Yes you read that right, Canada’s largest refinery, the Irving Oil New Brunswick facility, imports oil from Saudi Arabia. If you study crude trading markets, that news won’t come as much of as surprise since waterborne crude can originate anywhere, but for most of us, it’s a bit of a disconcerting shock. Why does Canada import oil at all, and if we must why from Middle Eastern nations like Saudi Arabia?
Given that eastern Canada imports oil from abroad, it becomes obvious that Canada has a problem. One region of the country produces too much oil, while another imports it from distant and perhaps unreliable jurisdictions. The imbalance is bad news for Canada because locally produced oil is having trouble getting to market due to a lack of pipeline infrastructure, which hurts multiple stakeholders. One solution is Trans Canada’s Energy East pipeline. It would move up to 1.1 million barrels per day of crude from landlocked western regions to eastern Canadian refineries. This would benefit western Canadian producers, eastern refiners, the government – through higher royalties and taxes – and Canada as a whole. Yet the Energy East project is, like any pipeline big enough to make the news, having a lot of trouble getting off the ground.
Opposition to Energy East is an outstanding oddity in Canadian public discourse. The grounds upon which there is opposition are so flimsy as to be nearly surreal. And of course, the overarching objective of the pipeline’s opponents is not to prevent industrial catastrophe, but rather to put a stop to oil sands development (and beyond that, end fossil fuel usage). Keeping that context in mind helps us understand why such disinformation can exist in the first place.
It’s not useful to engage Energy East’s opponents on the terms they choose to debate. Those discussions always tend to lack intellectual substance and play only on our fears, no matter how speculative. The question of whether pipelines are a worthy mode of crude transportation is not worth debating. There are plenty of statistics showing how safe pipeline transportation is relative to other means. It is nonsensical to say that new pipeline construction should be halted because accidents will happen. It is an insult to the people of Lac Megantic, QC to state, as was the recent case with several Montreal area mayors, that alternative oil transport systems (like crude by rail) are preferable. From an environmental perspective, perhaps a pipeline offloading oil in treacherous conditions in an incredibly sensitive ecosystem would be a concern. But to reverse an existing pipeline and build a new piece that ends at a refinery? Clearly a different situation (Energy East). Yet pipeline opponents make no distinction. Therefore, it is important to not pretend that that is a wise weighing of pros and cons. It is emotional fear-mongering with a different goal in mind.
That goal of course is to end the development of the oil sands. Up until now, development in the region has been comprehensively vilified. Take a look at this example, which claims that the ‘tar sands’ are one of the gravest threats to global warming. The author’s argument is derived from the fact that oil sands development requires more direct energy to extract than other sources of energy. This fact however quickly gets spun into ludicrous headline-grabbing statements about the inevitable catastrophe of developing the resource. For example, the article paints a grim picture of the consequences of “burning all the oil in the oil sands.”
It takes about 30 seconds to refute such nonsense. Oil sands production, even if optimistic projections were attained (but never will be due to the recent capping of oil sands emissions), could theoretically have reached 5 million barrels per day. In the first mentioned scenario, burning all 170 billion barrels of reserves, at 5 million barrels per day this would take…93 years. At today’s production rates you would need to double that time frame, meaning 186 years, give or take a year. To burn all 1.8 trillion barrels at 5 million barrels per day would take 980 years. An engineer in the article gravely points out that this would raise temperatures by 0.4 degrees Celsius. This chap unfortunately forgot to finalize the calculation, so I’ll do it for him – that’s .0004 degrees per year. To build enough solar panels to provide the energy equivalent of 1.8 trillion barrels of oil would have large environmental impacts as well. But who wants to hear about that.
There are other non-market factors that should be considered as well. If we choose to import oil from Saudi Arabia, then before claiming that it’s cleaner than oil sands’ “dirty oil”, shouldn’t we estimate the total GHG impact of Saudi Arabian oil, which must include the military footprint of safeguarding that oil in the midst of a perpetual war zone? Could someone please show the calculation for how much GHG is emitted by a fighter jet launching air strikes at irritating neighbors, including the chaotic aftermath? What are the CO2 emissions of torched oil wells that will take months to put out? How much GHG is emitted by tanks blowing things up, or by aircraft carriers lurking around the Strait of Hormuz? Well maybe the last is an over-embellishment since aircraft carriers tend to be powered by nuclear energy. Score that one for the environment.
The only logical reason not to build the Energy East pipeline is that the market doesn’t want or need it. And there could possibly be grains of truth to this argument, because the world’s petroleum business generally works quite well when produced oil is freely mobile to go wherever needed. Therefore, Saudi crude making its way to New Brunswick may seem simply like an efficient market at work.
But there’s more to it than that.
Few energy markets are truly efficient, or work without intervention of some kind. Even in the US, crude oil exports were banned for 40 years for political reasons, with exports just resuming a few months ago. Most nations have some sort of energy policy that is driven by how much the country produces relative to how much it needs.
Except Canada. Canada produces far more than it needs. Total Canadian production is about 3.8 million barrels per day, while the country consumes about 2 million barrels per day. Western Canada produces most of the oil and gas (about 95 percent), while eastern Canada consumes most – Ontario and Quebec alone account for over half the nation’s total energy requirements. It is obvious that western Canada needs to move excess energy production, and that eastern Canada needs to import it. We could leave that to the free market to determine, which might mean all eastern Canadian oil would come from any exporting nation no matter how nefarious, or we could maximize the benefit to Canada. To do that requires thinking about how significant our energy resources truly are, to the whole country.
Western Canadian oil has an enormous economic impact on the nation. As Brett Wilson recently pointed out, we are a resource based nation, a function of our huge size, abundant resources, and relatively small population. These resources are important not just to Canadians but the whole world. In Canada, tax dollars from resource extraction goes a long way, including equalization between have and have-not provinces. It is in the nation’s best interests to maximize these resources. With western Canadian oil being landlocked, pipeline access to markets is in the best interests of all Canadians. Enabling Canadian resources to be utilized by other provinces is, from a national governing perspective, about the easiest decision a government should have to make.
TransCanada’s Energy East project would provide Canadian oil to Canadian refineries, and most of the pipeline is built already. All that is needed are pieces at each end. The project is welcome to New Brunswick in particular, for whom the pipeline will provide economic benefits as well securing a Canadian supply for the Irving refinery. It would also ensure Canadian oil supplies to refineries along the way in eastern Canada, further lessening the need to access foreign oil. Yet despite all of these benefits, Montreal objects to Energy East, calling it dangerous, even as mob-built overpasses fall on their heads and oil sands money finds its way into their daycare centres.
At the end of the day, consuming oil creates pollution. But globally, that is what we do – all of us, even environmentalists – to the tune of 90+ million barrels per day. Oil is produced in various parts of the world, and consumed in others, necessitating massive transportation schemes. Most nations, almost all, act in their self-interest to ensure adequate supplies of reasonably priced energy from reliable sources. And with such prolonged opposition to the Energy East pipeline, Canada, it appears, wishes to stand defiant of that club.
Regardless of free market oil pricing situations, it is nonsensical for Canada to be importing oil from unstable regions, when proper usage of Canada’s own resources would have multiple benefits to the country. There is no logical reason not to build the Energy East pipeline, and a lot of reasons in its favour.
Mr. Trudeau, you want infrastructure projects that will help the nation. Here is one that is half completed, won’t cost you a dime, is as safe as any other Canadian industrial project, and will benefit multiple diverse regions of the country. What more could you ask for? If you won’t help pay for it, then at least help clear the way.
Read more insightful analysis from Terry Etam here