Skip to main content
barrie mckenna

If the Keystone XL pipeline was a measure of Barack Obama's environmental record, Energy East is destined to become a test of Justin Trudeau's economic cred.

Many Canadians may wish the country was not a natural resource powerhouse.

But we are. In many ways, it's the family business.

Commodities such as lumber, nickel, wheat and oil make up roughly 20 per cent of the economy. They represent an even larger share of the exports and investments that help sustain Canada's envied standard of living.

That prosperity hinges on getting those products safely and efficiently to consumers. The price of rejecting every proposed pipeline would be substantial. And it would be paid by every Canadian, regardless of where they live.

Before becoming Prime Minister, Mr. Trudeau acknowledged the need for more pipeline capacity.

"We need to get those resources to market, whether it is Energy East, whether it is a Western pipeline, whether it is Keystone XL, because the alternative is more rail cars carrying oil, which nobody wants across the country," Mr. Trudeau told CBC Radio last July, just before the election campaign began.

Last week, Mr. Trudeau's Liberal government introduced a new layer of review for pipeline megaprojects, including TransCanada Corp.'s $15.7-billion Energy East project, a 4,600-kilometre pipeline that would carry 1.1 million barrels of crude oil per day from Western Canada to refineries in Quebec and New Brunswick.

The government said the new hurdles – including an assessment of their impact on upstream greenhouse-gas emissions and more consultations with First Nations – are aimed at re-establishing the credibility of the review process, tainted by the previous Conservative government's overtly pro-development stand. The changes will delay by nine months a final decision on Energy East, and by four months for Kinder Morgan's $6.8-billion Trans Mountain pipeline from Alberta to B.C.

The government is being careful not to prejudge the outcome. Natural Resources Minister Jim Carr said attracting investment to Canada hinges on "sustainably developing our energy resources."

But it won't be too long before Mr. Trudeau recognizes he'll have to invest more political capital if these and other pipelines are to get built.

Natural Resources Canada insists that pipelines are "a safe, efficient and reliable way to move Canadian energy to consumers," according to the department's own website. That's why Canada is home to 825,000 kilometres of oil and gas pipelines, including 73,000 km of major interprovincial and international pipelines.

Outright rejection of all new pipelines by Ottawa – as a vast coalition of environmental groups demand – won't spell the immediate end of oil production in Canada. But it would send a clear signal to the world that Canada no longer wants to be a major oil and gas player because moving the product can never be rendered safe or sustainable.

Surely, that's not what Mr. Trudeau wants. Rejection would mean billions in lost income to Canadians, spread broadly across the country, but felt acutely in Alberta and Saskatchewan.

In a report released this week, the National Energy Board forecasts what the next couple of decades would look like if four major proposed Canadian pipelines are not built (Energy East, Trans Mountain, Keystone XL and Northern Gateway).

Among the report's inconvenient findings: There would be a quadrupling of oil shipments by rail and a $5 (U.S.) per barrel widening of the already substantial discount on oil sands crude. As well, overall Canadian oil production would continue to grow between now and 2040, but at a slower rate (8-per-cent below the NEB's base-case forecast).

Ottawa will inevitably face a conundrum as it tries to apply its new, more stringent review regime to Energy East and Trans Mountain. It has promised to assess the impact of these projects on greenhouse-gas emissions. And yet the NEB, the government's own regulator, readily acknowledges that new pipelines would lead to more oil production and, one presumes, greater emissions.

At some point, Mr. Trudeau will have to publicly acknowledge that, yes, more pipelines are needed – both to sustain existing oil production and to make other oil sands projects already in development viable.

That's a much tougher call than merely determining what steps pipeline operators must take to mitigate the risks of spills.