipeline.

Mark Maki:

Well, I’ve been in the sector a really long time. So I started working in industry and business in the mid-eighties with another big company here in town. And I actually started out of the US, which is Enbridge or what is now the Enbridge companies. And so I’ve been a part of the oil pipeline space for a very long time. And as I got towards the end of career at Enbridge, it was just time to do something different. And I know Dawn talked about service to country in her podcast a year ago, I would say my wiring was similar. I wanted to do something that mattered to a sector I’ve been a part of for a really long time and be part of something that was good for the base and good for the country, a country that adopted me along the way, which was kind of nice. Going to work for Trans Mountain felt like the thing I needed to do. And so went in, came into Trans Mountain as CFO and after a long history with Enbridge in the US and Canada, it was a chance to help make a difference. And so I’m thrilled to be here and thrilled to have the position I am following some incredibly talented people in Ian Anderson and Dawn Farrell and I hope I hold the same standard that they did.

Peter Tertzakian:

Well, that’s wonderful. I call it the People’s Pipeline now because we as Canadians own it and I don’t say that facetiously, I think it’s incredibly important that we have this strategic piece of infrastructure. Many countries in the world where strategic infrastructure is actually owned by the state. Certainly many of the power lines and stuff in this country are, so why wouldn’t the pipeline? Now the pipeline is also making some pretty important contributions financially now, isn’t that right Jackie?

Jackie Forrest:

Yeah. So we’ll ask you about this. This is a Globe and Mail article. I didn’t read all your detailed results, but it talks about the Trans Mountain paying roughly 1.25 billion over the course of the year in 2025 with expectations of more in 2026. So these are profits that are coming from the pipeline that are going back to the government. So maybe explain that and explain why maybe it could go up in 2026.

Mark Maki:

Sure. A few reasons for that. First off, now that we’re running and we’re operational and instead of having money come into the system to pay the bills for construction, we’re actually, the customers are moving barrels off of our system into the markets in North America, but then also in Asia, and we’ll get to that I’m sure a little later. We have a line of credit with the government, so we’re paying them interest on that and then they are the shareholders. So you mentioned Canada is the shareholder, big round numbers, there’s 40 million of them, although citizens of Canada effectively own, have an interest effectively in the company, that’s how we like to think about it. And so we’re paying a dividend upstairs to the owner. So first quarter between the interest and dividends, 311 million, about 148 was interest, the balance, 163ish was a dividend that we expect will repeat the rest of the year, that’s the 1.25 billion. And this year we’re still finishing up some of the construction work on the expansion. And so that’s taking some of the money that we’re generating and that will disappear in 2026 largely and so that gives us more room to pay more dividend upstairs to the owner. So it should go up.

Jackie Forrest:

Well and we’re going to get to it. That’s not the only economic benefit to the country because it has seriously improved pricing for Western Canadian crude oils because now those folks in the Midwest, well there’s scarcity, they have to compete for our barrels and pay us higher prices. So we’re going to get to that part. But I also wanted to talk about benefits to indigenous communities. Do you have any information on that?

Mark Maki:

Oh, for sure. Whether you think about employment or the mutual benefit agreements that Ian helped to put into place and Dawn helped complete and now we’re operating under those so mutual benefit agreements with the Nations, 69 agreements, I think it’s 81 different Nations that are covered by that. As far as contracting, roughly $6 billion, in fact an excess of 6 billion of contracts to either indigenous-owned or indigenous partnerships. So that was a huge benefit. The other thing I really want to comment on is that the quality of the work that was done by the indigenous contractors is A1. And in fact, it isn’t so much that they’re indigenous contractors as much as they’re really good at what they do and that’s why you hire them. So there’ll be ongoing relationships there now for the decades to come. Finally, employment, more than 10% of the workforce that worked on the project was identified as indigenous. And I think that’s tremendous and I think that really, again, helps open doors in the energy community to opportunity for the Nations.

Peter Tertzakian:

Yeah, I think the statistic is that broadly speaking, in Canada, the indigenous participation in, I’ll call it corporate Canada or work or however you want to do, is about 2%. So 10 percent’s very high.

