The handling of the Keystone XL pipeline process by the Obama administration serves as a loud wake-up call for Canada. While America remains our most important market, Prime Minister Stephen Harper has said that Canada should not be a “captive supplier” of energy for the United States. In light of global demand growth, it’s also in Canada’s national interest for Ottawa to act decisively to enable our oil and gas industry to diversify its customer base.
The fast-growing markets in Asia, particularly China and India, are obvious targets, but they need the assurance that Canadian oil won’t be landlocked in Alberta. Federal and provincial governments must understand that the Chinese and Indians are not sitting idly by enjoying the spectacle of the interminable and uncertain Canadian regulatory process. They’re actively seeking long-term supplies from other producers around the globe.
Obviously, the best way to ship Canadian oil to Asia would be through West Coast ports. That’s the rationale both for the proposed Northern Gateway pipeline to Kitimat and for expanding the existing Trans Mountain pipeline system to B.C.’s Lower Mainland. But the longer the regulatory approval process drags out, the more likely it is that potential customers will go elsewhere.
There are, of course, environmental and aboriginal concerns that need to be addressed, but neither should be allowed to stymie legitimate, environmentally sound infrastructure development. Those who are fundamentally opposed to any expansion of oil sands development will never be satisfied. No process and no amount of consultation will reconcile their concerns.
Canada must do more to reduce carbon emissions from the oil sands; the federal government should work with Alberta to establish effective standards for the industry so that unconventional crude generates the same level of emissions as most conventional oil. We need a balanced action plan that enables greater production of a valuable resource as well as enhanced environmental standards that constrain our carbon footprint.
But if Canada doesn’t get its act together quickly, we’ll miss a historic economic opportunity. Without fresh direction, the current lengthy and uncertain regulatory process may torpedo the possibility of moving oil to the Pacific Coast. The government, therefore, needs urgently to put in place a new streamlined and time-certain regulatory process. It would also be prudent for industry and government to consider options to a West Coast route.
A more immediate way to ship oil to the Far East from Alberta may lie east, not west. Moving Western Canadian oil to the East Coast over existing rights of way holds two major benefits for Canada. First is the displacement with domestic supply of relatively expensive imports of foreign oil, some of which comes from the politically uncertain Middle East. Few Canadians realize that Eastern Canada (except Newfoundland) still relies on imported foreign oil. Moving product from west to east can be done relatively simply with few regulatory hurdles. It requires reversing certain existing pipelines. In the longer term, it may mean constructing a new pipeline from Montreal to Atlantic Canadian ports.
Second, opening access for Western Canadian crude to Eastern Canada and East Coast ports has the huge added advantage that it can provide certainty of supply to potential Asian customers. Canadian crude and bitumen, whether or not refined in Canada, could be shipped by tanker from Montreal or other East Coast ports through the Panama Canal to Asia. The route may be longer than from Kitimat or Vancouver, but the ability for Asian customers to negotiate guaranteed long-term supply contracts would far outweigh the additional marginal cost of transportation. Industry and government should now work together on an urgent basis to take the steps necessary to enable flows of Alberta oil from west to east.
Diversifying Canadian oil exports beyond the U.S. market is in the national interest and must be a national priority. It calls for leadership and action at the national and provincial levels. It’s one thing to say we’re an “energy superpower,” quite another thing to act like one.
Derek Burney, who served as chief of staff to Brian Mulroney from 1987 to 1989 and Canada’s ambassador to the United States from 1989 to 1993, is senior strategic adviser at the law firm Norton Rose OR LLP and a director of TransCanada Pipelines Ltd.
Eddie Goldenberg, who served as senior policy adviser and later chief of staff to Jean Chrétien from 1993 to 2003, is a partner with the law firm Bennett Jones LLP.