Economics, not politics, should drive pipelines
It may be naive to think that politics can be divorced entirely from the conversation about pipelines, but in a perfect world these matters would be driven solely by economics.
There is, for example, a strong economic case for building a pipeline to the West Coast and creating the ability to export product to foreign markets other than the United States. Obviously, the proposed Trans Mountain pipeline expansion project has been bogged down and nearly derailed by politics, but the economic case remains.
The idea of building pipeline infrastructure to the East Coast so as to displace imports of Saudi oil is one that is based almost entirely on political considerations. As such, it is not an idea that ought to be a priority right now. Canada’s pipeline capacity and market access issues would be sufficiently addressed through the completion of TMX, Keystone XL and the Line 3 pipeline replacement. That’s where our focus needs to be.
There was a mixed bag of news on those three projects last week. The National Energy Board gave the green light for construction to begin on the Edmonton-to-Kamloops section of the Trans Mountain expansion project and Enbridge announced the start of construction on the Line 3 project. However, south of the border, a Montana judge ordered the U.S. State Department to conduct a full environmental review of the revised route for the project, thus creating new delays for Keystone XL.
Even with these projects moving forward there is a lingering sense of frustration about the demise of the Energy East pipeline and the extent to which changes in the pipeline review process played a role in its demise (as opposed to the revival of Keystone XL and other changing
Even with these projects moving forward there is a lingering sense of frustration.
market forces). Now, with the onset of a sudden and severe diplomatic spat between Canada and Saudi Arabia, there have been calls to resurrect Energy East — or something similar — so as to reduce, if not end outright, any dependence we might have on Saudi oil.
From Alberta’s perspective, it’s not so much that an economic imperative exists for us to access East Coast refineries, but more so that a shared sense of moral outrage exists to the opposition such a proposal has faced and would face from other Canadian jurisdictions. We can wish for a greater pan-Canadian appreciation of Alberta’s oil industry, but that shouldn’t be a driving factor in building pipeline infrastructure. We should also be careful about interfering with the decisions made by privately owned Canadian refineries and the economic reasons they have for processing Saudi oil in the first place. If the federal government feels at some point that a boycott of Saudi oil is a necessary response, then the simple and obvious response would be for those eastern refineries to increase the amount of U.S. oil they import.
One potential benefit from Alberta’s perspective that Energy East offered was access to tidewater. The nationalist arguments for having Canadian oil feed Canadian refineries always seemed like more of a political argument than an economic one.
If we are prepared to allow such nationalist political considerations to justify government restrictions and inferences with regard to oil imports, what’s to say such considerations wouldn’t be invoked to restrict, or interfere with, oil exports? It seems hypocritical to make an economic case for an expanded number of export markets and then use political arguments for a reduced number of import markets.
Again, our immediate efforts need to be focused on getting TMX, Keystone XL, and Line 3 completed. From there, we should indeed take a hard look at whether Ottawa’s proposed new pipeline review process has set the bar too high and whether we’re discouraging investment and creating barriers for potential future projects that would otherwise have a strong economic case. Sticking it to the Saudis and wrapping ourselves collectively in the Canadian flag might make for good politics, but it’s a poor substitute for sound economics.