Mark Maki:

Yeah, we’re very proud of that and the country should be as well.

Jackie Forrest:

All right, well we’re going to get to the potential sale and maybe potential for indigenous ownerships at some point, but let’s talk about the operations of the pipeline. I think a lot of our listeners would be interested in the logistics of moving oil. Once you move the oil to the tankers, how do the tankers get out? Are they piloted? Are the pilots helicoptered back? Just explain all the logistics of getting crude moving onto Tidewater.

Mark Maki:

I grew up in a port and family, either railroad people or tied to the port. So this stuff is, first off, it’s cool to me and dad was a Navy guy, so all that, so when I go onto the dock, I start to vibrate because it is incredibly fascinating, the operation that we have at Westridge. But the tankers, when you stand up alongside one of those things, you realize how big they really are. But the care that is taken to bring the ships in and to have them leave is tremendous. So first off, as ships come in now, they’re unladen and they can only come in during the daylight hours into the port. They have guide tugs that help bring them in. There’s guide tugs that help take them back out of the port. They leave the port when they’re loaded, really only on slack, high tide.

And so there’s only a certain number of windows in any given day for ships to come in and go out. Now eventually there are going to be improvements in the port that allow unladen nighttime transits in and that’ll help the logistics. Think of it like dancing elephants, that’s what they are, but that’ll help smooth the logistics out. One of our really big tests this year was, it was our first winter with the new facilities up and running, and so one of the things we were wondering about was how much would weather impact loading and so forth. And actually things went incredibly smooth. And using month of March as an example, it was our peak month. We had 29 ships leave the facility. If I remember correctly on the split there was two Panamax, which is a little bit smaller ship, and the balance were Aframax, which are larger. And everything worked really well. So the logistics of the port operation, the logistics of our facility, the people that work there, and they’re incredibly proud, you go into the control center and you look out over the bay and you look at three ships loading, I was down there a couple of weeks ago and they were like, “We got three going today, Mark.” And they were excited, they were happy, they were proud of what they were doing for the country.

Peter Tertzakian:

So logistically the biggest constraint factor or the vulnerability is the Lions Gate Bridge? Is that the issue?

Mark Maki:

It’s really the bridge is around the second narrows and the CN bridge that goes up and down. That really is the primary logistical consideration. And then there’s clearance issues on the Lions Gate Bridge. So a much larger tanker than an Aframax won’t work.

Peter Tertzakian:

Just because when the tide is down, it’s not down enough for the top of the tanker to clear.

Mark Maki:

Yeah, clearance is an issue. So Aframax fits well. And one of my colleagues describes an Aframax as like the F-150 of the truck world. Common, very versatile tanker.

Peter Tertzakian:

Just for context, so there’s Panamax, which is slightly smaller, it can go through the Panama Canal, therefore the name. Aframax, it can, I guess go to Africa, is that where it comes from?

Mark Maki:

Yeah, not Africa. It’s a standard, but yeah-

Peter Tertzakian:

Some standard. Okay. And then there is the-

Mark Maki:

The acronym, I forget, I’m sorry, Peter.

Peter Tertzakian:

That’s okay.

Mark Maki:

I’ll look it up and send it to you.

Peter Tertzakian:

And then the largest is the ULCCs, I don’t know what they call them-

Jackie Forrest:

VLCCs, the very large carrier-

Peter Tertzakian:

Isn’t there a ULCC?

Mark Maki:

There’s a UL…

Peter Tertzakian:

Ultra-large, super-big, but those don’t fit.

Mark Maki:

Those don’t fit probably pretty much anywhere and there’s very few of those left in the fleet. So ULCC is the biggest, VLCC, Suezmax, Aframax and there’s big and small Afras, and then Pana.

Peter Tertzakian:

And then Panamax.

Jackie Forrest:

Yeah, so we’re on the smaller end. And it’s worth probably just clarifying that when these tankers have to navigate these bridges and things like that, they have local pilots on that are familiar. So the person who maybe if the ship is flagged Panama, or wherever it’s flagged, they actually have a Canadian pilot who’s familiar with these areas that has to drive the boat out and there’s tugs on all corners to make sure that it has a lot of control.

