Building oil pipelines to bring Canadian product to market is in many ways a no-brainer.
Take for example the proposed Northern Gateway from Alberta to the West Coast and the Energy East proposal from Alberta to the East Coast.
The construction of these projects is a no-brainer because today, more than ever before, we need Canadian oil sands product to reach tidewater and international markets.
According to a recent bank report, Canadians lost $25-billion in oil revenue in 2012 due to a lack of pipeline infrastructure and continuing bottlenecks that prevent our oil from getting to the highest-paying markets.
We’ll lose another $20-billion this year and $15-billion every year going forward without new pipeline construction.
This is money that would benefit Canadians from coast to coast, helping to fund our health, education and social programs.
The time when we could depend on the United States as our sole oil and gas customer is long gone. In 2011, for the first time in more than 60 years, the US exported more gasoline, diesel and other fuels than it imported.
Thanks to the shale revolution, the United States is set to become the world’s largest oil producer – overtaking Saudi Arabia and Russia – just four years from now according to the International Energy Agency.
Given the U.S. is awash in oil and gas and given the country remains Canada’s only customer, Western Canadian oil sold earlier this year for a discount of as much as $43 a barrel compared to the oil known as West Texas Intermediate. And Canadian oil was discounted even further compared to the North Sea oil known as Brent. While those differentials have since narrowed, Canadian oil still trades at a significant discount.
Even more worrisome is the prediction by experts that in the foreseeable future the US won’t need Canadian oil at all. Currently, the U.S. has been able to reduce its reliance on oil from unfriendly countries such as Venezuela by replacing it with increased imports from Canada. But as U.S. oil production continues to grow rapidly, its imports of Canadian oil will inevitably decline.
Canada’s need to diversify its oil markets, then, has never been clearer. While U.S. demand for foreign oil declines, strong demand remains in emerging markets such as China and India.
So why the controversy over pipelines? Surely we must consider environmental impacts and ensure those impacts are managed and mitigated to the greatest extent possible. Proposed projects like Northern Gateway have committed to doing just that.
But pipelines are not a new, untested technology. Canadians have been building pipelines since 1853, and we’ve become leaders in innovative and safe pipeline design.
Pipelines remain the safest means of transporting large volumes of oil and gas overland.
Today’s pipelines use the latest technology, including 24/7 computerized monitoring, aerial patrols, x-ray and ultrasonic testing of welds, durable coating systems, increased pipe wall thickness and properly spaced safety control valves – just to name a few of the advances.
I can’t emphasize enough how essential it is that we start moving ahead with pipeline projects that run east to west and west to east. And let’s not consider the Energy East pipeline as a replacement for Northern Gateway or vice versa – true market diversification means we need both.
Yes, there are risks with moving forward, as there are with any energy development.
But I believe the risks of not doing so are far greater. Indeed, if we fail to build new pipeline infrastructure, we are risking the future prosperity of this country.
Norway made the right decision in developing its offshore oil and gas reserves. It now enjoys one of the highest per capita incomes in the world and its health, social and educational programs are second to none.
Closer to home, Newfoundland has developed its offshore oil and gas sector, becoming a “have” province for the first time in history and enriching its citizens and Canada as a whole.
Endlessly debating the pros and cons of pipeline development will get us nowhere.
The world will not wait for Canadian oil. If we can’t deliver the goods, markets will find other suppliers, including growing shale oil and gas deposits in the United States.
Determining what share of the windfall each province receives is a detail that can be worked out at the negotiating table – but not having inter-provincial agreements now is no reason to delay the decision-making process.
So let’s commit to new, safe and environmentally-sound pipeline infrastructure that runs east to west and west to east and will get our oil to market responsibly – and let’s do it now.
Because whether you’re from B.C., Alberta, Quebec, New Brunswick or another province, we’re all Canadians, and we’ll all benefit when our oil can be sold on the international market for a fair price.
Sherry Cooper is financial advisor to MDC Partners Inc. and former executive vice-president and chief economist at Bank of Montreal.