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TEACHING NOTE
THE TRANS MOUNTAIN EXPANSION PROJECT: AN INDIGENOUS BID
FOR THE FUTURE OF ENERGY INFRASTRUCTURE
Christian Dippel, Adam Fremeth, and Carol Zhai wrote this teaching note as an aid to instructors in the classroom use of the case The
Trans Mountain Expansion Project: An Indigenous Bid for the Future of Energy Infrastructure, No. W28553. This teaching note should
not be used in any way that would prejudice the future use of the case.
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Copyright © 2023, Ivey Business School Foundation
Version: 2023-03-09
SYNOPSIS
In December 2019, John Young, vice-president of Aboriginal, tribal and community engagement at
Pembina Pipeline (Pembina), must evaluate a partnership opportunity with the Western Indigenous Pipeline
Group (WIPG) to bid for the Trans Mountain pipeline. Although the Canadian government owns the Trans
Mountain pipeline, it has publicly committed to reselling the pipeline after the Trans Mountain Expansion
(TMX) project has been completed. Pembina chief executive officer Mick Dilger had previously told
shareholders that the company was likely not bidding on the pipeline due to the challenging legal landscape
it faced, especially regarding Indigenous land rights. However, since WIPG consists of Indigenous
communities who hold land rights along the pipeline’s route, partnering with WIPG could mitigate these
concerns. If the project succeeds, the financial payback could solidify Pembina’s position as a market leader
in oil and gas transportation and storage. Young does not want Pembina to miss out on what could be a
huge opportunity, so he needs to decide whether or not to partner with WIPG for a joint TMX bid. Should
Pembina proceed with the WIPG partnership? If they do move forward with the partnership, how should
they manage relations with government and activist stakeholders?
LEARNING OBJECTIVES
This case will teach students how to think critically about the risks and rewards of pursuing a cross-sectorial
partnership. It will teach students to reflect on stakeholders of interest within a complex legal and political
landscape and prompt students to consider how they might manage each of these stakeholders. Not only
will this case help give students an inside view into the oil and gas industry, but it will also allow them to
balance corporate goals against societal, legal, and environmental concerns. On completion of this case,
students should be able to
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conduct a cost-benefit analysis to assess the strategic fit of a cross-sectorial partnership;
analyze how to manage stakeholder negotiations and political risk associated with pipelines; and
examine how to gain internal buy-in for initiatives among executives with diverse perspectives.
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POSITION IN COURSE
This case is intended for modules focused on cross-sectorial partnerships at the undergraduate or graduate
level in a strategy or business and environment course.
RELEVANT READINGS
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Bill Gallagher, Chapter 1, in Resource Rulers: Fortune and Folly on Canada’s Road to Resources (Bill
JW Gallagher: Waterloo, ON: 2012).
Trans Mountain, Trans Mountain Expansion Project: An Application Pursuant to Section 52 of the National
Energy Board Act, Volume 4c: Project Design & Execution—Operations & Maintenance, December 2013,
accessed December 17, 2021, https://docs.transmountain.com/V6B_PIPELINE_EPP.pdf.
The National Indigenous Economic Development Board, Indigenous Economic Reconciliation:
Recommendations on Reconciliation and Inclusive Economic Growth for Indigenous Peoples and
Canada, December 10, 2019, http://www.naedb-cndea.com/en/launch-of-the-2019-indigenouseconomic-reconciliation-report/.
Brandon Schaufele, Margaret Loudermilk, and Andre Wilkie, The Duty to Consult and Accommodate
Aboriginal Groups in Canada, Policy Brief, Ivey Energy Policy and Management Centre, September
2014, https://www.ivey.uwo.ca/media/1366355/sept-2014-the-duty-to-consult-and-accommodate.pdf.
Jeffrey Jones, “Pembina Wasn’t Interested in Buying Trans Mountain Pipeline. Why Joining Forces
with an Indigenous Group Changed All That,” The Globe and Mail, updated June 19, 2021,
https://www.theglobeandmail.com/business/article-why-pembina-is-backing-indigenous-led-groupsto-bolster-canadas-energy/.
ASSIGNMENT QUESTIONS
1. Should John Young propose that Pembina partner with WIPG to bid on the Trans Mountain pipeline?
Discuss the pros and cons of such a partnership.
2. What partnership structure should John Young propose, and how should equity be split among the two parties?
3. How can John Young ensure support for the WIPG partnership among executives at Pembina?
4. How might John Young handle negotiations with stakeholders, including governments, environmental
and Indigenous activists, and competing Indigenous bidders?
TEACHING PLAN
This case would most suitably be delivered in a class with a duration of 75 to 90 minutes.
Discussion Point
Introduction
Assignment Question 1: Partnership Evaluation
Assignment Question 2: Partnership Structure and Negotiations
Assignment Question 3: Internal Buy-In at Pembina
Assignment Question 4: Stakeholder Analysis
Conclusion
Time
(Minutes)
5
20
10
20
20
5
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ANALYSIS
Introduction
The instructor could start the case discussion by asking students:
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Who was the decision maker?
