Is Energy East still in the pipeline?

Jacques Poitras is the author of Pipe Dreams: The Fight for Canada’s Energy Future, which will be published next week.

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With new legal setbacks for the Trans Mountain and Keystone XL pipelines, and the recent diplomatic chill between Canada and Saudi Arabia, there are even louder calls for a revival of the proposed Energy East pipeline from Alberta to New Brunswick. The line, it is claimed, would allow Canadian crude to be refined in Canada – a nation-building project of epic scale, analogous to Sir John A. Macdonald’s forging of the Canadian Pacific Railway.

As early as 2012, politicians and industry leaders were using the tale of the CPR to sell Energy East. Frank McKenna, writing in The Globe and Mail in June, 2012, compared the pipeline to the railway that “helped knit the country together both symbolically and economically.” Then-Saskatchewan premier Brad Wall dubbed it “the modern-day version” of Macdonald’s national dream – a project that would see Canadian oil, not foreign imports, processed in Eastern Canadian refineries. Mark Scholz, president of the Canadian Association of Oilwell Drilling Contractors, urged Prime Minister Justin Trudeau to do like Macdonald and show “tremendous political courage and leadership” to get the job done. And when opposition to the project began to mount in 2016, Jason Kenney huffed in a tweet that “our national railways would not have been built if we had been governed by ‘social license’ rather than rule of law.”

Now – with Energy East dead almost a year – the metaphor is coming back to life. Peter Mackay chimed in over the summer as pro-pipeline politicians wrung their hands over the Trans Mountain delays. Mr. Mackay, too, invoked Macdonald to urge Justin Trudeau to get behind the revival of the west-east “nation-building” project. The former Conservative minister said Alberta crude should be refined in Eastern Canadian refineries instead of importing oil from Saudi Arabia, Algeria and Venezuela. The subsequent Saudi sabre-rattling against Canada seemed to only reinforce his take.

This sudden urge to banish Saudi imports is curious, by the way, given Irving Oil’s Saint John refinery has been importing the country’s crude for more than half a century. The imports provoked no outrage, however, until there was a west-east pipeline to sell. The equally sudden outbreak of chest-thumping economic nationalism, with its invocation of Macdonald’s railway-laced protectionism, is coming mainly from leaders who previously swore by the inevitability of north-south continental trade and the desirability of lower trade barriers.

To research my book, Pipe Dreams, I followed the route of the proposed Energy East pipeline from west to east. I wanted a ground-level view of the landscape it would span – and a less bellicose perspective on the issues it raised. On the prairies, I found that even ardent supporters of oil pipelines rolled their eyes at the suggestion that Energy East was a modern-day CPR. “The railway is probably a little bit different,” said Jeff Golka, a soft-spoken real estate agent in Hardisty, Alta., the industry hub where the line would have begun. He noted the CPR had multiple uses while a pipeline has but one.

“I’m not sure we should be comparing the railway to the pipeline,” he said. Neil Block, a Saskatchewan rancher whose land would be bisected by Energy East and who supported the project, also dismissed the overheated rhetoric. The line would “tie the country together,” he told me, “but I don’t think on the same scale that the railway does.”

The CPR story was hardly a perfect metaphor. Think of the land speculation by corrupt public officials, the price fixing, the poor working conditions, the shoddy, unsafe construction, the conflicts of interest and the cost overruns that required government bailouts. The backroom deals, favouritism, brinksmanship and corporate welfare hardly lived up to the soaring rhetoric of 21st-century pipeline boosters. Even more sordid was the often brutal displacement of Indigenous people to clear a path for the railway and the treatment of the Chinese workers who helped build it.

The analogy failed, too, as a business case. In the 1950s, John Diefenbaker’s government placed a geopolitical asterisk on any notion of Alberta’s oil industry as a nationalist enterprise. Mr. Diefenbaker created a de facto trade barrier within Canada when it blocked Western producers from building a pipeline to Montreal. Canada had secured a hard-won exemption from a U.S. national-security ban on oil imports, so Mr. Diefenbaker steered prairie crude south, leaving Montreal refineries to rely on imports. Pierre Trudeau subsidized an extension of an Edmonton-Sarnia pipeline to Montreal, but shipping crude east on the line wasn’t viable until 2013. Alberta oil producers were fine with this arrangement because it conformed to the logic of the market: It was simpler and cheaper to ship to the closest customers.

With Canada’s energy sector so tightly integrated with the United States, the Canada-first case for Energy East sprung many leaks. Most of the Alberta crude would not have been refined in Canada but would have been exported via Saint John. So, too, would U.S. oil, brought into the line via a lateral from North Dakota. In Ontario, TransCanada Corp. needed additional imports of American natural gas to persuade local gas utilities that the conversion of an existing gas line to Energy East would not jeopardize their supply. And an Irving Oil executive acknowledged that the project would not put an end to its foreign imports: Irving would refine Alberta crude, he said in 2016, but “probably not at the expense of our Saudi barrels.”

The most vivid illustration of the limits of the project’s nationalist sales pitch came in 2017, when U.S. President Donald Trump granted a permit to Keystone XL. Faced with slowing production forecasts in the oil sands and less demand for pipeline capacity, as well as a long regulatory slog on Energy East, TransCanada pulled the plug and reverted to its fallback: the certainty of the nearby U.S. market.

Energy East wasn’t a nation-building project; it was a commercial venture designed to get oil to where it needed to be, where the best price was, regardless of country, border, sentiment or slogan. Patriotism had no place in Canada’s pipeline debate. Market forces saw to that.