By Theo van de Kletersteeg

There would be major public benefits from construction and operation of a pipeline like Energy East, or through other arrangements that could result in higher volumes of U.S. oil being purchased for use in Eastern Canadian refineries, in exchange for higher export volumes of Western Canadian oil. But, and this is a big but, pipelines need long term commitments, and refineries want the flexibility of buying crude globally at the lowest possible price. Perhaps Energy East never had a viable future after all, after from bureaucratic bungling, regulations changing on the fly, and public opposition. Does that mean that the idea of lessening our dependence on U.S. markets is dead? No, far from it.

The oil and gas industry is Canada’s most important industry. While we have become accustomed to its ups and downs, the volatility of the past three years has been astonishing. Moreover, we have witnessed punishing discounts against WTI prices which in the case of certain grades has meant that, after transportation expenses, some oil producers have at times received almost nothing for their production. Needless to say, a vibrant oil and gas industry is able to employ tens of thousands of workers that buy homes, cars, appliances, in addition to paying taxes. A shrinking energy industry sheds employees, and leaves local governments with debts it cannot cover. What can be done to mitigate the current problems and begin to think of the creation of a healthier energy industry for tomorrow?

First, no stone should be left unturned to review whether or not Energy East, in its most recent incarnation, or some modified version, might still have a future. If the answer should be negative, all other alternatives to get western oil to eastern Canadian refineries (import substitution), or to export markets, should be examined. For example, any new federal government should examine whether an organization like Canadian Commercial Corporation (CCC) could facilitate export sales of Canadian crude through existing infrastructure, or infrastructure that that is yet to be constructed. The federal government, through its ownership of 14 ports in Eastern Canada along federal waterways, and its regulation of the railways and pipelines is in a unique position to negotiate pipeline access to export markets, or to ensure that other means of transportation are available for oil to be carried to export markets. Another, not well-publicized option, is for Canadian oil to be transported by pipeline from Alberta to the west coast of Hudson’s Bay, from where it could be transferred to Polar Class 4 tankers for shipment to the Irving refinery in Saint John, NB, or Gulf coast refineries, or Europe. Polar Class 4 ships have the ability to navigate first-year ice-covered waterways such as those encountered around Hudson’s Bay twelve months per year safely without unusual technical challenges. Proposed by Michael H. Bell, a former Senior Vice-President with Arctic navigation specialist Fednav, Bell believes the full cost of transporting oil from Alberta to Saint John could be $8.35 per barrel. Shipping oil to the Gulf Coast would cost around $10, and shipping oil to Europe might cost $10.25/barrel.

Lastly, recognizing the importance to Canada of being able to carry its oil production to tidewater, the federal government has set an important precedent by acquiring the Trans Mountain pipeline, and confirming that the expansion of that pipeline will happen. Lastly, Canadian Commercial Corporation was established to facilitate government-to-government transactions, which are important in some parts of the world.

One way or another, oil revenues are too important for Canada to ignore, and whoever should lead the country after October of 2019 should make substitution of domestic oil for imported oil, and higher export volumes of Canadian oil, key priorities that will help ensure our future prosperity.