Energy security and Nova Scotia’s reliance on crude oil

Larry Hughes

Given the driving habits of Nova Scotians and the province’s reliance on light-fuel oil for space heating, it should not be surprising that crude oil products such as gasoline, diesel, and home-heating fuel meet almost 64% of Nova Scotia’s energy needs. However, what may come as a shock is that these products meet less than 39% of the energy needs in the rest of Canada.

This should be of concern to every Nova Scotian, not only because of the seemingly unstoppable rise in the price of some of these products, but because unlike every province west of Quebec, the major suppliers of the crude oil used to make these products in Nova Scotia are either in decline or in politically unstable regions, or both.

In light of this, it would be reasonable to assume that Premier Dexter and his government would be developing policies that transition the province away from these insecure sources of energy to ones that will improve both the provincial economy and its environment. Two events over the past few weeks illustrate the pressing need for such policies: the tax concessions given to the Imperial Oil refinery in Dartmouth and the opening of the Enligna Canada pellet mill in Upper Musquodobit.

The tax concessions for the refinery have been presented by Premier Dexter as a way to both ensure employment at the refinery and keep gasoline prices low since it is produced in the province, thereby reducing transportation costs. By focusing on these two objectives, the premier will ultimately succeed in doing neither.

Nova Scotia’s reliance on insecure sources of crude oil makes it particularly vulnerable to production challenges and political events worldwide. The effect of the growing world demand for crude is reflected in the fact that despite Saudi Arabia pumping more oil than it has in the past 30 years, crude oil prices remain at over $100 a barrel. If the American war-of-words with Iran continues to escalate and tanker traffic through the Persian Gulf is affected because of military action or the threat of it, not only will crude oil prices continue to rise, but crude oil supplies may decline. Either or both of these events would impact Nova Scotia’s economy severely.

One seemingly secure supply of crude oil for Nova Scotia would appear to be the tar sands in Alberta. Despite the benefits of the tar sands being expounded by Canadian politicians and oil companies, their intended markets are the United States and Asia—Nova Scotia does not warrant a consideration.

However, even if western Canadian heavy crude from the tar sands could be shipped from Montreal to Dartmouth by ship, it could not be refined here because it is a heavy crude, although it could handled at the Irving refinery in Saint John (a few weeks ago, TransCanada proposed building a pipeline from Montreal to Saint John for this very purpose).

By giving the Dartmouth refinery tax-concessions without requiring it to be upgraded to handle heavy crude or securing access to western Canadian, light synthetic-crude, the premier has all but ensured that as the world supplies of light and medium crudes become harder to access, the Dartmouth refinery will become redundant, inevitably leading to its closure, the loss of employment, and the reliance on gasoline and other oil products from outside the province.

As world crude oil supplies become both less accessible and more expensive, the 60% or so of Nova Scotians who rely on light-fuel oil for home-heating will need to find other ways of heating their home. Wood pellets are one such alternative that, if produced sustainably in Nova Scotia, would ensure long-term employment in many parts of the province.

In fact, the recently announced reopening of the former Mac-Tara pellet mill in Upper Musquodobit would appear to be one such example. However, while this is undoubtedly a good news story for both forestry and mill workers in this part of rural Nova Scotia, the same cannot be said for Nova Scotia, as the mill’s owners intend to sell the pellets to energy companies in Europe.

According to news reports, once in operation, the mill will convert about 18,000 green tonnes of wood a month into pellets. If the province had encouraged the development of a wood-pellet market, these pellets could be destined for Nova Scotia rather than Europe and could be used in pellet furnaces for heating; for example, depending upon the age of the building and its energy intensity, an estimated 17,000 single-detached homes or 50,000 apartment units could be heated.

Both of these examples illustrate the fact that Nova Scotia’s existing energy strategy—developed in the early part of the last decade with its focus on natural gas exports to New England—is no longer relevant in a time of unprecedented changes in the world’s energy markets. The province needs a new, transformative energy strategy, one that improves Nova Scotia’s economy, environment, and energy security.

Published in 13 April 2012