Construction of Energy East Pipeline can mitigate effects of Keystone cancellation

Source: The report of the Leger market research company with the results of a poll conducted for the Montreal Economic Institute (MEI) in November 2018

Marco Levytsky, Editorial Writer.

To begin with, we must congratulate U.S. President Joe Biden upon his inauguration and acknowledge that this will have a positive effect upon U. S. relations with Canada, with Ukraine and with the rest of the world as American foreign policy will revert to its traditional internationalist role based upon cooperation with democratic countries. However, there is one serious bone of contention as far as Canada is concerned, and that is the Executive Order rescinding the permit for the Keystone XL Pipeline that was signed within hours of his inauguration. This decision will cost thousands of jobs on both sides of the border. Had the project gone ahead, the 1,930-kilometre pipeline would have carried 830,000 barrels per day (bpd) from Hardisty, Alberta, to Nebraska, then on to refineries in Texas. It would also have relieved a North American bottleneck that has led to discounts and sometimes sharp reductions in the price of Alberta’s oil.

Biden’s decision was based on an election promise he made to reinstate President Barak Obama’s cancellation of the project, which was overturned by President Donald Trump. It was also intended to mollify the left wing of the Democratic Party which considered Alberta oil sands to be “dirty oil” causing environment damage through carbon emissions.

But Canadian oil sands producers have been working hard to correct environmental issues. Between 2011 and 2018, carbon emissions from the oil sands have declined by 22 per cent. What’s more, the Government of Alberta has committed $1.24 billion through 2025 to two commercial-scale carbon capture and storage projects. These will help reduce the carbon emissions from the oil sands by the yearly emissions of 600,000 vehicles.
Meanwhile, the United States has become the world’s largest producer of oil and gas through an extraction process called hydraulic fracturing, or fracking, as it is known for short. In fact, fracked oil has increased from two per cent of total U.S. oil production in 2000 to over 50% in 2019.

Fracking involves injection of a fluid at high pressure into an underground rock formation in order to open fissures and allow trapped gas or crude oil to flow through a pipe to a wellhead at the surface. It is one of the most environmentally harmful forms of oil extraction. This process consumes large quantities of fresh water which returns in a highly polluted state. Recovered fracturing fluid contains not only the original additives (some of which are carcinogenic if consumed in raised quantities over time) but also salty subsurface brines as well as minerals brought up from the formation that may include toxic elements such as barium and radium. Fracking can also cause earthquakes.

In addition to calling for the cancellation of the Keystone project, the left wing of the Democratic Party also urged a national ban on fracking. At least they’ve been consistent. Biden, on the other hand, took the position that the United States should gradually move away from fossil fuels but continue fracking as a “transition”. It should be pointed out that fracking is a major industry in Biden’s birth state of Pennsylvania, which also was one of the key battleground states Biden had to carry in order to win the election. So, political expediency has taken over environmental concerns in this particular case.

Prime Minister Justin Trudeau raised the Keystone issue with Biden during his January 22 telephone conversation with him – the first call Biden made to any foreign leader — but was told that while the U.S. President appreciates this will cause economic hardship in Canada, he will not go back on a campaign promise. That doesn’t sit well with Alberta Premier Jason Kenney, who wants Canada to initiate a trade war with the United States over the Keystone issue. His argument – Canada was willing to battle Trump over aluminum tariffs which hurt Central Canada, so now it’s time to stand up for the West.

One reason for Kenney’s belligerent attitude is that he has painted himself into a corner with a questionable decision to invest $1.5 billion of Alberta taxpayers’ money into the Keystone Pipeline, knowing full well that it was a risk when he made that decision last year. Kenney was gambling on any one of three things happening – Trump winning re-election; Biden not canceling the project if construction has begun; or that he himself could convince enough Democratic Party supporters that it is in their interests to back Keystone. All these expectations came to naught and now Kenney is looking to recover costs by selling off pipes intended for the construction.

While Kenney’s call for a trade war with the U.S. is unrealistic, his comments about the federal government favouring Central Canadian interests over Western ones rings true. And the Trudeau government needs to take a much bolder stand in resolving some very basic problems that are at the root of Western alienation.

The best method to undo much of the damage caused by the decision to cancel Keystone is to reduce imports of fracked U.S. oil. And you don’t have to start any trade war to do so. You simply have to provide those parts of the country that currently import fracked U.S. oil (as well as Saudi oil) with Western Canadian oil. And that can be done by extending the current TransCanada Pipeline which ends at Montreal right to the Maritimes. But the Energy East project as it is called, has been blocked by Quebec Premier Francois Legault.

Currently Quebec receives 44 per cent of its oil from Western Canada but relies on fracked crude from the United States for another 37 per cent. New Brunswick’s Irving refines much of the Maritimes’ oil at the Irving Oil Refinery – the largest in Canada, incidentally — but relies upon Saudi Arabia for one third of its crude. Yet that province would very gladly replace Saudi crude with Western Canadian oil and has been a strong supporter of the Energy East pipeline.

And the people of Quebec also favour such a pipleline. A poll conducted by the Leger market research company for the Montreal Economic Institute (MEI) in November 2018 found that 66 per cent of Quebecers preferred that their oil come from Western Canada, followed by the United States with seven percent (20% had no opinion). When asked about their preferred method of transporting this oil, 45% of respondents selected pipelines, 14% tanker truck, 13% train, and 9% tanker ship, with 19% offering no opinion.

While Keystone and the extension of the TransMountain Pipeline through British Columbia have had a lot of attention, the fact is that pipelines carrying Western Canadian oil to the Pacific and to the United States already exist. But we have no pipeline carrying Western Canadian oil to the Atlantic. Building one would not only allow Quebec and the Maritimes to reduce their foreign oil imports, but open up all the trans-Atlantic markets to Western Canadian oil. And it’s only the Government of Quebec that is standing in the way.

Unlike his attitude to Western Canada, Justin Trudeau has always treated Quebec with kid gloves, and this has caused considerable alienation in the West. But jurisdiction over inter-provincial pipelines lies with the federal government and he has the power to approve a pipeline to New Brunswick even if the premier of Quebec objects. That’s certainly more than any influence he can hope to impose upon an American president.

So, while we can bemoan the loss of Keystone, we can always offset any damage that will create by taking the matter into our own hands. That means approving a network of pipelines that will truly serve Canada from coast to coast. But to do so, Trudeau has to give priority to Canada’s national interest, rather than mollifying one particular provincial premier.