According to Reuters, Chevron (CVX) just applied to the National Energy Board of Canada to nearly double the Kitimat LNG plant's size. Kitimat is in the northern part of BC latitudinally directly across from all kinds of oil and natural gas in the neighboring province of Alberta and not far from the southernmost point in Alaska.

Source: Author, via Google Maps

In fact, if you have ever taken a cruise to Alaska, you may well have seen Kitimat on your way to Ketchikan, Glacier Bay, and Juneau.

Chevron has Woodside Energy Ltd. of Australia as its 50-50 joint-venture partner in the project. (Subscribers who have been with me for more than a decade remember when we bought Woodside as a near-penny stock and sold it for a nice profit before all the oils declined way back when.)

Chevron will be the operator of this already-big LNG project and had previously planned to be able to process 10 million tons per year of production capacity. To reduce the cost of its supply, CVX now wants to produce 18 million tons per year. The project is expected to come online by 2023 or so, and that presumes that Canadian politicians and various interest groups do not intercede.

This Kitimat LNG project, if approved in its latest form, would be a real boon for Canada. It would increase the demand for domestically produced natural gas by a significant amount, and it would create magnificent export opportunities to fill Canada's coffers - by avoiding the long and costly route via either the Canadian Maritimes or the US Gulf Coast, then through the Panama Canal, and across the North Pacific. With the approval of this project, the LNG would reach Japan and the rest of Asia much more quickly and at considerably lower transit cost.

It would also involve a less actively-traveled route which would be 100% pure maritime, as opposed to traveling first by pipeline, then in a high-traffic shipping area along the crowded US east coast, and maneuvering through the Panama Canal before entering the North Pacific. This would likely lessen the likelihood of a dangerous accident.

Source: Author, via NatGeo Interactive Maps

Some opposition groups claim the Douglas Channel leading to the port of Kitimat would be difficult to navigate, and there would, therefore, be marine oil spills. I should note, however, that the risk of marine oil spills "could" occur anywhere. The same fights occurred when the Trans-Alaska Pipeline was proposed, and this has been the case with virtually every other pipeline ever proposed and those few that have actually been constructed.

Of course, one can never predict what the politicians in Canada might do. A cautionary tale comes from another of our holdings' - Enbridge (ENB) - attempt to build a pipeline from the same Bruderheim area of Alberta to the same port on the fjord in Kitimat. (We have owned ENB many times, most recently purchased via an exclusive article for subscribers last week.)

This was the Northern Gateway Pipelines project, an attempt to build a twin pipeline from Bruderheim to Kitimat. The idea of the westbound pipeline was to export a slurry of bitumen from the famous Athabasca oil sands for transportation to Asian markets via very large crude carrier oil tankers. The project would have included terminal facilities to accommodate loading and unloading. This ahead-of-its-time $CDN 7.9 billion project was proposed in the mid-2000s. Then, the opposition began.

Parenthetically, I must mention my own bias: I think Canadian oil and gas are too valuable a national resource to remain in place. Both will be transported by one means or another. From all my research, it seems that pipelines are a considerably safer way to transport the product than the alternatives, trains or trucks.

Many municipalities, along the proposed pipeline path, including some environmental groups, general opponents of mining the oil sands, and First Nations organizations opposed the project. (Just as there were once more than 500 American Indian nations in the USA, in Canada, according to the Assembly of First Nations, there are 634 recognized First Nations bands spread across Canada.)

Even though proponents of the pipeline argued that the pipeline would have provided indigenous communities with equity ownership, considerable employment in areas of high unemployment, and stewardship programs, the proposal was strongly opposed.

Still, in June of 2014, the Northern Gateway pipeline project was approved by the federal government, subject, according to the Canadian Broadcasting Corporation, to 209 conditions.

Even though it was at long last approved, and the conditions were being met one by one, immediately upon taking office in 2015 newly-elected Prime Minister Justin Trudeau imposed a ban on oil tanker traffic anywhere along the north coast of British Columbia, which effectively killed the project. A year later, Mr. Trudeau officially rejected plans for the pipeline.

