The Northern Gateway Project, introduced in the middle of the last decade, promises to keep British Columbia mired in debate for years more to come. Despite the National Energy Board’s recent approval, staunch opposition from First Nations groups and environmentalists looks set to suspend the pipeline in a state of legal limbo. Across the border, meanwhile, the high-stakes world of pipeline politics means U.S. State Department approval for Keystone XL continues to elude TransCanada Corp. As those projects stagnate, the spotlight is about to turn to the Energy East project, a proposal to ship Alberta crude to New Brunswick. Long before any ground is broken, though, a little province called Ontario will have some big questions to face.
Although the particulars may be different, Kathleen Wynne has just as much reason to worry about a new pipeline passing through central Canada as Christy Clark does about seeing one head to the west coast. Part of TransCanada’s plan for building Energy East includes converting an existing natural gas pipeline to carry bitumen from the oil sands. The move to retrofit the line isn’t without costs to the province. Ontario’s supply of natural gas would be cut by roughly 25 percent, leaving some regions with few obvious alternatives to substitute for the loss. An offer from TransCanada to build a new natural gas line to the province seems good on the surface, but considerably less magnanimous when you consider it’s asking the Ontario Energy Board to approve a 52.3 per cent increase to the rates it charges to some of its customers. Why natural gas users in eastern Ontario should subsidize the transit of Alberta bitumen through their backyard remains unclear.
It’s easy to understand why the oil industry wants to find a route that will get its bitumen to a coast. Doing so will allow western Canadian producers to get world prices for their oil. While the so-called bitumen bubble that was causing such a steep discount between the amount fetched by Canadian oil and benchmark U.S. prices isn’t as much of a problem as it used to be, it’s still an issue. The completion of two projects that carry oil from the Midwest to the Gulf coast—the reversal of the Seaway pipeline and the southern leg of the Keystone project—have helped to alleviate much of the build-up in inventories, but Canada’s oil industry still isn’t out of the woods. If the Energy East project were to be built, it would deliver another 1.1 million barrels a day to the Atlantic ocean where it could end up in coastal refineries and improve the pricing picture even further.
The benefits for Ontario are harder to see. Premier Wynne recently shared a stage with Al Gore, who gave her kudos for reducing Ontario’s reliance on coal-fired power. Nationally, however, Ontario’s efforts to cut the amount of carbon pollution from electricity generation are more than offset by the growth in emissions from the oil sands, which are expected to triple by 2020 from 2005 levels. New pipelines would allow production to continue to expand, meaning those emissions would only head higher. If Alberta can be considered the culprit behind Canada’s sad track record on carbon emissions, then Ontario’s acquiescence to the Energy East pipeline would make it a willing accomplice.
If the threat to natural gas supply and soaring carbon emissions aren’t enough to get the Premier’s attention on Energy East, then there’s also the economy to consider. Ontario’s once mighty manufacturing sector hasn’t shared in the spoils of Canada’s emergence as an energy superpower. As the country’s oil-dominated trade flows have tied the value of the Loonie to triple-digit world oil prices, the resulting strength of the currency has turned into a curse for exporters in general and Ontario’s factories in particular. Over the last decade, Ontario’s share of Canada’s GDP has shrunk to its lowest level in the post-war period.
During roughly the same time frame, the province has also lost more than 300,000 manufacturing jobs. Wynne’s recent election win spared Ontario from the 100,000 public service job cuts promised by her Conservative opponent Tim Hudak. However, if new pipelines help to boost Canada’s already overpriced petrodollar, she won’t be able to help Ontario avoid more job losses in the manufacturing sector.
There is much that Ontario could do in the meantime. The province’s energy board could refuse TransCanada’s request for the huge rate increase that it needs to help bankroll its replacement natural gas pipeline. The province could also block permits for the construction of new pumping stations that will be needed by Energy East, if the specifications don’t meet environmental protection standards. Similarly, there’s a chance that the pipeline’s multiple water crossings could also contravene Ontario’s Clean Water Act, which is designed to protect the sources of drinking water for the province’s communities.
Ontario’s premier would do well to take a note from her counterpart on the west coast. Christy Clark didn’t shy away from objecting to her province being used as a conduit to move Alberta’s bitumen to foreign markets. At the very least, she insisted that some of the economic benefits of the project would have to flow to B.C., a condition that’s yet to be met. Halfway across the country, Wynne has at least as much at stake in looking out for the best interests of her own province.