Mark Maki:

Bow and stern and yeah, the ships are piloted by people that understand everything feels different. Like on the Mississippi River, you have Mississippi River pilots because they know how the river behaves. Same thing would apply here in Vancouver Harbor, tides are strong and so people that are familiar with the harbor and have years and decades of experience are making sure the ships go in and out safely and high standard is applied to any ship that calls and our facility has to meet very strict requirements. And we have rejected ships just said, “Nope, that one doesn’t fit the bill.” A ship calling on our facilities is very, very carefully looked at.

Peter Tertzakian:

Right. So where do the tankers go now that we’ve established the port and how’s the operations work there?

Mark Maki:

Yeah, this is really interesting and there’s some really cool things we’ve learned through this. Once the tanker and flange from our pipeline meet, we don’t control once it’s on the ship and where it goes. But we are very interested, for lots of reasons, “What’s the market it’s going to?” A little more than half of the ships that leave Westridge are born for Asia.

And broadly China is by far the largest taker, but other locations include Japan, Korea, Singapore, we’ve seen some ships go to India and Brunei, that’s the typical market for oil leaving that’s going to Asia. On the North American side, interestingly enough, some ships leave the harbor and go down into, effectively Puget Sound into the US, so they offload at the Washington Refining Complex. So some go there, a lot, go to California. And the reason for that is California is a heavy oil market. It’s a natural place for Canadian barrels to go. And then we’ve had a couple of tankers that found their way up to Alaska, which is again, I think quite interesting given Alaska is an oil producer. So we have been very, I wouldn’t say surprised, but very happy. The thesis that was there at the beginning of the pipeline was it was going to diversify markets for Canadian oil. And that has been very true and it shows up in the numbers. Yesterday I spent a little time with Bank of Canada, we’re actually talking about this as well and just they commented this pipeline and what it does shows up in the GDP for the country.

Peter Tertzakian:

Well it does because you get higher prices, you get global prices. So the profitability all the way back up the pipe to the producers, we saw it in the prices coming up.

Jackie Forrest:

Yeah, well and this is the thing that’s important. It’s not just the 890,000 barrels a day that goes down the Trans Mountain. It’s actually affects the price for all crude in Western Canada. So we produce like 5.5 million barrels a day of crude, all of it gets lifted by this pipeline because now it creates scarcity in the market. And in the past, buyers knew we had very few options for our product and therefore they would offer us low prices. Now with the Trans Mountain, we have places to put our barrels and now they have to pay us a more fair price. So I did a little back of the envelope and every $1 per barrel higher price adds about $2 billion in annual revenue to the oil and gas industry. For lights and heavies it’s been different, but they both narrowed, but I think you could argue at least $3. So we’re talking at least $6 billion a year of additional income. I don’t know, Mark, I’m sure you’ve got more accurate numbers on that.

Mark Maki:

I think those are good working numbers and we try to be understated in our business and don’t talk too much on that. But yeah, we think it’s made a difference to the differential. And if you look back over history, and I know you touched on this in the podcast with Dawn, there’s times the differential’s been $30 a barrel.

And whenever the pipeline network gets constrained, and you saw this in the eighteen-ish timeframe before line three came online on Enbridge, differentials blew out. And throughout history, in my time in the space, we would build infrastructure to catch up with supply and then the differential would come in and then as production increased, it would blow back out again. So now for the first time in a while, we’ve got a little bit of slack in the system and I think that has helped for sure on the differential. But the other thing that’s really helped is the market diversification. And I’ve got lots of stories from ancient history that I’m happy to go into, I know you love history, about views on differentials, but we look at that $9 differential now and go, “That feels like we did something that matters.”

Peter Tertzakian:

That’s huge.

Jackie Forrest:

It’s typically even on average been 15, so there’s $5, so maybe it’s more like $10 billion annually.

Peter Tertzakian:

It flows all the way through to taxes, royalties, and everything.

Jackie Forrest:

By the way, just that money was money that was transferring from our economy to I would say a lot of US refiners. They were getting the economic benefit. And now by building this pipeline, that’s shifting back over the border to Canadians getting a better price for their crude oil, instant.