What has happened up to the case decision date?
Where are the events unfolding?
When will this decision occur? Is this decision urgent?
Why did Pembina end up in this position?
How do we solve the problem? Are there alternative solutions to this problem that are currently
unconsidered?
This exercise will help students understand the case situation by gathering basic information.
1. Should John Young propose that Pembina partner with WIPG to bid on the Trans Mountain
pipeline? Discuss the pros and cons of such a partnership.
This question represents the major decision point in the case. Students need to consider both the positive
impact that this partnership could have for Pembina and the risks that the company is taking on when
considering whether or not to partner with WIPG. The instructor can use a whiteboard to highlight the
reasons for and against pursuing the partnership.
Reasons for Pursuing the Partnership
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Potential for large financial rewards due to the massive revenue and profits that the TMX generates,
with the potential to ship 890,000 barrels of oil per day.
Mitigated legal risks due to WIPG having the land rights to the pipeline’s route.
Solid environmental protection measures, due to the ability to leverage WIPG member communities’
environmental expertise.
Stronger relations with Indigenous communities in Western Canada, which could be beneficial for
future collaborative partnerships.
Since this would be one of the most prominent cross-sectorial partnerships to ever take place in the
Canadian pipeline space, it would benefit Pembina’s brand image and can build credibility with the
Canadian government.
Reasons Against Pursuing the Partnership
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Uncertainty around the pipeline’s completion date and cost, which makes planning and projections difficult.
The potential for large financial benefits also will likely come at a high cost, especially because the
project continues to face delays and exceed its initial budget.
The possibility that the Canadian federal government will favour WIPG’s competitors—namely,
Project Reconciliation—in the final bid because they have more members.
The complexity of navigating internal factions within WIPG and building trust within Indigenous
communities who are skeptical of Pembina.
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2. What partnership structure should John Young propose, and how should equity be split among
the two parties?
Students should consider what roles Pembina and WIPG could respectively take on under such a
partnership, and they should discuss the pros and cons of Pembina taking on more or less equity than WIPG.
Partnership Structure and Division of Roles
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Pembina should take on the role of the pipeline operator, due to the complexity of running large-scale
energy infrastructure projects.
WIPG’s members can take on the role of environmental stewards for the project and help implement
best practices for environmental protection.
The two parties can form membership employment agreements, whereby Pembina agrees to hire
employees from WIPG’s tribes to help build and maintain the pipeline.
Pembina can also offer skills training and education to members of WIPG, to help them achieve better
human capital outcomes and enable economic reconciliation.
Equity Split
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The benefits and costs of Pembina taking on a larger equity share than WIPG are:
o Benefits: Pembina will have more control and oversight over the project and can influence its
overall direction more strongly. WIPG might have a more difficult time financing their equity
share of the project.
o Costs: Pembina is exposed to increased risks, including financial risks, should anything go
awry with the pipeline. Moreover, WIPG is unlikely to be willing to give up more than half of
its equity in the project.
The benefits and costs of Pembina taking on the same equity share than WIPG are:
o Benefits: A 50-50 split means that both parties will have to be equally invested, which aligns
interests between Pembina and WIPG and compels both parties to do their best to ensure the
bid can succeed.
o Costs: The main issue arises if there are disagreements between Pembina and WIPG
surrounding operational practices. Because the parties have equal equity, they will have to
come to a consensus agreement, and no party can overpower the other. Pembina might also
need to assist WIPG with the financing of its equity share, although there might be government
programs that could assist with WIPG’s financing, such as the Aboriginal Loan Guarantee
Program.
The benefits and costs of Pembina taking on a smaller equity share than WIPG are:
o Benefits: Pembina is taking on less risk and could still reap large financial rewards from the
pipeline while benefiting from WIPG’s land rights.
o Costs: WIPG could overshadow Pembina’s interests, and Pembina could face resistance to their
suggested operational practices, which puts the pipeline’s operational success in jeopardy.
3. How can John Young ensure support for the WIPG partnership among executives at Pembina?
Among the stakeholders who are opposed to the project, two key groups exist. First, there are internal
stakeholders who do not believe in the merits of such a partnership (the “opposed at all costs”) and do not
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believe in partnering with Indigenous communities. Second, there are individuals who doubt that the project
could succeed but would be willing to support the project if they believed that it could (the “feasibility
skeptics”). Students should focus their efforts on persuading the second group to support the project and
mitigating the voices of the first group.
Strategies for Persuading the “Feasibility Skeptics”
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Continue strengthening cultural awareness and education initiatives at Pembina to help senior
executives to understand Indigenous issues.
Bring more executives to open houses at WIPG reserves to help them shed pre-existing biases and
understand the benefits of economic reconciliation.
Compile case studies of past successes with partnerships between oil and gas companies and Indigenous
groups to prove to skeptics that such partnerships can be successful.
Hire members of WIPG to work at Pembina to get an “inside view” of the coalition and understand any
potential issues.
