In the mid-1950s, Parliament engaged in a heated debate over the TransCanada Pipeline – a proposed west-to-east natural gas pipeline that would feed Ontario and Quebec with Alberta's plentiful supply of natural gas. At that time, U.S. financing of the venture was the political hot button. The project was approved, but the sovereignty issues raised by the historic pipeline debate contributed to the Liberal government's electoral defeat in 1957.
Canadians today are still debating pipelines, and the focus has shifted to oil and the environment. Enbridge Inc. has proposed to reverse the flow and increase the capacity of its Line 9 pipeline, which now carries up to 240,000 barrels per day of imported oil from Montreal to Sarnia, Ont.
Those in favour of the Line 9 reversal have written about the positive impacts on employment, on the continuing viability of petrochemical and refining industries in Ontario and Quebec, and on the overall importance of the oil and gas industry to the national economy and the pocketbooks of millions of Canadians. To be sure, these are powerful arguments in favour of this project.
But, let's approach it from a different perspective, one that recalls the pipeline debate more than a half century ago.
Then, as now, the issue involved giving Canadians in Central and Eastern Canada better access to Alberta's plentiful energy supply. Then, as now, new pipeline construction was aimed at creating a more integrated North American energy market. Indeed, this continent's natural gas market is a prime example of the benefits of such integration.
Imagine if the TransCanada Pipeline had not been built. For the ensuing half century, most Canadian consumers would have had less choice – and likely higher costs – in heating their homes, cooking their meals or powering their businesses. Without natural gas, dependency on more polluting coal-burning or oil-burning generating stations would have been more pronounced.
But the pipeline was built, and a robust distribution network now brings natural gas to millions of Central and Eastern Canadian homes. In fact, natural gas pipelines today form a North American grid that creates an integrated and efficient market. As a result, Canadian gas customers today are benefitting from the enormous shale gas finds in the United States which have exerted downward pressure on gas prices for several years, with affordable supplies of natural gas into the foreseeable future.
Today, Central and Eastern Canadians pay more for gasoline and heating oil than Western Canadians, and the remaining refineries in these regions are struggling for survival in a very competitive industry because they pay more for their feedstock. Meanwhile, landlocked Alberta crude sells at a discount to world benchmark prices – a price gap that recently stretched to $40 per barrel. This translates into an estimated cost to the Canadian economy of roughly $2-billion every month in lost oil revenue. When one considers taxes and royalty payments by oil companies – not to mention the energy stocks in the retirement portfolios of millions of Canadians – this $24-billion annual loss combined with the higher costs for imported oil is one we can ill afford as a country.
An integrated North American energy market in oil, natural gas and electricity is one that is more efficient, offers consumers greater choice, and provides government and industry players more options to serve the public and help our economy transition to a clean energy future. The proposal to reverse Line 9 contributes to that integrated market, and is in the best interests of all stakeholders.
Dr. Phil Walsh is an Associate Professor of Strategy in the Ted Rogers School of Management, Ryerson University.