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Senate energy committee backs sending western oil east

Rig workers operate a self moving pad rig on a multi-well pad at Cenovus's Foster Creek operation near Fort McMurray, Ab. Sept. 1/2010.

Kevin Van Paassen/Kevin Van Paassen/The Globe and

The Senate's Conservative-led energy committee is throwing its support behind efforts to ship western oil east to be refined in Ontario and Quebec.

Acknowledging Canada has so far failed to secure public support for shipping more oil sands oil south to the United States and a new pipeline to the Pacific remains controversial, the committee's Conservative chair David Angus says looking east is a "no brainer."

The outgoing Quebec Senator said it doesn't make sense for eastern provinces to be importing oil from countries like Algeria and Venezuela when there is excess supply in the west.

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"It's pretty crazy when you have such bountiful supplies of your own," he said, embracing the argument that Canadian oil is more "ethical" than imported oil. "Why would we have all these ships coming in from Nigeria into the St. Lawrence river with crude oil when we've got so much of it in other places of the country?"

The endorsement of shipping western oil east is part of a 68-page report of the Senate committee on energy, the environment and natural resources released Thursday. The report was adopted unanimously by the committee's seven Conservative members and five Liberals. There are no New Democrats in the Senate.

The report, titled 'Now or never: Canada must act urgently to seize its place in the new energy world order," takes a largely rosy view of all of the available energy options in Canada. While the report says Canada's environment must be vigorously protected and outlines various options for curbing emissions such as a carbon tax or carbon pricing, the Senators take no position on what measures Ottawa should approve to curb energy emissions.

Greenpeace Canada co-ordinator Keith Stewart took issue with the committee's decision not to consider climate change and global warming as part of its energy study. Dr. Stewart said ending the use of fossil fuels should be the "core challenge" facing Canada's energy system.

Earlier this year, Enbridge Inc. announced a $2.6-billion plan to reverse the flow of a key pipeline in order to bring western oil to refineries in Sarnia and Montreal.

Canada's oil and gas sector – as well as Canadian governments that benefit from the billions in revenues from the industry – are currently missing out on the high prices available for internationally-traded Brent crude. Canada's current distribution network leaves it largely dependent on supplying the North American market under the separate pricing for West Texas Intermediate, the benchmark for North American crude oil. The WTI price is lower than Brent because of a current glut of supply in the United States.

Resolving this bottleneck has become a political priority for Prime Minister Stephen Harper, who pushed hard for a new Keystone XL pipeline to the U.S. Gulf Coast, which would send oil for export.

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Facing political pressure from domestic opponents of the pipeline, U.S. President Barack Obama put the project on hold earlier this year, though it is expected to be revived some time after the November presidential election.

In response to the delay, the Prime Minister made clear that Canada's priority would be to ship oil sands oil west to the Pacific. His government's 2012 budget bill include a wide-range of measures aimed at speeding up regulatory approval of large-scale resource projects, including new pipelines.

Yet Enbridge's Northern Gateway plan to run a pipeline from Edmonton to Kitimat, B.C. is also facing political opposition and it is unclear at this point whether the project will ultimately go ahead.

Late last month, Enbridge's outgoing CEO Patrick Daniel expressed frustration that the plan to seek regulatory approval to ship oil east using the existing Line 9 pipeline is also facing opposition.

"It has been a disappointment, but I don't relate that to Gateway, but to two other things: industry issues around Keystone XL, which is not an Enbridge project, and the disruption of hearings on our Line 9 proposal, which would re-reverse the flow of oil in our pipeline from Sarnia to Montreal to allow it to carry Western Canadian crude east, rather than transport North Sea oil west," he told the Globe and Mail in an interview. "People don't realize how important energy is. They oppose energy projects at the same time they step on the gas pedal."

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