Pipelines as nation-builders?

Energy East isn’t next CP Railway: historians

To hear some proponents of the Energy East project tell it, when the taps open on the $12-billion oil pipeline the moment will be as significant as when the last spike was driven into the Canadian Pacific Railway almost 128 years ago.

Linking western crude to eastern markets would be a huge undertaking — it’s the most expensive project in TransCanada Corp.’s (TSX:TRP) more than 60-year history — but some observers are dubious Energy East will one day be worthy of its own Heritage Minute.

Tugging at Canadians’ patriotic heartstrings is a “smart and usable PR strategy” to get the public onside with the project, said Claire Campbell, a historian at Dalhousie University in Halifax.

“But I don’t think it is going to be written about as the new national dream by historians 100 years from now.”

Sean Kheraj, a historian at York University in Toronto, said it’s far from the first time Canadian business leaders and politicians have used nationalistic rhetoric to drum up support for controversial proposals.

For instance, Canada’s first prime minister, John A. Macdonald, used lofty language to entice Parliament to spend huge amounts of public funds on the railway in the late 1800s.

“It seems very clear that there’s an express political purpose behind this to try and use nationalism as a way to motivate consent from Canadians for permission to construct the project,” Kheraj said.

Earlier this month, TransCanada announced with great fanfare that it had enough commercial support to go ahead with Energy East, which would send 1.1 million barrels of crude a day across six provinces.

It was an important milestone, but just one of many hurdles Energy East needs to clear before shovels can hit the ground, not the least of which would be obtaining regulatory approval. Environmentalists have vowed to fight the project and it’s not clear whether Quebec is behind it.

At a news conference, company CEO Russ Girling likened Energy East to “bold ventures” like the Canadian Pacific Railway, the Trans-Canada Highway and the company’s own cross-country natural gas mainline.

“Each of these enterprises demanded innovative thinking and a strong belief that building critical infrastructure ties our country together, making us stronger and more in control of our own destiny,” he said.

TransCanada referred to the thousands of jobs that would be created during construction and their associated economic spinoffs, as well as the “energy security” it would provide eastern Canadians — a 700,000 barrel-per-day market whose fuel mostly originates from abroad.

Building the pipeline will require droves of tradespeople, such as pipefitters and welders, generating benefits to the stores and restaurants that serve them and the hotels that house them, TransCanada executives said. However, once pipelines are up and running, they require relatively little manpower to operate, so those effects will likely be temporary.

Provincial politicians, albeit the two that stand most to gain from the project, were also vocal in their support. Alberta Premier Alison Redford called it “truly a nation-building project” and her New Brunswick counterpart, David Alward, called it a “game changer and historic opportunity” for the country as well as his province, home to the country’s largest oil refinery.

But, according to Campbell, the historian, it was the railway’s championing by the federal government that made it the “quintessential example” of a nation-building project.

In the case of Energy East, Ottawa’ benefits would be in the form of increased tax revenues, with Alberta oil no longer landlocked and flowing to more lucrative markets.

Both Prime Minister Stephen Harper and Natural Resources Minister Joe Oliver expressed support for the project, but Alberta and New Brunswick played a much more active role in promoting it.

“That’s where I think the analogy of a pipeline with a railway in 1885 is a little disingenuous,” said Campbell.

Warren Mabee, an energy expert at Queen’s University, said the railway was more of a national project than a pipeline because of its flexibility. It helped grow industries ranging from agriculture to tourism.

A pipeline is “not the sort of thing that keeps giving back the way that the railways did,” he said.

“With a pipeline, it’s a sunk cost, it goes in and that’s all it can do. It locks us into an economic path that a lot of people are not totally comfortable with.”

Mabee says he sees the flag-waving rhetoric as a way for pipeline backers to get in front of the kind of environmental backlash that has stymied many projects.

“I think that by invoking the nation-building idea, they’re hoping to sidestep that whole issue; that you’ll have Canadians buying into it out of patriotism,” he said. “Whether that works, I’m not sure.”

Kheraj, the York historian, said Macdonald used similar nation-building language in reference to the railway.

Decades later, politicians would appeal to Canadians’ patriotism in relation to oil pipelines, such as the Interprovincial Pipe Line — the forerunner of Enbridge — connecting Edmonton and Superior, Wisc.

“When the Interprovincial Pipe Line crossed through Saskatchewan and the first gasket was pulled, it was almost like driving the last spike in the railway,” said Kheraj.

“This was done by (then-premier) Tommy Douglas in 1950 and he declared that this was a major milestone in Saskatchewan’s economic history because it was going to connect Saskatchewan to the energy resources of Alberta.”

Those pipelines helped industrialize huge parts of the country after the Second World War by supplying them with energy, Kheraj said.

Most of today’s pipelines, by contrast, are geared toward exporting Canadian oil to lucrative markets, such as Asia.

Energy East would supply crude to refineries in Quebec and New Brunswick, displacing imports from overseas. But a big part of its raison-d’etre is also to export crude from Saint John, N.B., to markets as far afield as India.

As a whole, Canada is a net exporter of both crude oil and refined products, said Roger McKnight, senior petroleum adviser at En-Pro International in Oshawa, Ont.

He said the main beneficiaries of Energy East would be Alberta oil producers, eastern refineries and TransCanada itself. He doesn’t see Energy East lowering prices at the pump.

If TransCanada had an easier time getting its controversial Keystone XL pipeline — connecting Alberta crude to the U.S. Gulf Coast — approved, McKnight said Energy East would be nothing more than an “afterthought.”

“Energy East, in my opinion, is a last gasp to get this product to a market.”

—Lauren Krugel




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