Without pipelines, Canada’s prosperity is on the line

Will lead to a loss of well-paying jobs, shrunken energy industry supply chains, and diminished revenues for governments

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By Jock Finlayson
Executive vice-president
and Denise Mullen
Director of Environment and Sustainability
Business Council of B.C.

VANCOUVER, B.C. Nov. 22, 2016/ Troy Media/ – When it comes to reaching new energy markets, Canada lags dangerously behind the Americans, who have aggressively expanded their oil and gas industry and built the infrastructure necessary to support it.

There are approximately 840,000 km of pipelines in Canada – 25,000 km of feeder lines, 250,000 km of gathering lines, 450,000 km of distribution lines, and 117,000 km of transmission lines. They carry oil, refined petroleum products, and natural gas. The National Energy Board directly regulates about 73,000 km of this pipeline network; the provinces are largely responsible for everything else.

The United States had 4.3 million km of pipelines as of 2015 – 510,331 km of gathering lines, 3,505,077 km of distribution lines, and 332,760 km of crude transmission lines. A national agency, the Federal Energy Regulatory Commission, regulates the transportation of oil and gas by pipeline in interstate commerce, while state public utility commissions oversee the construction of pipelines within their jurisdictions.

As the table below shows, there has been a 25 per cent jump in U.S. hazardous liquid pipelines (HLP), measured in kilometres, in the last decade. Most of this growth occurred under U.S. President Barack Obama’s watch. Of the total kilometres of hazardous liquid pipelines in the United States, two-thirds transport refined petroleum products or crude oil. The U.S. added 8,600 km of pipeline capacity between 2014 and 2015 – equivalent to 7.5 Trans Mountain pipelines! Canada’s pipeline additions during this period totalled zero. In fact, no major oil pipeline has been constructed in this country in many years.

U.S. hazardous liquid pipelines including crude oil and refined petroleum products (km)

2015                                           332,760
2014                                           319,454

2014-2015 % change              4.17

2012                                           297,954

2012-2015 % change               11.68

2006                                           266,750

2006-2015 % change               24.7

The lack of additional Canadian pipeline capacity matters. Our only foreign market for crude oil and natural gas is the United States. A one-customer business model is obviously risky for any supplier.

What’s the problem?

  • The United States is transitioning from being a net importer of energy to a net exporter. In 2015, U.S. crude oil production was the highest since 1972, with further growth expected in the coming decade. Canadian oil exports could be squeezed by rising U.S. domestic production.
  • The recent American election could lead to more inward-looking policy and a heightened pre-occupation with energy security. Alternatively, the new U.S. administration and the Republican-controlled Congress might be open to treating Canada as a “reliable” and “friendly” source of energy, as they seek to lessen America’s dependence on Middle Eastern and other offshore oil suppliers. This is the argument Canadian governments should be advancing in discussions with American policy-makers. If persuasive, Canada may have considerable scope to increase shipments to the U.S. in the next five to 10 years.
  • The world still needs petroleum products. Projections from the International Energy Agency (IEA) indicate that petroleum will continue to meet a sizable portion of global energy needs for the foreseeable future, even as most governments address climate change. The latest data show China becoming the world’s largest oil importer by 2020, with India emerging as the second-largest importer by 2035. Both markets represent growth opportunities for energy producers in Canada. One thing is certain: if Canada fails to develop the capacity to export oil and other energy products to Asia, other suppliers (including the U.S.) will happily fill the void. The notion that the global environment will be in better shape if Canada abandons plans to sell oil and gas to customers abroad is wholly unconvincing.

As a major player in the global energy business and with large and diverse natural resources, Canada must find ways to get our products to market. This is a task we’re failing to do.

As Canada dithers and the volume of our oil and natural gas available for export expands, constrained pipeline capacity inevitably means price discounting (as well as more oil being shipped by rail). Revenues for Canadian oil producers decrease as shipping costs rise and other suppliers make inroads in the markets where energy demand is growing.

The collateral damage is a loss of full-time, well-paying jobs in Canada, shrunken energy industry supply chains across the country, and diminished revenues for our governments. Continuing down this path will have dire implications for Canada’s future prosperity.

The Americans have shown an impressive ability to expand their oil and gas industry, and to build the infrastructure necessary to support this. Shouldn’t Canada be following their example?

Jock Finlayson is executive vice-president and Denise Mullen is Director, Environment and Sustainability at the Business Council of British Columbia. 

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