East needs west: Western Canadian crude oil and Eastern Canada

Larry Hughes
(Response to A pipeline from coast to coast by Frank McKenna, Globe and Mail, 18 June 2012)

Canada is one of the few countries in the world that produces sufficient crude oil to meet its domestic refinery demand and export to international markets. Despite this, the eastern Canadian provinces of Quebec and those in Atlantic Canada (Newfoundland and Labrador, New Brunswick, Nova Scotia, and Prince Edward Island) rely on non-domestic supplies of crude oil for over 85% and 80% of their refinery needs, respectively.

Worryingly, most of the region’s crude oil suppliers have reached a peak in their production or are facing some form of political instability, or both, meaning that in addition to volatile prices, the supply of crude oil is becoming less assured. With the rise in demand for crude oil in China and other emerging market economies, any event negatively impacting the supply or price of crude oil could affect energy security in eastern Canada.

Both Quebec and Atlantic Canada—like the rest of Canada—use the refined products from their refineries to meet most of their transportation requirements; however, unlike other Canadian provinces, those in Atlantic Canada rely disproportionately on oil products for space and water heating rather than natural gas (as is the case in much of the rest of Canada). The high price of heating oil is placing an unsustainable financial burden on many households in these provinces.

In the short-term, improving the region’s energy security will mean replacing insecure sources of crude oil with ones that are secure. This could be achieved by giving Quebec and Atlantic Canada access to western Canadian crude oil from the tar sands. To reach refineries in Montreal would mean either reversing existing oil-pipelines or converting existing natural-gas pipelines to carry crude oil, as proposed by Enbridge and TransCanada, respectively. A new supply route would be required from Montreal to Atlantic Canada’s refineries.

Three such routes could be: through the existing Portland-Montreal pipeline to Portland, Maine and then north by tanker; an entirely new pipeline to New Brunswick and possibly Nova Scotia (although this would exclude Newfoundland and Labrador); or by icebreaking oil-tanker down the Saint Lawrence River (allowing Newfoundland and Labrador to access western Canadian crude oil).

Of these routes, the construction of a new pipeline is the one most favoured by pipeline companies. However, volatile crude oil markets, pressures to reduce carbon emissions, and public objections to pipeline construction, suggests that shipping by tanker from Montreal offers the most appropriate approach as it involves limited new construction and can be wound-down inexpensively if demand declines.

Overshadowing the improvements to energy security that access to western Canadian crude offers are two pressing long-term issues: the affordability and environmental acceptability of crude oil. As world crude oil prices continue to rise and the impact of fossil-based energy becomes more apparent, it will be necessary to adopt secure, low-carbon energy resources to meet the region’s energy needs. While Quebec can turn to hydroelectricity, some provinces in Atlantic Canada will be hard-pressed to find secure alternatives.

Expecting Quebec and Atlantic Canada to continue relying on insecure sources of crude oil is not justifiable given Canada’s position as a net exporter of crude oil. Not only do these provinces need access to western Canada crude oil to replace insecure supplies of crude oil, they also need policies to move off oil and onto secure sources of low-carbon energy.

Submitted to Globe and Mail 21 June 2012. Unpublished.