Peter Tertzakian:

So in actual fact the dividend that you talked about earlier, that the Crown Corp is paying back to the people is augmented and amplified by the increase in corporate taxes and royalties that are also being paid. So it’s really, you got to include that in the calculus. Now you mentioned that we’re not constrained, which is a good thing because we don’t have the differential. The March data suggests that it’s about 89% full with a bit about 10% room. On May 15th, the Financial Post reported that Minister Guilbeault, who used to be the Minister of Climate Change Canada, he’s now a minister of Canadian Identity and Culture, he said that the Trans Mountain pipeline was not fully used, only about half used. It’s actually 89% and therefore Canada does not need additional pipelines. So how do you respond to that?

Mark Maki:

Just with the numbers. So in the first quarter it was 85% utilized overall in the month of March, as you pointed out, 89. So we ran about 790,000 a day in the month of March. Seasonal maintenance on the oil sands will bring it back down a bit in Q2 and Q3 and then in Q4 we expect we’ll be back in that 90 percent-ish range. Longer term I expect we’ll fill up. Now that could be as soon as late ’26. Our talking kind of view has been ’27, ’28. But I’ve heard others in this sector talk about the network being full again by the end of ’26. Mr. Guilbeault’s comments, I try to make sense of it and I know people get lots of numbers in their head, I think maybe he was talking about the amount of SPOT space being utilized was around 40%. That’s the closest I can come up with.

Peter Tertzakian:

So the SPOT, just to be clear, so there’s what they call firm, which is the contracted capacity of the pipe.

Mark Maki:

Yes.

Peter Tertzakian:

So these are long-term contracts that the producers buy and they fill and then the SPOT is or otherwise known as the interruptible, is a small section of what’s remaining in the pipe that you can sort of put your barrels on as a producer at any time without having a long-term contract.

Mark Maki:

Right.

Peter Tertzakian:

And so perhaps he was just focusing in on the narrow slice that was not fully contracted.

Jackie Forrest:

And is that about 10% of the total capacity or?

Mark Maki:

The system has, I’m going to round a little bit here, it’s not as precise, but the actual… Well, this must be precise, 707,500 is the contracted space in the system out of the 890, then the balance is SPOT. And when you look at how utilized it was in the first quarter, it was around that 40 percent-ish of SPOT was utilized. So he may have had that in his head. So I’m trying to justify the number, but the overall system, the way to think about is 85 and that little bit of capacity that’s left over that is going to get soaked up pretty quick.

Peter Tertzakian:

But in some ways we don’t want it to get it fully soaked up because then we run into constraints again.

Mark Maki:

Differentials go out. Yes.

Jackie Forrest:

Well, but there’s maybe some potential for expansion and we’ll get to that. But I wanted to ask you one final question here. There is this CER hearing on the tolls for the pipeline with the shippers seeking lower tolls. Maybe you can just tell us now what are the tools and what’s the process to get certainty on this situation? I see this is pretty critical to, we’re going to talk about maybe a potential sale, but if you don’t know what you’re going to charge for tolls, it’s a big unknown for a buyer.

Mark Maki:

Yeah, that’s a good comment for sure and a great question. And it’s one that probably got sidestep a bit because we’re in the process of litigating that in front of the regulator. But this would be pretty normal stuff in our space. If you’re a utility, the customers want to take a closer look at the rates, that’s their right. And so there’s a process for it. We’ve been going back and forth with evidence and questions and so forth. That’s where we are effectively big picture in the process. We’ll go to hearing now currently in November, and then probably by the second quarter of ’26, a decision will come back from the regulator as to how should the rates be adjudicated. So that’s probably as much as I want to go into today on that. And that again, it’s normal, painful as the process is, there’s a reason the process exists.

Jackie Forrest:

Right. Well, I got involved in one of those hearings and I know they take a long time, but it is good that you have that system for people to put forward their arguments and it takes a while, but I think it’s a good process.

Mark Maki:

And it’s an interesting one, this one too for us, and without getting too much into it, but you’ve got the shippers of course would want the rates lower for obvious reasons. We want the rates at a particular place because we think that’s the right number. And there’s another party in the case who wants the rates higher because they think the rates that we’re charging is a subsidy to industry. So CR is going to have a lot to sort through on this one and it will be interesting, but it’s a different dynamic than what I’m normally used to, which is where you got the pipeline wants something, the customer base wants something different and it’s two parties at it, and here you got three.

