By Christopher Williams
Canada accounts for 10 per cent of the world’s proven oil reserves with an estimated reserve of 171.0 billion barrels —166 billion in Alberta’s oil sands, along with 5 billion barrels in conventional, offshore, and tight oil formations. Despite the presence of all this potential wealth, Canada has been attempting unrewardingly for years to build new pipelines to carry the crude to tidewater and world markets. Canada already moves about 95 per cent of its oil by pipelines, but they are full. Rail is the second most economical transportation mode for exporting crude. While new pipeline projects mired in bureaucracy, oil travelling on Canada’s railways increased eight times since 2012.
Taking centre stage in Canada’s pipeline drama is the Trans Mountain pipeline expansion which carries crude and refined oil from Edmonton, Alberta to Burnaby, BC. On the east coast the “Energy East” pipeline continues to reinvent itself as a long-term conduit for oil products from Alberta eastward to Saint John, New Brunswick, for refining and export. The $15.7-billion Energy East project was officially cancelled by TransCanada in 2017, among other things due to delays in the approval process, new environmental criteria, and opposition to the line along major sections of the proposed route. Nevertheless, east coast and particularly NB politicians, business leaders and newspaper editorialists repeatedly call for the federal government to somehow revive the Energy East proposal—even if it takes a U.S. detour around Quebec.
Irving people are everywhere
The Irving Oil Refinery in Saint John is the largest oil refinery in Canada, capable of producing more than 320,000 barrels of refined products per-day. It already processes diluted bitumen, and equipment upgrading could accommodate a bigger supply processing heavy oil-sands bitumen into light, synthetic crude, with higher demand.
Irving refinery pipelines directly connect with Port Saint John and Irving’s own Canaport terminal. Irving receives 100 million barrels of crude oil each year via tankers from primarily Middle Eastern suppliers, and via railway tanker cars. An Energy East pipeline would supply crude oil mainly from Canadian sources.
“There was huge disappointment around the demise of Energy East,” recalls Chris Bloomer, President and CEO, Canadian Energy Pipeline Association (CEPA). “This was a valid way to bring Canadian oil into New Brunswick.” Bloomer says Canadian oil exports are all in one U.S. basket. “We are already exporting our oil to Chicago, Houston, and facilities in Minneapolis designed to handle heavy crude. Canadian heavy oil has found a happy home in Gulf refineries too.”
“The current crisis [lack of pipeline capacity and high pricing discounts] is not an Alberta issue, this is Canada’s issue,” adds Bloomer. “Canada is losing millions every day but there is nothing on the horizon that would see a project coming in the near-term to move oil into Saint John and off to export. There is a lot of talk about bringing Energy East to the table again, but in the transmission pipeline industry, there is nothing on the drawing boards right now that would see that happen.”
Rail transport will continue despite the Lac Megantic catastrophe. “I’ve been in the business of railing bitumen to the Gulf Coast and Eastern Canada, and rail is a safe system,” Bloomer observes. “But pipelines are the safest way to do it, and a pipeline can move large volumes to diverse markets, while rail is limited. It’s a short-term stop gap at about 300,000 barrels per day. In the long term, pipelines can transport millions of barrels that rail can’t handle, adding value by reaching markets beyond North America.”
Pipelines continue to carry hydrocarbons such as bitumen, refined fuels and natural gas; in the ground, under water and roads; ranging from half-an-inch to 48 inches in diameter, depending on their function. Crude oil, natural gas, and refined products cover an existing 117,000 km of Canada and U.S. borders. At least 13,370 people work directly for the Canadian pipeline industry and it varies according to projects.
Saint John Mayor Don Darling continues to press all governments to revive the Energy East pipeline, especially considering last year’s decision by the federal government to purchase the Trans Mountain pipeline for $4.5 billion. “It does not seem fair that we couldn’t get that level of support,” the gregarious mayor implies, often speaking at length about it on Facebook. On the west coast, Vancouver’s new mayor believes a revamped National Energy Board (NEB) review of the Trans Mountain pipeline expansion is likely to land the federal government in court. Kennedy Stewart said reviewing the project’s impacts could stall the Trans Mountain project for years.
Last November, newly elected N.B. Premier Blaine Higgs (PC)—a retired Irving Oil manager and former NB government Finance Minister—expanded discussions around Energy East, taking issue with the federal Trans Mountain strategy. “If you look at what they (feds) did out west, they bought a pipeline. I’m not asking them to buy a pipeline, but I’m asking to maybe create the application process,” Higgs told media. “Jointly between the provinces we could create a process where we could put an application in for a pipeline from the west to the east. You could create a holding company. Canada is in the terrible position of overdependence on the U.S. market for oil, a problem that won’t be fixed until we can consistently transport our resources to ocean ports via pipeline.” Higgs also took advantage of a January Council of Atlantic Premiers meeting to advocate for energy corridors through the region.
Jim Irving, co-CEO of J.D. Irving Limited, and a nephew of billionaire Arthur Irving, President of Irving Oil, said at a recent Saint John Chamber meeting, “I’m not going to get into the politics of it, that’s not my job. But I will tell you, we should not let go of Energy East. It’s still the right thing for the country, so we’d encourage everybody in Ottawa not to let go. Stick with it.”