Host meetings between WIPG and senior executives so they get to know the faces behind the group’s
name and can better empathize with the group.
Conduct comprehensive financial analysis to understand the opportunity’s potential return on
investment in optimistic, base case, and conservative scenarios, and present these to the executives to
reassure them that the pipeline can still yield great financial results even without using its full capacity.
Employ an external third-party consulting firm to assess the opportunity and recommend best practices
to ensure its success.
4. How might John Young handle negotiations with stakeholders, including governments,
environmental and Indigenous activists, and competing Indigenous bidders?
Students should first consider each’s stakeholder’s net attitude toward the partnership and their level of
influence. The most problematic stakeholders will be those who are strongly opposed to the project and
have powerful influence over its approval.
Federal Government of Canada
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Net Attitude: Supports Indigenous participation in the bid but wants to appease the maximum number
of people possible, making Project Reconciliation and WIPG both strong contenders.
Level of Influence: Very High.
Key Risks: The federal government could pressure WIPG to partner with Project Reconciliation if they
want to win the bid.
Mitigations: WIPG and Pembina need to articulate their joint competitive advantage, which is
Pembina’s operational expertise combined with WIPG’s land rights, and they need to position
themselves as the best long-term owners of the pipeline.
Provincial Government of British Columbia
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Net Attitude: Against the pipeline but has exhausted all its legal options for fighting it.
Level of Influence: High.
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Key Risks: Could implement new legislation which makes the pipeline’s construction more difficult or
gives environmental activists more power.
Mitigations: Pembina and WIPG need to build a trusting relationship with the provincial government
and potentially conduct lobbying to minimize the potential impact of new legislation.
Provincial Government of Alberta
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Net Attitude: Pro-pipeline, but previously opposed the TMX due to wanting the Liberal federal
government out of Alberta’s pipeline business.
Level of Influence: High.
Key Risks: The government of Alberta is not a dangerous stakeholder given that they are historically
pro-pipeline; however, it might want to prioritize other bidders for the pipeline (e.g., private oil and gas
companies).
Mitigations: Pembina should engage in outreach with the Alberta government and work to mitigate any
concerns that it might have about the partnership.
Environmental Activists
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Net Attitude: Against the pipeline and will actively continue to protest its construction.
Level of Influence: Medium.
Key Risks: Given that legal challenges have been exhausted, the main risk at this point is physical
altercations at construction sites or other construction obstacles that protesters create.
Mitigations: Pembina should increase their security presence, have plans in place for removing
protesters from the construction site, and legally challenge the protesters’ actions in court.
Competing Indigenous Bidders (Mainly Project Reconciliation)
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Net Attitude: In support of the pipeline, but views WIPG and Pembina as a threat they would like to
diminish.
Level of Influence: Medium.
Key Risks: If the competing Indigenous bidders become too popular with the public or build stronger
relationships with the Canadian federal government, they could win the bid over WIPG.
Mitigations: WIPG should try to convince the remaining uncommitted tribes within the 129
communities along the pipeline’s right-of-way to support them so the Canadian government will see
them as maximizing Indigenous involvement.
WHAT HAPPENED
In June 2021, Pembina and WIPG announced they were partnering to bid for the Trans Mountain pipeline.
With their joint bidding project, Chinook Pathways, they strove to create pathways to sustainable economic
reconciliation for Indigenous communities.1 They structured the partnership as a fifty-fifty equity split so
both parties would have equal ownership in the pipeline. Pembina would be the primary pipeline operator,
Wendy Stueck and Jeffrey Jones, “Pembina Pipeline joins Indigenous effort to buy Trans Mountain,” The Globe and Mail,
updated June 9, 2021, accessed December 17, 2021, https://www.theglobeandmail.com/business/article-pembina-pipelinejoins-indigenous-effort-to-buy-trans-mountain/.
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while community members from WIPG would be employed to help build and maintain the pipeline with
membership employment agreements. Leading up to the announcement, Young coordinated meetings
between WIPG and Pembina executives, compiled past case studies of successful cross-sectorial
partnerships, and hired two leaders from WIPG to work on his team.2 With his expanded team and further
financial analysis, he gained internal support for the partnership initiative.
However, given that the construction of the pipeline is still ongoing as of December 2022 there is no definite
answer to “What happened?” regarding managing different stakeholders or the success of their bid. By early
2022, there were two other competing Indigenous-led groups seeking to acquire the Trans Mountain project,
and the timeline for sale was unclear. In February 2022, the cost of the project was estimated at $21.4
billion, up from the original budget of $12.6 billion.3
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John Young, conversation with Christian Dippel and Adam Fremeth, November 5, 2021.
The Canadian Press, “Cost of Trans Mountain Pipeline Expansion Soars 70 Per Cent to $21.4 Billion,” The Globe and Mail,
February 18, 2022, https://www.theglobeandmail.com/business/article-cost-of-trans-mountain-pipeline-expansion-soars-70per-cent-to-214/.
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