Peter Tertzakian:

And at the end of the day does not also have to be competitive with other outlets like the main line that goes to the United States and-

Mark Maki:

Yes. And our assessment is that if you look at where product ends up off of Trans Mountain, especially if you tanker it to California or tanker to Asia, we are competitive with the alternative.

Peter Tertzakian:

Okay. I want to ask you one more question before we get into the next phase of potential development. And that is, what is being transported on this pipe? Is it just diluted bitumen or is there light oils? What sort of liquids are being transported on this pipe?

Mark Maki:

It’s a little bit of everything. Refined products, some refined products move in the system, gasoline and diesel to lower mainland. And that’s for the local consumption in BC. Light oil, which is also used in the BC markets, some light oil is exported, some light oil goes into Washington state. Some heavier oils may find their way into Washington state where they’ll blend. And a lot of different types of heavy oil really are moving on the new line. And that largely goes then to export.

Peter Tertzakian:

So help us visualize how this works because it’s kind of fascinating. You have gasoline and diesel, which is a refined product, it goes in big slugs and then you follow it through with heavier stuff and they know how to off take it at the back end.

Mark Maki:

This is fascinating stuff. But what you’re trying to do is basically think of it like rail cars almost, without a physical barrier, but basically a rail car is moving down inside the pipeline. So you have a rail car full of light oil, next to say a rail car full of diesel, next to a rail car full of unleaded gasoline. And so that will be your train effectively moving through the pipeline. And if you maintain certain pressure and certain conditions, it’s in a state called turbulent flow. So you don’t get a lot of mixing. The box curves won’t run over each other, so they stay separate. And there’ll be a little bit of mixing at the interface and you deal with that by where you cut the batches. Line one is light oil and refined products, some synthetic oil. Line two is largely heavy, different types of heavy oil.

Jackie Forrest:

So you have to just kind of switch the tank you put it in when…?

Peter Tertzakian:

Yeah, no, it’s fascinating.

Jackie Forrest:

And you need a lot of tanks to handle all those different products at the end of the line, I suppose

Mark Maki:

You do. We have a certain kind of suite of cocktails, for lack of a better way to put it, that we move through the system.

Peter Tertzakian:

It is fascinating because I’ve always viewed rail cars, a unit train of oil, as a pipeline on wheels. And so now we have a pipeline that is, I don’t know, rail cars metaphor as well.

Mark Maki:

Yes. Yeah, exactly. Yep, yep.

Jackie Forrest:

All right. Well another thing that could enhance the value of the pipeline is if it could even move more hydrocarbons through it. So tell us about, you came up with some news that there is potential to increase the Trans Mountain pipeline capacity. And this all happened back in February when we were going to get those 25% tariffs on oil and there would’ve been a lot of incentive to move more oil through the Trans Mountain and even greater economic benefits to the country. But tell us what are the short and long-term options to add capacity?

Mark Maki:

Sure. Now that you’re done with the pipeline, and again, having been in the sector a long time, the first thing the pipeliner does is goes, “Okay, what can I do to it now to make it run better?” And so that really is where our minds turned shortly after the completion of the pipeline. “Well, okay, what’s next?” So obviously we’re focusing on running the system well, making all the parts, the symphony hum, but where we can go first, and we’re evaluating this now, but is using dreg reducing agents in the pipeline. That’s a common strategy used by pipeline companies too. It’s a chemical you mix in with the oil and as we talked about those batches of oil moving through the system, it makes them move easier through the pipe.

Peter Tertzakian:

So you can go faster?

Mark Maki:

It reduces friction. And therefore less energy and you can move more and more and more product through the system. So we’re going to evaluate that and are well on the path of that. That could be in service as early as the end of ’26. And so we’re going through basically right now some testing of it on the system, trying it out in different segments to see how the pipeline behaves. The next logical thing after that that we’re evaluating is adding some horsepower to the existing pipeline. The full capability of what we just built is closer to 800,000 versus 540. And so that is one of the other things that we’re going to evaluate. So more horsepower on the system, maybe a little bit of pipe, we have to see, but we’re going to evaluate that as well. And so that’s more like a ’29ish timeframe and that fits pretty well with one of the things the prime minister has talked about is projects that make a difference in say the next five years and that one can.

