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Energy East Pipeline Fight Is Simply A Proxy War

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ENERGY EAST PIPELINE PROJECT
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The news is again full of stories about the Energy East pipeline, a proposed 4,600-kilometre pipeline designed to carry 1.1-million barrels of crude oil per day from Alberta and Saskatchewan to refineries in Eastern Canada.

It is unique among the eastward pipeline proposals in that its entire length remains within Canadian borders and is thus protected from U.S. political concerns. Backers of Energy East point out that Quebec and New Brunswick currently import more than 700,000 barrels of oil every day -- or 86 per cent of their refinery needs -- from countries such as Algeria, Iraq, Saudi Arabia and Nigeria.

While those imports are gradually swinging towards the U.S., that still represent imports and those U.S. imports travel almost exclusively by rail.

While the supporters of the pipeline are predicting demand of over 700,000 barrels/day (b/d), the Canadian Association of Petroleum Producers (CAPP) reports that refineries in Québec and Atlantic Canada currently represent a potential 640,000 b/d domestic market opportunity for Canadian suppliers.

This pipeline expansion is being aggressively targeted by activists, primarily based on concerns over climate change. For these people, pipelines aren't really an issue, per se, but rather represent the only opportunity they can see to fight the battle they actually want to fight: against climate change. It is in effect a proxy war.

The activists have been told that if they can block new pipelines they can choke off the development of oil sands by stranding this resource and in doing so can kill off the "tar sands." Ironically, they believe this because that is what the proponents of the pipelines told them when they initially pushed for the development of these pipelines.

The problem is that this was never the truth. As indicated in a Maclean's article by Dr. Andrew Leach of the University of Alberta, given the investment already in the ground, the best these protestors can do is to choke off some theoretical further growth of the oil sands. Even with $50/barrel oil and no pipelines existing, current oil sands facilities, and a number of nearly completed developments currently underway, won't go away anytime soon.

The question must be asked: what will it take to slow the growth of the oil sands? Well, too much money has been invested in existing or almost completed projects to simply abandon these facilities, and most will continue to generate healthy profits even in a lower price oil market. Thus the only way to limit future growth of the oil sands is on the demand side. This has to be done by putting a price on carbon and providing cheaper alternatives to fossil fuels.

Realistically, the only thing that can stop to the development of the oil sands is the combined might of government regulation and the market.

The argument against Energy East that I find most confusing is that it runs the risk of increasing oil exports. I am not sure why this is a bad thing? From a nationalistic perspective, a stronger national economy can only be better for Canada.

In a world with plentiful oil supplies from numerous markets, fighting oil exports represents cutting off your nose to spite your face. The world represents one big market and unless you treat it as such, any work done in Canada can be just as easily undone in Nigeria, Kuwait or Algeria.

It is time the climate change activists stopped fighting these proxy wars and started fighting the actual war they want to fight. Don't fight against the safest, least environmentally risky form of transport for this necessary resource; fight to reduce the market for the resource.

If the demand exists, then supply will be found to meet that demand. Until a market-based mechanism is found, we can't realistically stop the oil sands, so the pragmatic approach would be to ensure that oil sands are developed responsibly.

Pragmatically, pipelines represent the safest, most environmentally responsible way to transport that oil over land. Even from a greenhouse gas perspective, pipelines use less energy to transport oil than by rail.

I know fighting Energy East makes for great soundbites and will no doubt bring in lots of donations to activist groups; but it will do nothing to slow the exploitation of the oil sands.

Moreover, if we force the future oil sands production out of pipelines and onto trains it will result in more spills, more polluted watersheds and most importantly more Gogamas, Galenas and Lac Megantics.

If the activists really cared about climate change, they would not be fighting pipelines. They would be fighting for market-based mechanisms like carbon pricing. History has shown the only way to reduce fossil fuel use (and resultant carbon emissions) is to address the demand side of the ledger.

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