Pipelines are to a landlocked oil economy what supply lines are to invading armies: critical to success but vulnerable to attack.
Canada’s prairie oil producers – led by Alberta but including Saskatchewan and now Manitoba – have been wildly favoured in geology but less so in geography. While the provinces are enjoying a boom in production from oil sands and new light oil prospects, they are located far from the massive refining hub on the U.S. Gulf Coast, and far from ocean ports that would allow them to reach energy-hungry customers overseas.
Government and industry are now frantically looking for options. Companies are pursuing a series of pipeline projects through the U.S. and moving west and east in Canada. Recently, they have talked about ambitious plans to use rail cars and river barges to get their oil to market – even shipping crude by rail to Alaska to reach the Pacific.
But their pipe dreams have drawn fierce opposition from environmentalists and some first nations communities, and the regulatory process has at times bogged down.
The current lack of pipeline access is exacting an enormous cost on Canada, and especially Alberta, by driving down the price that Canada reaps for its oil, the country’s most valuable export by far. Alberta has long depended on central Canada and the middle of the United States as its oil markets. But those regions are now saturated with crude from booming North American production, and the glut has driven down prices.
That in turn has blown a $6-billion hole in the province’s budget, and will result in lower corporate tax revenues for Ottawa.
As protesters flooded Washington this weekend to demand President Barack Obama turn down a proposal to build a major pipeline through the U.S. heartland to the Houston-area refineries, Alberta politicians and industry officials were scrambling to promote other export pipelines, and even rail links.
Proponent: TransCanada Corp.
Volume: 850,000 barrels per day, which is about 85 per cent of the capacity of Canada’s existing main export pipeline to the U.S.
Destination: Texas Gulf Coast, home to the world’s largest refining market
State of play: The U.S. government is still considering environmental, economic and security implications after Nebraska approved a new route.
Decision expected: TransCanada had hoped for a ruling by March 31, but it is now not expected before the end of June, at the earliest.
Opposition: U.S. environmental groups have targeted the pipeline as a litmus test in President Barack Obama’s promise to address climate change. Opponents say it will make U.S. more dependent on a carbon-intensive type of fuel.
Pipe dream: Prime Minister Stephen Harper once called Keystone a “no-brainer,” but handicappers would now give it no better than 50-per-cent chance of approval.
LINE 9 REVERSAL
Proponent: Enbridge Inc.
Volume: 300,000 barrels per day.
Destination: Montreal, home of Suncor Energy’s refinery
State of play: Enbridge wants to reverse a line that had been delivering imported oil to southwestern Ontario, allowing it to send Western Canadian crude to Montreal to be refined. It has filed an application with the National Energy Board, which last year approved Enbridge’s first phase in the project, reversing the flow of the line from Sarnia, Ont., to Imperial Oil’s refinery at Nanticoke, Ont.
Decision expected: Following new federal rules enacted last spring, the regulator has until March, 2014 to make a decision.
Opposition: Canadian environmental groups intervened to oppose Enbridge’s previous reversal of an Ontario portion of the Line 9 pipeline, but new federal rules will limit their involvement in this application.
Pipe dream: Because Enbridge is reversing an existing line, odds are very good the project will be approved.
WEST TO EAST PIPELINE
Proponent: TransCanada Corp.
Volume: 500,000 to 1 million barrels per day
Destination: Quebec, possibly Saint John, N.B., home of the 325,000-barrel-per-day Irving Oil refinery and a deep-water port that would facilitate ocean-bound exports
State of play: TransCanada says the project – which would convert an existing, under-utilized natural gas pipeline – is commercially viable and the company is now looking to line up support from producers who would need to commit to ship oil on the line. An application to the National Energy Board would follow.
Decision expected: Assuming producer support, the company expects to file later this year, and the regulator would then have 18 months to consider the application.
Opposition: Canadian environmental groups are gearing up to oppose the pipeline, and hope for an ally in the Parti Québécois government, but Premier Pauline Marois has so far been neutral to positive on the project.
Pipe dream: So long as oil producers support it, TransCanada is likely to win approval for transforming its natural gas line to oil as far as Montreal. It faces tougher odds to extend the line to Quebec City or Saint John, since it will need to build a new pipeline, which always attracts greater opposition.