Jackie Forrest:

Okay, so that would include some new construction because you’d have to add some pumping and maybe some pipe. And would it add, was that 300,000 of additional capacity or so?

Mark Maki:

Or 250, big round numbers.

Jackie Forrest:

250 or so.

Mark Maki:

Yeah.

Jackie Forrest:

Now that will cost money and you’re going to have to get some shippers to sign on to that additional capacity. Do you have any concerns that shippers would support an expansion? We’re going to get to the Bill C-5 soon, but I’m just looking at it in terms of long-term contracts. We have this oil and gas emissions cap, which is creating some uncertainty in terms of the amount of supply growth. And do they feel comfortable committing barrels to a pipeline when they’re not certain? If they can grow with a policy like that?

Mark Maki:

Well, that’s where you got to start. I think at the highest level for us to optimize the kit that we have and for other pipelines to optimize the kits that they have, you have to see that there’s going to be interest to contract for the space. And so we would go through a process, when the time comes, and if the time is right, we will go through an open season process and look for contracts. That’ll only be successful if the producers see we’re going to increase production. And there’s a natural amount of growth that seems to be there from… And they’ve become really good. And I know Peter, as an economist, and Jackie, as an economist, you watch this stuff with laser focus, but they have become extraordinarily successful over the decades at getting a little bit more out of their systems and doing it more efficiently and at lower costs.

And so you’re going to see with some capital investment, some growth, and the pipeline system is still tight so it won’t take much. And then so you have to look at these little optimizations, like I mentioned, DRA at the end of ’26. That could be a just in time delivery of a really important layer of capacity. And then you get to the pumping addition and other pipelines are looking at similar things. And so we can ratchet up to a point and then you hit hydraulic max on the systems and then you really need another barrel.

Jackie Forrest:

Right and then you need probably a bigger commitment of new supply to come to go for a greenfield. And I did want to talk about this article in the financial post in February that talked about the potential for a northern leg to the Trans Mountain pipeline that would take crude oil to Kitimat, BC. This was apparently envisioned in the early days of the pipeline, but was never actually filed with the regulator as the plant. Can you just talk about what the benefits of that would be or over just maybe expanding the pipeline into the existing Burnaby Port?

Mark Maki:

Yeah, the thought at the time when the original designs for Trans Mountain were done, and I think one of the former CEOs, was Ian who was talking about both this idea and it was a great idea. It was a concept they had at the time where, think of it like a Y, you had a part of the system that went north to Kitimat and part of the system that went south to Burnaby. And so they would’ve altered the pipe size after it left, the fork in the road, so to speak, when the Trans Mountain expansion project was completed, that fork in the road, the provision for that really isn’t there any longer. We did the same, effectively the same pipe size all the way down to Burnaby because going to Kitimat would’ve been incredibly expensive and just there wasn’t the appetite for a facility as you know from the Northern Gateway plus other things that happened in the background. So the feasibility of the northern leg today, it probably isn’t there. If you were going to think about something like that, first thing you do is optimize what you have. So we always start there, but if you’re thinking about another fork in the road, you would do another pipeline to some other location.

Peter Tertzakian:

So is there another location in between Burnaby and Kitimat just a bit further north?

Mark Maki:

Again, subject to all kinds of things, but there would have to be commercial support. But Kitimat, Rupert, maybe point north of there. The other thing that’s been in the dialogue of late has been Churchill too as another thought, different market, different ocean effectively that you’d access through Hudson’s Bay. It’s an interesting idea to… Get into a pipeline guy, kind of vibrate and go, “That would be interesting.” But you have to think, “Is there a market? Is there supply to fill the pipeline?” There’s a lot of things you got to get over first. And so I think you got to start first with some of the policy things you were talking about, which is, “Okay, what is the carbon regime and what can we do to make that work?” And then incentivize investment. We need investment in the sector to drive enough volume to support a pipeline.

