By Hugh Holland
The outcome of the US elections in November 2020 will have major implications for the world and especially for Canada with the longest common border and biggest trading relationship.
Over the next five months there will be many announcements by each party and candidate; some of which we will like and some we will dislike. We need a clear sense of priorities to help us evaluate each announcement and the total package from each party.
From a global perspective, the Democrats are currently more likely to restore the international cooperation that is crucial to successful management of pandemics, climate change, and fair trade—all of which will serve to reduce conflict, and the resulting mass migration of refugees that now number over 75 million in the world.
From a Canadian perspective, Trump launched a long list of headaches for Canadians and our federal and provincial governments. The Democrats are currently more likely to be rational, fair, and consistent partners in managing the biggest common issues, but we will likely not agree with them on every issue. As has been the case many times before, in all possible combinations of political leaders in the two countries, we can agree on most important issues but respectfully disagree on some lesser issues.
To date, the biggest potential disagreement with the Democrats is Joe Biden’s announcement that he will stop the Keystone XL (KXL) oil pipeline from going through the USA. Perhaps Biden feels he needs the environmental vote to win in a tight race. But there is more than one way to look at Keystone XL.
The short view is that the 3,500-kilometre KXL pipeline would enable Canada to increase oil production by 800,000 barrels per day. However, KXL would lock in and perpetuate an even bigger portion of our biggest export to the unfair US price discounts that already reach as much as $10 billion dollars per year. They will continue to pay whatever they want because they can. The 1,100-kilometre Trans Mountain pipeline expansion is well underway, will enable Canada to increase production by 600,000 barrels per day, and provides flexibility to sell to other markets at a fair undiscounted price. Building both Trans Mountain and KXL would increase our production beyond five million barrels per day, thereby reducing both the life and future value of our oil reserves.
The long view is that Canada is better off without KXL that will always be under the current whim of US activists and politicians. Trans Mountain will enable Canada’s oil production to increase to the long-term sustainable level of five million barrels per day. When the US and other smaller global reserves are depleted, the US and Asia will need more oil from Canada. The 1,500-kilometre Eagle Spirit pipeline from Fort McMurray to the open-ocean port of Prince Rupert, BC is less problematic than the earlier Northern Gateway pipeline route and offers a better option than KXL. Eagle Spirit is advocated for and supported by First Nations, is entirely within our own borders to build and control, would attract full price for the oil it carries, is well located to supply the biggest markets in either the USA or Asia, and depending on politics in both countries could possibly be built as soon as KXL.
It should be noted that with the 2015 west-to-east reversal of the existing Enbridge Line 9, we now have pipeline capacity of 300,000 barrels per day to supply Alberta oil to Quebec; more than enough to fill Quebec’s consumption of 230,000 barrels per day. Atlantic provinces produce 240,000 barrels per day and can easily supply the 60,000 barrels per day for their own consumption. So, there is no need to build TransCanada’s $15 billion Energy East pipeline.
Of course, it is the short-term view that affects voters’ stock portfolios and gets politicians elected but losing KXL would not be the end of the world. In the long-term view Eagle Spirit would be equal to KXL for achieving Canada’s climate change goals and would be better for the longer-term global energy supply, and for Canada’s longer-term energy security and economic stability.
Our grandchildren are already destined to be hammered by climate change. We would do them a big favour by taking the long view on oil production and pipelines. A Biden win may disappoint some but would be more in line with Canada’s most important priorities. All we can do is hope for the best and be prepared for the worst.
Hugh Holland is a retired engineering and manufacturing executive now living in Huntsville, Ontario.
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Hugh, we need to do both coasts. You forgot about Africa, whose population by 2050 reaches 2.5 B people. Also, there is opportunity to supply parts of Central and S. America, with another 300 Million or so, there are lots of future market opportunities off the E. Coast too. Europe needs competition to Middle E. and Russian energy, and Europe is a far better partner. The world needs competition and options, and we certainly can’t trust China.
Our own E. East (Ontario, Quebec and Atlantic Canada) will need more capacity in the future too. NL oil fields will be in decline within a decade. Also, if we increased refining in the East, we could also export more end products to the US, rather than just shipping raw crude.
Dave, it simply makes more logistical sense for Canada to build a 1,500 km pipeline to the west coast to export to 2,400 million people in the Asia-Pacific market, than to build a 4,500 km pipeline to the east coast to export to 600 million people in the European market that is relatively close to the Middle East. The reason for current continued imports to eastern Canada has nothing to do with pipeline capacity. It has to do with the tail end of longer-term contracts and refinery capability in Quebec. Quebec’s refineries need to be re-activated and modified to process heavy oil from western Canada. Otherwise why did Enbridge reverse its line 9 from running east to west to running west to east?
Ian, there are many Asia Pacific countries that will need oil, not just China. Eagle Spirit and KXL would have an equal impact on Canada’s emissions. Not better and not worse. But Eagle Spirit is better than KXL on most other measures.
Rob Millman, as they say, timing is everything, TransMountain was proposed in 2013 as an expansion on an existing route which should be less problematic than a new route. Eagle Spirit was proposed in 2015 as a new route. If Eagle Spirit had been proposed earlier with the strong support it has from First Nations, it would likely have been built first.
Very thoughtful and responsible opinion piece, Hugh. What is an additional variable is the assumption that the Asian’s ( read: Chinese) are willing tp pay more for a barrel of oil sands oil than the American’s will pay. They are well aware of the current “dirty oil” discount imposed by the Americans. I guess the assumption is that they will pay the most cost effective price per BTU, regardless of the enviromental discount. I suppose when they are replacing coal in their power generation, oil sands still looks attractive. That said, the Chinese are not exactly the easiest country to trade with, less predictable compass. Not sure I understand how this helps Canada achieve its climate goals, either Keystone or transPacific.
Hugh, interesting article. Here is my perspective. The strategic value of Energy East pipeline was not just to bring more western oil to Ontario, Quebec and Atlantic Canada, but to open up international markets in Europe and perhaps parts of Africa to Canadian oil and refined products.
Also note, well over half the oil consumed in Quebec and Atlantic Canada today is imported from foreign sources. In 2018 Canada imported almost 600,000 bbl, costing $19.4 billion (60% U.S., 18% Saudi Arabia, 22% the rest, including Venezuela, Nigeria, Norway). These are important facts to understand.
Thanks Hugh, would you consider running for Prime Minister?
IMHO … The US citizens will vote and the US citizens will determine what THEY want for their country! Not Canada .. not me .. not Hugh .. US citizens! .. But .. I do agree we all have the right to express opinion on this and that! Nov 2020 ..after the ‘USA people’ vote is what counts .. period!
I’m certain that you’ll agree, Hugh, that Eagle Spirit should always have been the preferred alternative to TransMountain. It was less problematic environmentally; it had aboriginal support; and it flowed to a considerably less busy port. But that decision is history. Given the fact that Alberta recently approved a controversial non-oil project without an environmental assessment; what are the chances that they will revisit the inefficient tar sands project in the north?
Thank you Hugh. The Federal government should have your number on speed dial! The only thing prohibitive about Biden is his lack of filter, verbally, at the most inappropriate times..though nothing compared to Trump.