The Harper government has rejected calls to provide financial support for a west-to-east pipeline that would bring lower-cost North American crude to eastern Canadian consumers who now rely on premium-priced imports.
In a call from India, Natural Resources Minister Joe Oliver said Ottawa supports the development of an oil pipeline network into eastern Canada, but that any project must be commercially viable on its own.
"It isn't the intention of this government to subsidize the oil and gas industry," the minister said from Mumbai, where he is promoting greater trade and investment ties in the resource sector between Canada and India.
"We believe that the economics of moving oil and gas east will have to be determined by the private sector. But I don't see any reason why the economics wouldn't work out."
In an interview Wednesday, former Bank of Canada governor David Dodge said the Conservative government needs to move beyond its "hands-off" approach to energy policy and create federal incentives such as loan guarantees, tax breaks or public-private partnerships to encourage the construction of a west-to-east pipeline.
He said such a project would be part of a broader attempt to "lean against the wind" in order to balance the growing disparity between resource-rich regions and struggling eastern Canadian economies.
Mr. Oliver said the government supports the need for the oil industry to diversify its markets by building new pipelines to the south, west and east. He said it could make more sense for producers of both oil and gas could supply to the energy-starved Indian market from Atlantic coast rather than the Pacific one, given the shorter distance.
New Democratic Party finance critic Peggy Nash said Mr. Dodge's views are consistent with those of her party, which has endorsed the vision of extended pipeline network so that western oil can feed refineries in Quebec and Atlantic Canada.
"We were really pleased to hear the former Governor of the Bank of Canada really support the view we've taken about a more balanced economy, which we think is really lacking right now, and support the notion of an east-west pipeline, which we have talked about. We think his comments were generally helpful and we appreciated him engaging in this debate," she said.
NDP leader Thomas Mulcair has taken a lot of criticism – including an indirect rebuke from current Bank of Canada Governor Mark Carney – for suggesting that an over-heated western Canadian energy sector is hurting the rest of the country by inflating the Canadian dollar.
The NDP has been very vocal in opposing the idea of a Northern Gateway pipeline that would bring Alberta crude to Canada's Pacific coast. Mr. Mulcair has previously said he supports the idea of a pipeline to the east, but has not said whether he supports using federal tax dollars to encourage the project.
The NDP has traditionally criticized federal subsidies for the oil and gas sector, but when asked about subsidizing a west to east pipeline Thursday, Ms. Nash did not rule out the idea.
"So how do you pay for that? We have never said, for example, that job creation measures should not involve public spending or tax incentives," she said. "So right now it's in the state of a hypothetical, but we have argued in support of an east-west pipeline."