Future of Pipelines Puts at Stake Canada’s Reputation as a Place That Сan Move Projects Forward

New Pathway.

On November 29, Prime Minister Justin Trudeau announced that the government approved of two major oil transportation projects in Canada, Kinder Morgan’s Trans Mountain, a 1,150-km pipeline from Edmonton to a terminal in Burnaby, B.C., and Enbridge’s Line 3, a 1,659-km pipeline from Hardisty, Alberta to Superior, Wisconsin.

At the same time, the government rejected the Northern Gateway project to build a 1,177-km pipeline from Bruderheim, Alberta, to a port terminal in Kitimat, B.C. While explaining the decision, Prime Minister Trudeau quoted environmental reasons and concerns “of the local affected communities, including Indigenous Peoples.” In response to that decision, Interim Conservative Leader Rona Ambrose said she was disappointed and suggested that the terminal could be moved farther north on the B.C. shore to avoid the environmental effect.

The importance of oil pipelines, especially those which would enhance Canada’s capacity to export oil to Asian markets, as is the case for the Northern Gateway project, was highlighted by Tim McMillan, CEO and President of the Canadian Association of Petroleum Producers (CAPP) at the media reception held by MultiLinx Community Organization in Brampton on November 17. That reception was held before the government’s decision to give the green light to the Trans Mountain and Line 3 projects. According to CAPP website, Canada’s current oil pipeline infrastructure has approached the limit of its capacity as the country’s current average supply is 3.981-million barrels of oil per day while the transportation capacity is 4-million barrels per day. This threatens the prospects of the Canadian energy sector development as CAPP expects that more than 850,000 barrels per day of oil sands supply will come on stream in the country by 2021.

Addressing the lack of major pipeline development projects in Canada, Tim McMillan said at the November 17 reception that “Canada is getting a reputation as a country that can’t build major projects.” After the government’s positive decision on the Trans Mountain and Line 3 projects, Tim McMillan said on November 29: “Canada’s reputation as a place that can move projects forward took a step forward today”. At the same time, the Trans Mountain projects is still facing strong opposition from the environmental groups and the energy industry proponents are calling on the federal government to further support the project.

CAPP, which represents companies responsible for 85% of the oil and gas production in Canada, has recently undertaken a lot of efforts to have “a more balanced discussion about energy” in Canada. Canada is an energy nation as it has world’s third largest resources of oil. It is also world’s sixth largest producer of oil and world’s fifth largest producer of natural gas. Oil and gas contribute about 20% to Canada’s exports. The oil and gas industry includes 2,400 companies and employs 400,000 Canadians.

And when this industry is hurting due to low prices, the shockwaves spread throughout the country. Lower oil and gas prices, which have been persisting for more than two years now, halved the industry’s revenues from CAD 150 billion in 2014 to CAD 75 billion this year. This loss is an equivalent of a loss of the whole autosector in Canada.

The decline in revenues is partly due to Canada’s energy companies becoming less competitive as compared to the US energy companies which have been able to maintain a bigger share of their production during the low price environment. In his interview for the New Pathway, Tim McMillan named the royalty review in Alberta as one of the factors contributing to the poorer performance of the Canadian oil and gas sector. Mr. McMillan said that CAPP wants to contribute to the process of introduction of the carbon tax in Canada to make sure that the tax does not drive investment out of the country’s energy sector.

The Canadian oil and gas sector needs to stay competitive on the U.S., Asian and even domestic markets. The International Energy Agency expects that the global energy demand will grow by 32% by 2040. CAPP believes that even with the current shift towards renewable energy sources this growth presents ample opportunities for the oil and gas sector. This presents challenges for Canada as its ability to transport its oil overseas is limited due to the lack of East-West pipelines. Domestically, Quebec and Eastern provinces import 50% of the oil they use and spend CAD 17 billion annually on that which could be spent domestically. This issue could be addressed by the Energy East project, a 4,500-km pipeline that would transport 1.1 million barrels of oil per day from Alberta and Saskatchewan to the refineries of Eastern Canada and a marine terminal in New Brunswick.

As Tim McMillan put it during the media reception on November 17, Canada has an opportunity and responsibility to meet the increased demand as a supplier. Our country is very well positioned to meet the demand because it has the highest environmental standards among oil and gas producing nations, and deep respect for transparency and the rule of law. CAPP estimates potential private sector investment in the Trans Mountain, Northern Gateway and Energy East projects at $30 billion in total.

To garner the popular support for the oil and gas sector, the Canadian Association of Petroleum Producers introduced the Canada’s Energy Citizens initiative. The initiative, according to Tim McMillan, now has 140,000 followers. Within the initiative, Canadians have sent over 40,000 emails to the government and politicians in support of the energy projects.