Jackie Forrest:

To do a big greenfield pipeline you have to have a view that there’s projects coming along and there’s nothing, no big greenfield projects coming along that make you think supply is going to grow at a really rapid pace. So that’s a concern I think in terms of building a big pipeline, is getting some of those policies like the oil and gas cap, which create uncertainty for people to move forward with some of these bigger projects.

Mark Maki:

Yeah, I think that’s the message I’m sure the administration has heard loud and clear from the industry side, that there’s this overarching policy things and we have to see certainty to invest because it’s a long-term investment and the rules can’t change five years later or six years later if someone else comes in and they got a different view of the world. So they’re trying to invest into that. The advantage the oil shale people have in the states is they get their cash back quick. And oil sands play is a much longer play. It’s a great investment, but it takes time. And so they have to know that they’re going to get recovery of capital and return on capital across that period. But the production decline curves like a bowling ball went out a window on the oil shale stuff. And so there’s a real advantage to the Canadian production, longevity is one of them and certainty.

Jackie Forrest:

But you also have to have certainty that you’ve got 10 or 20 years here of a horizon and not have policies like the oil and gas cap. We could beat that one up all day though.

Peter Tertzakian:

Well, and I would argue, as I’ve long argued on the podcast, the oil and gas cap is just one of a whole suite of policies. We need a holistic review of all the carbon policies, actually even carbon plus fiscal plus regulatory reform in general. And it’s not just for oil pipelines, it’s for any kind of energy infrastructure that needs reform. But that’s a whole other subject and topic. But actually one more thing, we also need the certainty on those tolls, right?

Mark Maki:

Yes.

Peter Tertzakian:

Sort of like the tolling regime because within the absence of understanding what it costs to move, what it costs to produce and the time it would take to build new projects as a consequence of the permitting process, etc, etc, all these things have to come into place before we really think about how to build infrastructure. Which as I said at the beginning of the podcast is sort of like that phase three, “Do we want to build?” “Yes we do.” “What do we want to build and what rank order priority?” “Okay, we’re in that phase now.” The third phase is the most difficult, “Well, how are we going to do it and how are we going to pay for it?”

Jackie Forrest:

All right, well, I think on a lot of people’s mind, and we’re going to get to the, it’s a $34 billion pipeline that the people of Canada own as Peter said, there has been an expectation set that the federal government will sell the pipeline. Any expectations in terms of the timing for that?

Mark Maki:

Yeah, I’d have a hard time commenting on timing, new administration in. But one of the things that the company has always been pretty vocal about, and I would go back to a hearing of the standing committee of natural resources that the company testified at. And I think my messaging at that was, “Don’t be in a hurry.” And the reason for that is you’re valuing a stream of cash flows over decades. And at the front end of that, there’s a little bit of uncertainty around the rate case that you mentioned earlier. So you want that behind you, the utilization of the system, how’s it going to perform? How’s it going to go through the first winter? Oh, that’s now history. We’ve got a year of operating history, which is really good and clean. Can it do 890? Yes, we’ve tested it at eight. So there’s a variety of things, as you remove that uncertainty, it becomes more of a valuing of an annuity. Now you’re talking about the tail, what’s the longevity of the business? And so that helps value. In the meantime, clip a coupon. So you’re a dividend holder, bring your basis in the asset down, my hand’s dropping down, which is meant to show, got 34 billion in, start taking some money back out of it. So time is helpful here and the government doesn’t need to be in any hurry. So that’s our advice.

Jackie Forrest:

Well, and you talked about the potential for expansion, and so it’s worth more money-

Mark Maki:

Even more, yeah. Thank you, yeah.

Jackie Forrest:

… if you can now move more oil through it.

Mark Maki:

I missed that one. That was an important one. But yes, you make something which is a concept on a piece of paper a little more real if you’re in the permitting process and you’ve got commercial support and the rest. Now somebody who’s looking at buying the company has got to value that or they’re going to lose. So it’s an important thing that we can advance and add value for the 40 million shareholders in the pipeline.

