Oil floating in a sea of politics

By Dr.  John Hollins, Past Chair of the Canadian Association for the Club of Rome

In the fall of 2017, TransCanada announced its decision, in the face of strong political opposition from the City of Montreal and the Province of Quebec and in the related absence of federal support, to abandon Energy East, a pipeline designed to carry oil from Alberta to St. John, New Brunswick. The driver for this proposal was to secure a route with more capacity than rail cars. Canada’s eastern refineries have been supplied with offshore oil for a long time. It may be 40 years since OPEC imposed embargoes, but this pipeline would also have secured for Canadian consumers from Ottawa to the East coast a reliable supply of Canadian oil from a modern pipeline, the safest way to transport oil, and independence from any future geopolitical upheavals in the Atlantic basin, which for oil extends from western Africa to Kazakhstan to Russia.

An editorial in the Globe and Mail on October 6, 2017, reviewing a claim by Jim Carr, Minister of Natural Resources, that TransCanada’s decision to abandon Energy East was purely a business decision, observed that it was a business decision floating in a sea of politics. This metaphor applies to a vast range of business decisions made in a parliamentary democracy. It is the raison d’être for many industrial associations, non-governmental organisations, and consulting companies. The state of the political sea, of course, changes with time.  Dr. Edward Manning, a past Chair of CACOR, observed that claims of victory now over Energy East might well be premature. It is not just politicians whose foresight is generally limited to less than the duration of one electoral cycle and who are unable to appreciate the breadth and complexity of the systems involved.

Here are a couple of observations that might provide an opening for some foresight.

Firstly: Two years ago, Valero, the US company that owns and operates the large refinery at Lévis, QC ended its dependence on oil from the Atlantic basin  by sourcing its crude oil from Western Canada and the United States. An article in the Financial Times noted that it means that Québec will have access to oil that is more secure at a time of rising geopolitical tension. Valero’s decision was driven by consideration of costs of supply and it was reported that the Province of Québec liked the idea of reducing its trade deficit.

This Canadian oil may be geopolitically secure, but it currently travels the 250 km from Montreal to Lévis by three modes: by oil tanker along the St. Laurent River through Lac St-Pierre (average depth 2 m.) to Lévis; by unit train along the banks of the river; and through a small existing pipeline, a process fraught with ecological insecurity. A rational choice would opt for a bigger, modern pipeline over an old pipeline combined with tankers in the waters of the St. Laurent and rail cars running on the clay bed of the former Champlain Sea.

Naomi Klein, I seem to remember, lamented that environmentalists concerned with energy issues generally focus exclusively on supply. With some experience in analysis of energy systems, I conclude that demand is generally the driving force, not supply,

As long as there is demand for petroleum products from refineries in Lévis and Montreal, which at best is likely to decline slowly, human ingenuity will probably find a way to satisfy it. For those of us concerned with global warming, the real issue is managing demand and finding the best way of satisfying it. In this particular case, we could, for example, drive less (or switch to electric vehicles, depending on the source of the electricity) and advocate to get our oil delivered through a modern pipeline rather than by ship through an estuarine ecosystem and by train along the banks of the river.

Secondly: The Province of New Brunswick and the State of Maine some years ago developed a proposal for an energy corridor (electricity, gas, and petroleum) to cross the state from Canada to Calais, ME with one branch crossing the border to Saint John, NB.  Renewable energy proponents in the United States like the idea of transmitting wind power from the northern states to Boston.  Hydro Québec likes the idea of a more direct route to customers in the eastern United States. Pipeline and trucking interests, of course, like the idea of cutting 250 km off the journey from southeastern Ontario to Saint John. I am not waiting for this idea to mature to reality, but observe that the political sea in  the USA at the moment is running favourably and, as CACOR Director David Pollack observed, impossible dreams are often a basis for more practical developments.