Chilly Arctic history bodes ill for Energy East
Winning approval to build TransCanada Corp.’s proposed $12-billion Energy East pipeline to move oil from Athabasca to the Atlantic could be the easiest part. Consider the four-decade history of government-approved plans of TransCanada and others to pipeline gas from the Arctic.
They were launched by the 1968 discovery of North America’s largest accumulations of both crude oil and natural gas. Most of the oil at the Prudhoe Bay field on Alaska’s northern Arctic coastal plain has now been produced, but Prudhoe Bay’s recoverable natural gas — equal to a third of all the known remaining recoverable gas in hundreds of fields in western Canada — remains frozen in place. So, too, do substantial gas and oil reserves in the Mackenzie River delta and Beaufort Sea, 600 kilometres east of Prudhoe Bay.
One year after the Prudhoe Bay discovery, TransCanada and two U.S. midwestern gas utilities began feasibility studies for a pipeline to move the Prudhoe Bay and Mackenzie delta gas to consumers across Canada and the United States. They were soon joined by some of the world’s biggest oil companies, by U.S. long-distance gas pipelines, and by regional gas utilities, including Consumers Gas Company of Toronto (since acquired by Enbridge) and Union Gas of Chatham.
The 1973 oil crisis brought a sense of urgency for a pipeline to tap the Arctic gas. The oil members of the Organization of Oil Exporting Countries (OPEC) slashed oil production from the world’s major supply sources and embargoed sales to the United States and the Netherlands.
This pushed up oil and related energy prices more than five-fold in three years, caused mile-long lineups for gasoline at U.S. services stations, cut U.S. highway speed limits to 50 miles per hour and threatened shortages in Canada.
In the House of Commons, prime minister Pierre Trudeau endorsed construction of a pipeline to move the Prudhoe Bay and Mackenzie delta gas. “It is in the public interest to facilitate early construction by every means that does not lower environmental standards or ignore or neglect rights of native peoples,” Trudeau declared in announcing the still controversial National Energy Program.
After eight years and $250 million of developing and pursuing three competitive proposals, and after more than 700 days of public hearings in Canada and the United States, an alternative route was chosen in1977, intended to protect the environment and native rights.
Bypassing the Mackenzie delta gas reserves by more than 700 kilometres, the approved pipeline was designed to move only Alaskan gas.
The approved pipeline lingered in limbo as energy prices continued to rise and shortages loomed. “I will personally insist that this gas pipeline be built with- out further delay,” president Jimmy Carter promised in a national televised address in 1979. “We strongly favour prompt completion” of the Alaskan gas pipeline president Ronald Reagan told a joint session of Parliament in 1981.
Little more was heard until Sept. 3, 2008, at St. Paul, Minn., when then Alaska governor Sarah Palin strode on stage to accept the Republican nomination for U.S. vice-president, and announce a deal under which “we began a nearly $40-billion natural gas pipeline to help lead America to energy independence.” The State of Alaska gave TransCanada a licence and a commitment of half a billion dollars in subsidies to build the Alaska gas line. It still lingers in limbo.
On March10, 2011, a group of oil companies and Inuit organizations won approval to build a 1,200-kilometre pipeline to move Beaufort Sea and Mackenzie delta gas to connect with TransCanada’s system in northern Alberta. There is no indication it will ever be built.
Will Energy East fare any better? Investors and lenders, such as pension funds, need assurance the system will remain profitable for 30 years or so if they are to recover their money. But what happens if aggressive actions urged by bodies such as the International Energy Agency sharply slash the use of fossil fuels to curb “hidden costs” of climate change? And those costs are no longer so hidden. The price tag on this year’s western floods is estimated to be $5 billion, to say nothing of the human costs. Some 60 national and regional governments, prominently including British Columbia, already impose modest carbon taxes or “cap and trade” measures. But much, much more is urgently urged. How much will that threaten the economics of Energy East?
Far more is at stake than an industrial project. Energy East fits hand-in-glove with the Harper government’s policies that gamble Canada’s economic future on yesterday’s fuels. And there is no plan B. Earle Gray is the former editor of Oilweek magazine and author of seven books about Canada’s petroleum industry.