These words came back to me when I learned that U.S. President Barack Obama had rejected TransCanada Corp.’s application to build the Keystone XL pipeline. The pipeline would have carried Alberta bitumen from Hardisty to Nebraska, where it would have linked with existing lines to the Gulf Coast.
In stating that Keystone “will not serve the national interests of the United States,” Obama blew apart the underlying logic of Canada’s energy strategy.
For years we’ve operated on the assumption that North America was integrating into a common market. This fit the oil and gas industry well, since it implied that corporate interests rather than national interests were primary.
From the corporate perspective, shipping raw bitumen from Alberta to the Gulf Coast makes perfect sense. A decade ago, many of the companies that mined bitumen had underutilized refining capacity and building the XL pipeline to fill this gap was logical.
But the truth is that the pipeline proposal didn’t serve Canada well. The economic development opportunities represented by this situation are too important for Canada to lose.
It’s time Canadians had a meaningful energy strategy.
Canada’s premiers have already started the process of developing such a strategy. And now that a new federal government is in place, we can have this important discussion at the national level.
Two major issues are not being discussed that are critical to our future. We can’t leave industry to sort them out for us.
One involves being masters of our own fate. Canadians need to be front and centre as we evolve from being primary producers to a fully developed post-industrial economy.
Secondly, we need to appreciate that markets are not impartial arbitrators of price and value. Oil markets, for instance, are manipulated, particularly by big producers and the cartel OPEC (Organization of the Petroleum Exporting Countries). Canadians suffer from the resulting market distortions and we need to take direct action to control our destiny.
Alberta Premier Rachel Notley said she was disappointed that Obama described Alberta crude as “dirty.” But we have only ourselves to blame for this perception — we need to improve our environmental record to achieve our goals.
More to the point, Obama’s rejection of Keystone XL was about protecting American interests by any means. Canada must do the same. Our position should be: we’ll manage our environment, thank you very much, and sell our energy products in as many markets as make sense.
Canadians expect to have ample access to cost-effective energy and want to see energy sources migrate from fossil fuels to greener, renewal sources. But we can’t accomplish this transition if we’re at the bottom end of the energy market, restricted to being producers of raw material.
So how can Canadian producers overcome being trapped mid-continent?
Conventional thinking says we must build pipelines to tidewater so our energy can be sold in global markets, where prices are higher. That explains the push to build expensive and environmentally risky pipelines.
A national strategy could take an entirely different course. The federal government could focus on securing Canada’s domestic energy supply and regulating prices, essentially pricing Canadian oil at the global standard, bypassing the discounted continental pricing established by U.S. producers.
Stable prices would provide the financial resources to encourage upgrading and refining in Canada, and to develop our industry in an environmentally responsible way.
And ultimately, a national energy strategy could encourage the development of renewable sources of energy, positioning Canada at the leading edge of the green energy revolution.
Robert McGarvey is an economic historian and former managing director of Merlin Consulting, a London, U.K.-based consulting firm. Robert’s most recent book is Futuromics: A Guide to Thriving in Capitalism’s Third Wave.