Colleen Mitchell, President, Atlantica Centre for Energy based in Saint John, says “the federal government bought Trans Mountain thinking if they could get it permitted and go through the process, they could maybe sell it back to Kinder Morgan or another pipeline company, but they haven’t actually gotten it permitted and it is all in theory.” Mitchell, an Atlantic Canadian careerist in energy, transportation and infrastructure sectors says “when TransCanada proposed Energy East, it was certainly possible to select a route through Maine, but the at time they were also trying to get Keystone XL accepted and didn’t want to try and to get presidential permits, because President Obama was in office at the time and he was using his presidential veto to stop the pipeline.”
Mitchell is candid about TransCanada no longer being a contender to drive Energy East. “When a company spends a billion dollars getting a project to the point of an application to the NEB only to have the rules continually change on them, they pull out. I don’t think their shareholders have an appetite for resurrecting that project until the federal government gives an indication rules are going to change for the better. The current Bill C-69 makes it even more strenuous when existing rules caused pipeline projects to fold. The fact they are going to make it even more restrictive, is more anti-pipeline,” asserts Mitchell
Positions on Bill C-69
On C-69, also known as the federal “Impact Assessment Act”, Bloomer says CEPA is engaging with the senate to get “meaningful and workable” changes. “At an indigenous conference in Calgary, they found the bill unclear, and we have a world-class regulator in the NEB which could be broken up in a way.” An Angus Reid Poll in January found amending Bill C-69 was fundamental to addressing market access, price differential and attraction of capital. NB Premier Higgs says Bill C-69 is a barrier to any resurgence of the tussled Energy East pipeline. Prime Minister Trudeau believes fixing a flawed review process is the only way to ensure pipelines get built by preventing the uncertainty created around Trans Mountain.
While each project has its own bureaucratic hurdles and environmental challenges, the Angus Reid Poll shows half of Canadians (53 per cent) support both the Energy East and Trans Mountain pipeline projects. Only one-in-five nationwide say they oppose both. Support leans heavily in the direction of building both pipelines in every region outside of that province. Inside Quebec, a third opposes both projects. Quebec Premier François Legault has rejected Energy East, stating “there is no social acceptability for oil in Quebec.”
Maxime Bernier, the Quebec MP who founded the People’s Party of Canada, spoke at a January Saint John Chamber of Commerce luncheon, and said Ottawa should have pushed Energy East through, using the constitution that grants federal jurisdiction over modes of interprovincial transportation. Bernier also said federal equalization payments unfairly give “have not” provinces such as NB and Quebec billions of dollars originating from “have” provinces. Premier Higgs had already set the tone on equalization, pointing out about 40 per cent of the NB’s budget is funded by transfer payments. “If people felt the pain, if I felt the pain, if Quebec felt the pain, and they didn’t get 70 per cent of the current transfer payments, they just couldn’t say, ‘No, we’re not allowing anything through our province, but yet I’ll take the money’,” Higgs told media.
Portlandia or Bust
Rather than baiting a constitutional crisis over equalization payments, detouring around Quebec through the U.S. continues to present itself as an option to get high volumes of western oil moved to the Saint John refinery, and tidewater. “Going through Maine is also possible,” Higgs admits. Chris Bloomer hypothesizes: “You could cobble something together because there is a history of energy partnership in the northeast, and you have the Portland pipeline system to Montreal. There is also the Maritime and Northeast gas pipeline system, so there are ways to do things, but CEpa is not aware of any plans to do that.”
The Portland Montreal Pipeline (PMPL) goes through three New England states and carried foreign crude oil from the Port of Portland to refineries in Montreal for 75 years. The 236-mile-long pipeline was built in 1941 across Maine, New Hampshire and Vermont, carrying over 5 billion barrels oil to Montreal refineries, making the Port of Portland one of the busiest on the eastern seaboard with 200 tankers calling annually. Three pipelines ran along the same corridor through rural areas and under the St. Laurence River until the smallest was retired in 1982. Two continued to operate until 2016 when oil slowed to a dribble, and a new pipeline connected Montreal refineries with the Alberta oil sands and Bakken light sweet crude sources. Western oil flowed east until Shell’s Montreal East refinery closed, shutting the line down. PMPL owners pitched a pipeline reversal. However, citizens groups had already begun protesting against that idea, and lawyers successfully petitioned the South Portland city council to ban “future Canadian tar sands from being exported” from Portland.
Could the pipeline be used to ship lighter Permian oil to Canada through Portland’s terminal by tanker or pipeline? “The Portland pipeline is an ideal vehicle to bring oil into the region, and frankly into the Port of Portland, to be shipped elsewhere,” says Jon Sorenson, President and CEO of the New England-Canada Business Council (NECBC) which advances issues between Canada and the United States.
Sorensen estimates 65 per cent of wholesale gasoline in New England currently comes from Irving Oil by rail and truck. “Canaport in Saint John has been a godsend for the northeast, but it’s coming down to price, and U.S. shale oil and natural gas is much less expensive. Sorenson recalls plans for PMPL to reverse flow into Maine a few years ago. “Portland city council got very outspoken about oil sands coming into Maine, things got delayed and then Lac Megantic happened in Quebec, which was terrible. Now the mood is somewhere between ‘Banana’ (Build Absolutely Nothing Anywhere Near Anything) and ‘Nope’ (Not on Planet Earth). Many people don’t really understand, and it’s frustrating.”