National Post (National Edition)

On pipelines, ‘yes’ means ‘no’

- KENNETH GREEN Kenneth Green is senior director of the Centre for Natural Resource Studies at the Fraser Institute. Tony Abbott, MP, is a former prime minister of Australia. These remarks were excerpted from his address to the Global Warming Policy Foundat

TransCanad­a’s withdrawal of its proposal to build the Energy East and Eastern Mainline oil pipelines is a huge loss to Canada and Canadian workers — a $16 billion project that was regulated to death.

Let’s get the red herring out of the way up front. Yes, the low world price of oil was surely part of this decision, but it’s certainly not all of it. The United States is getting its pipelines built despite the world oil glut.

Rather, a series of events killed these two pipelines. Firstly, while Energy East waited for approval, other pipeline projects were approved. Keystone XL finally won the White House’s approval, the Trans Mountain expansion, and the Line 3 rehabilita­tion (assuming it proceeds). If they all come to pass, they are estimated to have a combined capacity to meet export needs out to 2040.

Secondly, a cascade of provincial activities including the Alberta carbon tax, the Alberta Climate Action Plan and the oil sands emission cap have hammered investor confidence in Alberta in recent years.

Moreover, a huge investment opportunit­y opened in the U.S. oil and natural gas sector. Not only is President Donald Trump not making it harder to develop oil and gas resources in the states — he’s actually making it easier, opening additional lands, suspending a bunch of onerous regulation­s, dropping internatio­nal greenhouse gas obligation­s, allowing oil exports and promising to cut taxes on business.

But the ultimate straw The Energy East pipeline would have handled 1.1 million barrels of Canadian oil a day at a lower cost to Canadians, Kenneth Green writes.. that likely broke the camel’s back was the National Energy Board (NEB) announcing it would add an “upstream/downstream” emission test to its project reviews. The upstream/ downstream test risks seriously reducing the profitabil­ity of pipeline projects that would have to, in some way, internaliz­e the costs of the greenhouse gas emissions resulting from the production and consumptio­n of the oil they transport, not simply those caused by the act of transporti­ng the oil.

The cancelled Energy East project would have supplied eastern Canadians with domestic oil, rather than them relying as they do now on imported oil, while also helping Canada expand its export market beyond its sole dependence on the U.S. It should have been an absolute win-win for Canada. Eastern Canada imports more than 750,000 barrels per day from the U.S. and OPEC countries. The Energy East pipeline would have carried 1.1 million barrels per day of Canadian oil eastward to Canadians at lower cost while increasing Canada’s self-reliance. Even if much of the pipeline’s oil were exported, it would still be an economic benefit for Canada with foreign-market access that would allow for greater diversity of Canada’s customer base for its oil.

Instead, the death of Energy East/Eastern Mainline casts further doubt on whether Canada is still capable, as a country, of building important national infrastruc­ture of any kind.

And here’s something you likely won’t hear on the evening news: Alberta Premier Rachel Notley and Prime Minister Justin Trudeau deployed a strategy, from the beginning of their terms, to say “yes” to pipeline and oil sands developmen­t while governing like they meant “no.”

What they were really saying “yes” to was a federal price on carbon unmatched by our largest trading partner south of the border.

They’ve said “yes” to a provincial cap on greenhouse gases from the oil sands, casting a huge shadow over investing in new developmen­ts that risked slamming into the cap — again, a restrictio­n unmatched by our global competitor­s.

Provincial­ly, Canada’s premiers have said “yes” to climate action plans in the major provinces that are little more than tax grabs seized from energy producers and consumers to fund a grab bag of spending programs that have failed virtually everywhere they’ve been tried.

Is it any wonder that investor confidence in Alberta’s oil and gas sector has plummeted in the last few years? If you were looking to invest your marginal dollar in the energy sector, where would you put it? Would it be Canada? Or would it be Texas or North Dakota?

While telling people that they understand the importance of the oil sands, Notley and Trudeau, with assistance from Quebec Premier Philippe Couillard and environmen­tal activists, piled regulatory brick upon regulatory brick on the back of an industry already weakened by a soft world oil price. Watch for crocodile tears over the death of these pipeline projects by the very politician­s responsibl­e for making them economical­ly unviable. batteries, it always needs matching capacity from dependable coal, gas, hydro, or nuclear energy. This should always have been obvious.

Also now apparent is the system instabilit­y and the perverse economics that subsidized renewables on a large scale have injected into our power supply. Not only is demand variable but there’s a vast and unpredicta­ble difference between potential and dispatch-able capacity at any one time. Having to turn coal-fired power stations up or down as the wind changes makes them much less profitable even though coal remains by far the cheapest source of reliable power.

A market that’s driven by subsidies rather than by economics always fails. Subsidy begets subsidy until the system collapses into absurdity. In Australia’s case, having subsidized renewables, allegedly to save the planet, we’re now faced with subsidizin­g coal, just to keep the lights on.

We have got ourselves into this mess because successive federal government­s have tried to reduce emissions rather than to ensure reliable and affordable power; because, rather than give farmers a fairer return, state government­s have given in to green lobbyists and banned or heavily restricted gas exploratio­n and extraction; and because shareholde­r activists have scared power companies out of new investment in fossilfuel power generation, even though you can’t run a modern economy without it.

 ??  ??

Newspapers in English

Newspapers from Canada