Evan as political battle lines form around Alberta Premier Danielle Smith ‘s latest push for a new crude pipeline to the West Coast, the private capital that would be needed to build it remains firmly on the sidelines. Smith’s ambitious plan to get an oil pipeline onto Ottawa’s short-list of major projects may have the blessing of oilpatch heavyweights Enbridge Inc. and South Bow Corp., but so far none of their capital — and that should come as no surprise, said ARC Financial Corp. managing director Jackie Forrest. “I think there’s a lot of people that want to make this work, but they can’t take something like this to their shareholders and start putting tens of millions of dollars into a project when the barriers are so large. “It’s very risky capital to be putting forward.” Alberta’s government is putting its shoulder — and $14 million in taxpayer money — into securing approval for the new pipeline. But the firms advising on the project have been careful to stress they have no financial skin in the game, wary of reminding investors of the years and billions lost on past failures such as Northern Gateway, Energy East and Keystone XL. The process for approving major projects in Canada generates so much uncertainty, private capital can no longer be put at risk, Kevin Birn, chief analyst of Canadian oil markets for S&P Global Commodity Insights, explained. “I’ve been following pipelines for most of my career and the tug of war that ensues each one and the drama that goes around it,” he said. “It has cost Canada more than it should have, both in terms of the expenditure to get the metal in the ground, and it cost us in terms of confusion from financial markets about what we were trying to be and who we wanted to be. “It also cost us in reduced investment because people started to doubt our systems would function.” B.C. Premier David Eby called Alberta’s proposed pipeline “a direct economic threat” last week, criticizing the absence of an official private sector proponent, characterizing it as “not a real project.” Many analysts and economists have argued the proposed pipeline’s economic benefits could be real, however, even if no company is yet willing to puts its own capital at risk. Governments may ultimately be swayed for the same reason the Trans Mountain pipeline expansion has proven valuable — by lifting Canadian crude prices through tidewater access and protecting public revenues via higher taxes and royalties. Smith may have concluded that Alberta didn’t have a choice but to get involved if it wanted to see a project get off the ground, Forrest said. “We saw the reaction from the premier of B.C., and then you also have policies that are just blatantly clashing with the idea of building a pipeline, whether it be a West Coast tanker ban or the oil and gas emissions cap,” Forrest said. “I think it’s probably the only way to go forward, is to de-risk this with government money, because it’s just too risky for any private company to enter into.” Smith said her government has no intention of spending public money to build a pipeline, leaving it an open question where the money will come from to build the proposed one-million-barrel-per-day line from Edmonton to the north coast of B.C. Aside from the cost of the pipeline itself, filling it with oil could require roughly $100 billion in fresh capital investment into production over the next decade, far above current spending levels, according to a recent report co-authored by energy economist and ARC Financial Corp. partner Peter Tertzakian. Still, oil production in Western Canada is growing. Output is expected to exceed five million barrels per day this year, according to S&P Global, while export pipeline capacity averages around 4.5 million barrels per day. Crude flows from Western Canada could begin testing the limits of pipeline capacity as early as next year, Birn said. “So you will need optimizations as early as 2026 coming online to make sure the system doesn’t oversupply, and you don’t get those wider (price discounts),” Birn said. Existing incremental expansion plans for Enbridge’s Mainline pipeline and Trans Mountain could be enough to prevent a glut, market watchers say, but fall far short of the growth ambitions voiced by Alberta’s government and some producers. The problem, according to Smith and others in the industry, is a classic chicken and egg problem: pipeline companies won’t build until producers commit barrels, while producers resist expanding output unless they know for sure new pipeline capacity will be available. Painful lessons from the past two decades taught producers and their investors not to significantly grow production without a clear path to increased exports, Tertzakian noted in his recent report. He pointed to Canada’s enormous production growth in the early 2010s when multiple oil projects were built with the expectation that new pipelines were on the way. When Northern Gateway, Energy East and Keystone XL all stalled or were terminated, production swelled, exceeding available pipeline capacity, and oil prices plummeted. “With memories of cost overruns, stranded barrels, and billions in lost revenue still fresh, few in the industry are eager to sponsor the next big push if the movie risks ending the same way,” Tertzakian noted in the report co-authored by Studio.Energy director Carmen Velasquez. More optimistic proponents say things have changed since Canada’s last major pipeline project was scuttled, including important advances in Indigenous consultations, and the election of the Carney government on a mandate to blunt the economic pain of U.S. trade barriers with infrastructure projects and trade diversification. But equity markets remain skeptical. Smith: New pipeline requires law changes:Alberta promotes Canada-Mexico energy ties In a recent note to institutional and corporate investors, CIBC Capital Markets applauded the move by the Alberta government, while concluding the maneuver seemed likely to fail. “We are doubtful in the success of such a plan,” the note said. “While we remain open-minded to the possibility, the political and economic realities may be difficult to overcome.” mpotkins@postmedia.com