Peter Tertzakian:

Well, I’m just going to chime in, as I’ve said in the podcast before, as a Canadian, I do not want this pipeline sold. We need this pipeline and we should be happy that we bought it and built the expansions when we did, this is a key part of our energy security, it’s a strategic asset. And now when we’re talking about sovereignty and all the affiliated issues surrounding that, we need to have this critical piece of infrastructure that has actually served us well in historical oil crisis, energy shocks, the 1970s oil shocks. We use the Trans Mountain Pipeline to fill up the Panamax type tankers to take it through the Panama Canal to serve central Canada at a time when the world was hoarding oil. So to me, there’s no way we want to sell this.

Jackie Forrest:

That’s good point. If you were China, would you sell this pipeline?

Peter Tertzakian:

Well, no, but we don’t want foreign interests owning the pipeline. That seems absurd to me.

Jackie Forrest:

Well, no, I mean, just if this was a strategic asset in some of these countries like China, they would want to control it. So there’s some argument there, Peter, I guess, to why it should be a national asset.

Peter Tertzakian:

And it’s now starting to kick out good dividends, return on capital. If you hold it for the long term, you expand it as a foundation. And on that note, you mentioned Churchill, but are there other potential expansion or diversification of energy infrastructure projects that Trans Mountain may be thinking of?

Mark Maki:

Yeah, right now we’re probably sticking closer to home. That would be for the future to evaluate that. In near term it’s optimize what we have and we’re here to help support the owner.

Jackie Forrest:

Okay. Well, we’re running out of time, Mark, but we really want your opinion. There’s obviously a discussion in Canada now about the fast tracking and building of new pipelines and new any kind of energy infrastructure and we have this Bill C-5. Now I just want your advice, you’ve come to Trans Mountain after the construction, but learned a lot by being there. When you look at the delays and costs that Trans Mountain faced, and as I said, it was so bad that private investors wouldn’t support the pipeline, and you look at what’s being proposed in C-5, do you think that would help solve some of the problems that led to the cost increases and delays that we saw?

Mark Maki:

Yes, I do. I think it will help without question. I really and whenever I get the chance to say this, I’m very optimistic about where Prime Minister is taking the country. I think he very much understands the importance of the energy industry to Canada. I’m as optimistic as I’ve been in a long time about what’s to come. So I think C-5’s a great step in the right direction. Again, a little bit of history, Trans Mountain built was called the Anchor Loop, it was the beginnings of the Trans Mountain Expansion Project in the mid-2000s in Jasper National Park in Mount Robson Provincial Park. That project was permit filed at the NEB in February of 2006, it was approved in October of ’06. Construction was done in ’08. That’s how it’s supposed to work, not a 10-year odyssey.

Jackie Forrest:

And was it on budget?

Mark Maki:

From the original budget? It was a little bit over budget, but it was, if you look at the dollars and cents at the time, I think it was 550 million for that particular project. And a similar project today in BC would be about $4 billion. And that’s the effect of time. How? Which I know you talked about a lot with Dawn Farrell on the prior podcast, but the C-5 thing and the direction of the Prime Minister, I think it feels like it’s going in the right direction. And so I’m excited and optimistic.

Peter Tertzakian:

Wow. Well, great. So you are the third in a series of CEOs from Trans Mountain that we’ve had. We’ve had Ian Anderson, we’ve had Dawn Farrell, and now you, Mark Maki, delighted to have you. You’ve taken us through the technical aspects of pipeline logistics, port operations, things I didn’t even know about. You’ve talked us through some of the policies and the politics and the energy security and the strategic nature of this important piece of infrastructure. I’m certainly delighted you’re leading the People’s Pipeline, Trans Mountain, and hope that we see a lot more from that as it contributes to the economic and strategic benefit of our great country. So thanks, Mark. Wonderful to have you.

Mark Maki:

Jackie, Peter, thank you and happy to come back if you need me for any particular purpose and love to talk history. And please do flip through the book.

Peter Tertzakian:

Thank you for the book.

Mark Maki:

There are some incredible pictures in there, and you get a real appreciation for what was done here.

Jackie Forrest:

And thank you, Mark. And thanks to our listeners. If you enjoyed this podcast, please rate us on the app that you listen to and tell someone else about us.

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