Why the flow of oil cannot, and should not, be stopped

Editorial: Oil will find its way to market, even without a pipeline

Larry MacDougal / CP

Oil, like information, yearns to flow freely. That much hit home this week when it emerged that CN Rail was negotiating with Chinese-owned Nexen Inc. to move bitumen from the Alberta oil sands to the port of Prince Rupert. BC Rail officials believe they can get heavy crude to the West Coast at a rate equal to that of the proposed Gateway Pipeline and, though the economics of moving it by rail aren’t as attractive as sending it through a fixed conduit, CN’s enthusiasm points to an inescapable fact: Pipeline or no pipeline, the oil will find its way to market.

All 5.2 million barrels of it. That’s how much the oil sands are projected to be producing each day within about 15 years—fully 60 per cent more than the amount generated today by the entire country. The pressure to move the oil we have now has already reached a crisis point. On the same day that CN’s plans came to light, the Fraser Institute issued a report calculating the cost of transport bottlenecks to Canadian producers at $47 million per day, or $17 billion per year. That’s because Alberta bitumen hits an effective dead end when it reaches the U.S. Midwest. At that point, there are no pipelines to get it to coastal refineries, so it must be sold at a steep discount—currently about $37 per barrel.

The unsustainability of this arrangement is obvious. Foreign countries such as China need Canadian oil to continue the development of their economies, and they are willing to pay a premium to get it to market. Canadians in all walks of life have a stake in making that happen, because income from oil sands development powers the economy and pumps dollars into government coffers. (Alberta, for instance, is projected to receive $2.4 billion less revenue than expected this year, thanks in large measure to pipeline bottlenecks.) It would be better for the planet, were fossil fuels not the lifeblood of the global economy, and we must redouble our efforts to reduce our dependence on them. But that shift must be driven by fact, not by hyperbole, fear-mongering and misinformation.

Which brings us to the anti-pipeline movement. Led by opponents of Keystone XL, the proposed 2,400-km pipeline that would carry bitumen south to the Gulf of Mexico, a well-funded cadre of activists had persuaded some U.S. lawmakers (and possibly President Barack Obama) that the only way to head off “runaway global warming” is to keep Athabasca oil in the ground. Never mind that their most ardent advocate, Tom Steyer, is a former hedge-fund manager who divested his pipeline assets only after he’d made his billions. And never mind that the oil sands are responsible for only 0.15 per cent of global CO2 emissions. It is “dirty oil,” they insist, whose exploitation—more so than Kentucky coal, more so than North Dakota shale oil—will perpetuate the world’s dependence on fossil fuels.

In short, they have proven as proficient at jamming the transmission of fact as they have the flow of crude, and Canadians are paying the price. After five years of delay caused by half-truths and misdirection, Keystone XL today seems less likely to go ahead than it did 12 months ago. Meantime, the U.S.-based fanatics continue to sell the fantasy that blocking Keystone will prevent Canadians from fetching a fair price for their resource—though why this claim is working is a mystery. Maybe American leaders have been lulled by reassurances from Natural Resources Minister Joe Oliver, who speaks of Keystone as an “important project to both countries.” Maybe they think Canadians fear a rupture in their relationship with the U.S. too greatly to turn their backs on them.

If so, they should listen instead to the plain-speak of Gary Doer, Canada’s ambassador to Washington, who says flatly: “Oil will get to market. It will get to market with pipelines. It will get to market by trains. It will get there by trucks. It will get to India, it will get to China, and it will continue to have the opportunity to go to U.S. refineries.” Alternatives to Keystone, he notes, now include TransCanada Inc.’s planned Canada East pipeline to Quebec and New Brunswick, as well as the proposed Kinder Morgan expansion that would deliver bitumen to the B.C. Lower Mainland. The anti-pipeline activists will never acknowledge that their own activities risk cutting the U.S. out of an energy supply it needs. But they can’t keep a stopper on the truth forever—no more than they can on the oil.