Monday, November 14, 2011

When the going gets tough, Obama punts

The Obama administration’s postponement of its decision on whether or not to allow the extension of TransCanada Corp.’s Keystone XL oil pipeline until after the 2012 presidential election provides opportunities for Canada to explore options that may, in the long run, be favourable to our country.

With presidential elections less than a year away, Canada-U.S. relations are pretty well on hold leaving little if any probability for Canada influencing the timing of a decision. Even following the election, there is no certainty a democratic administration will ever OK the pipeline project and face the wrath of its influential constituency among environmentalists.

Given the situation, Canada will do well to consider alternatives to TransCanada Corp.’s pipeline extensions that would have seen crude oil from the Athabasca Oil Sands in Alberta piped to Cushing, Oklahoma and from there all the way to Port Arthur and Houston, Texas. For a start, there is an option to take oil from Alberta to the Pacific coast and shipping it to Asia and especially China, which is hungry for oil and will probably welcome a way to lessen its dependency on oil from the Middle East.

A West Coast option, though, could face similar difficulties to that which sidelined Keystone in the U.S., since any new pipelines required in British Columbia are likely to be threatened by protests from environmentalists and legal challenges from first nations groups.

So perhaps we need to look also to domestic markets in Ontario and Quebec for a place to sell our western oil. There seems to be an market there for upwards of one million barrels a day that are imported currently from overseas—though I’m not sure if eastern refineries are currently capable of handling the unusually thick crude from the oil sands. I have read that it is technically feasible to convert one of two natural gas pipelines to eastern Canada to carry oil. Such a decision would reduce or eliminate those provinces’ reliance on foreign crude.

Getting oil to Ontario and Quebec, or to the West Coast, will likely require expanding existing pipelines and building new domestic infrastructure projects, resulting in huge investment and job opportunities that will benefit Canadians for decades. This could be an enormous boon to Canada, so maybe the Americans are really doing us a favour.

One of the most promising options Canada has is to ship oil by rail. According to the New York Times:

Last October, in a joint venture with the Canadian National Railway of Montreal, Altex Energy, an oil shipping company, began shipping relatively small amounts of tar sands [sic] crude along Canadian National’s tracks directly to the Gulf of Mexico.

Although it costs more to ship by rail than by pipeline, rail would avoid billions of dollars in infrastructure investment and any of the expensive and time-consuming regulatory reviews in the United States and here in Canada. Pipelines also require crude from the oil sands to be diluted with chemicals to thin it and allow it to flow more easily. Railcars do not.

Regardless of what a future president of the United States may decide, be rest assured that—as Ronald Liepert, the MLA for Calgary-West and former Alberta energy minister, said—“this commodity [Alberta crude] will go someplace.” If the U.S. decides not to take what some there like to call our “dirty oil,” Eastern Canada and China will take every drop of oil Alberta and Saskatchewan can produce.




© Russell G. Campbell, 2011.
All rights reserved.
The views I express on this blog are my own and do not necessarily represent the views or posi­tions of political parties, institutions or organi­zations with which I am associated.


  1. The development of Prince Rupert as a major port to ship oil,gas and coalto Asia is preferable to expanding exports to the USA.

    The US economy will liely be stagnant for decades. The country is broke. China is booming and will be for the forseeable future.

    Further, the establishment of a major Chinese presence in our oil and gas sector will deter the US from acting in its natiunal interest to seize our resources in the future.

  2. I suspect that rail is far more expensive and dangerous than pipeline per barrel of oil moved. But if that's what Americans want, who am I to criticize?