To the Big Question:

Could Chevron get approval to build its massive new LNG plant, and then find that no pipelines would be allowed to connect to it?

I believe approval will be granted - with conditions and concessions, of course. As to whether any pipelines will be allowed to connect to it, I believe the answer is also a very strong yes.

The Canadian economy is particularly resource-dependent, and even the firebrands in and to the left of Mssr. Trudeau's Liberal Party have in the past couple years begun to accept the fact that pipelines are the safest form of transporting Canada's oil and gas bonanza to the world's consumers who desperately need this energy source to better their lives.

The government itself has since made a U-turn on this issue, as the Canadian government now owns a key pipeline itself! Here is what happened:

Originally proposed by Kinder Morgan (NYSE:KMI) in 2013, the pipeline known as the Trans Mountain Expansion Project was designed to carry diluted bitumen from Edmonton, Alberta to Burnaby, B.C. (For those who haven't been there in a while, Burnaby is the city next to Vancouver.) This expansion was to have boosted throughput capacity from 300,000 barrels per day to 890,000 barrels per day.

Kinder advocated this expansion of its existing pipeline as part of a broader effort to ship more of Canada's oil to the Asia-Pacific region via its Westridge Marine Terminal in Burnaby. KMI argued that Canada would get an additional $3.7 billion (CAD) each year from shipping oil across the Pacific Ocean instead of selling oil to or through US markets.

The pipeline was instantly opposed by the Green Party as well as some members of the New Democratic Party (NDP), some unions, and some first nations. As the case slogged its way through various courts, things got even stranger in 2018. As Hunter S. Thompson once said, "When the going gets weird, the weird turn pro."

B.C.'s provincial government unilaterally proposed a ban on more shipments of diluted bitumen. Alberta's provincial government then halted the importing of B.C. wine to Alberta. Alberta's legislature also passed a bill that threatened to prevent any oil exports from reaching BC, to which BC responded with a lawsuit.

Remember Kinder Morgan? They were caught in the middle of all this governmental wrangling, so they told the federal and provincial governments they would be forced to abandon the project unless some government somewhere gave them some clarity on the future.

Rather than do that, Canada's federal government announced that it would buy the existing pipeline for $4.5 billion and seek new investors to complete the expansion project. And, that is how the government of Canada became a pipeline operator and gets to experience what private industry has had to deal with up until now.

Source: The Canadian Encyclopedia

Further supporting my conclusion that, yes, Chevron will receive approval to expand its original LNG facilities and, yes, other pipeline companies will be allowed to build pipelines is the fact that some indigenous peoples have now decided that jobs, joint supervision over safety issues, and a royalty interest are in the best interest of their members. From the Canadian Encyclopedia article "Pipelines in Canada," written originally in 2006 but completely updated just 5 weeks ago,

"Certain pipeline projects have received the support of Indigenous communities. For example, the Inuvialuit Regional Corporation, the Gwich'in Tribal Council and the Sahtu Pipeline Trust partnered on the Mackenzie Gas Project as the Aboriginal Pipeline Group)… The Eagle Spirit pipeline, a proposed alternative to Northern Gateway, is backed by several First Nations seeking to build an Indigenous-owned pipeline."

By the way, the article I cited above is a trove of information itself - and has enough links to keep the most curious and interested pipeline investor (like me!) enthralled for hours.

My Conclusion

The changes we have seen in recent months augur well not just for approval for Chevron's LNG plant, but for other such projects as well - and of course, for the producers who place their product with the pipeline operators and those pipeline operators themselves. These include:

• The recent massive disparity in prices paid for Canadian crude as a result of pipeline bottlenecks
• The need for tax revenues to support the Canadian and provincial governments' spending plans
• The spotlight that is placed upon safety to ensure that there are triple redundancies in place in many avenues
• The obvious savings in time and money to ship Canadian crude to Asia over 5,000 miles rather than 15,000+ miles
• The fact that the federal government itself is now a pipeline operator with a pending project that is working its way through the courts, and
• The recent cooperation between pipeline firms, producers, refiners and at least some of the indigenous peoples across whose lands the pipelines must pass in order to reach Chevron's LNG plant - and others that may follow.