The politics of pipeline expansion in Canada are shifting again, as the federal NDP – which strongly opposes plans for a Northern Gateway pipeline to the Pacific coast – is now pledging its full support for a pipeline that would see Alberta oil pumped to Eastern Canada.
In a speech to the Canadian Club of Toronto at the Royal York Hotel, NDP Leader Thomas Mulcair gave his clearest sign of support yet for the notion of a west-to-east pipeline that would allow western producers to receive higher prices for their crude and refiners in Eastern Canada to replace imported supplies of oil with North American product.
The comments also highlight how politics is shifting the debate over pipelines for western oil, as even Conservative supporters including former federal minister Jim Prentice have criticized Ottawa's approach to pipelines that would carry Alberta bitumen through British Columbia for export to the Pacific Rim market.
While political momentum is building against the Northern Gateway pipeline, provincial and federal political leaders of various stripes are lining up in favour of a focus on the east. The federal Conservatives, New Democrats and Liberals are all in favour of having western crude refined and exported in the east.
Parts of the project are already under way as Canada's energy sector searches for ways around a current glut of supply in the U.S. Midwest, but the industry sees the eastern link as a complement to a new western line, not an alternative. With oil sands production set to double in the next 10 years, firms are looking to expand their ability to ship crude south to the U.S., west to Asia, and east to Quebec and Atlantic Canada.
In a speech aimed at easing fears that his party is opposed to oil sands development, Mr. Mulcair said shipping western oil to Eastern Canada is a "pro-business, common sense solution" that will create jobs and boost the country's energy security.
Mr. Mulcair later told reporters he has long said he would not speak against the oil sands expansion. "I said you have to include the environmental price in the way you are doing it and enforce legislation," he said. He said he would not "back down" from the argument behind the "Dutch disease" theory – that western energy developers are not paying the full cost of the environmental consequences of their projects. He said this is leading to an artificially high Canadian dollar, which hurts other sectors of the economy.
The Conservatives have slammed Mr. Mulcair, who represents a Montreal riding, as being opposed to resource development, while Bank of Canada Governor Mark Carney has rejected his prognosis of Dutch disease.
Natural Resources Minister Joe Oliver said in an interview that he was happy to see NDP support for the west-to-east line, which he has endorsed so long as industry supports it and regulators approve it. But he said the one pipeline would be insufficient to meet all the market needs of the growing We stern Canadian production, and noted the New Democrats have opposed all other pipelines proposals.
Calgary-based Enbridge Inc. is planning to reverse the flow of a pipeline known as Line 9 that now runs from Quebec into Ontario, in order to deliver western crude oil to Suncor's refinery in Montreal. Enbridge – which is also behind the controversial Northern Gateway pipeline proposed for B.C. – has already won approval to reverse a portion of Line 9 to deliver western crude from Sarnia, Ont., to a refinery in southwestern Ontario, despite opposition from environmentalists.
As well, TransCanada is mulling a plan to convert part of its cross-country natural gas pipeline to carry oil for refineries in Quebec and Saint John, and possibly for export from Atlantic ports.
Enbridge spokesman Graham White said the company expects to file with the National Energy Board by the end of the year for approval to reverse its Line 9 from Westover, Ont., to Montreal. He said the pipeline would initially carry light oil from western Canada and the United States, where production of conventional crude is booming.
Refiners in Eastern Canada are currently paying world prices for their oil, which is trading at $12-per-barrel more than the trendsetting West Texas intermediate crude due to an over-supply of oil in the central U.S. And producers in western Canada have been forced to sell their crude at a discount to WTI as a result of that glut and pipeline bottlenecks. CIBC estimated this week the double discount cost domestic producers $50-million a day in the first quarter of 2012.