Premier Alward made the pilgrimage to Fort MacMurray this week to promote a pipeline to bring oil sands crude to New Brunswick’s Bay of Fundy. The Premier’s enthusiastic endorsement effectively outflanks former Premier Frank McKenna and new Liberal Leader Brian Gallant, both of whom are also cheerleaders for the project. Alward was quoted in the Globe and Mail as saying, “This is something that is potentially a game-changer for New Brunswick, but more importantly than just New Brunswick, for all of Canada”.
Proponents have made claims that a pipeline will bring huge benefits to this province. We will have security of supply. The Saint John refinery will run on cheaper Alberta oil. Drivers will pay less for gas at the pump. Thousands of New brunswick jobs will be created during construction. Government coffers will swell with increased tax revenue that will pay for our healthcare.
Unfortunately, experience doesn’t support these optimistic scenarios. Some of those who, like me, were part of the discussion around construction of the Maritimes and Northeast pipeline will remember one of the proponents who dampened our local benefits expectations by frequently reminding us that the pipeline was “only a ditch!” As it turned out, he was right.
To be clear, we are not having this discussion because Alberta has decided to warm the hearths of eastern Canada. Albertans are looking east, and beyond, because their heavy oil producers have to find alternatives to the controversial Northern Gateway Pipeline to Kitimat and the stalled Keystone XL project. Like our Nova Scotia neighbors, they see New Brunswick as simply a pass-through province on the way to market.
Alberta’s heavy oil, which is currently selling in the US at a significant discount off the world price, has to move to world markets if they are going to get more for it. Earlier this year, the CIBC estimated that stranded western petroleum resources were incurring losses to the Canadian and Albertan economies of at least $18 billion a year. According to a report commissioned by the US Government, US Transportation bottlenecks will cost Alberta producers of heavy oil sands grades and heavy conventional grades as much as $65 billion/year by 2030 if the current situation isn’t remedied. Alberta’s search for new export markets is a matter of economic survival for the oil sands industry. That may be the only argument to defend a pipeline east that doesn’t raise false expectations or otherwise mislead the public.
A west to east pipeline will not address energy security because Canada does not have an energy security problem. If we did, the National Energy Board would prevent exports. Canada’s exports represent more than we would need for domestic consumption if we had no alternatives. Because we are part of an integrated North American energy market and the North American Free Trade agreement supports the free flow of energy, we have pooled our requirements and our production within a single market. That provides a measure of energy security. Today we have a surplus of petroleum in the west and we import some oil in the east. The complication is that we sell western resources low, at a US benchmark price and buy high at a world benchmark like Brent.
Logic might suggest that if we shipped Alberta crude east to displace imports, Alberta producers would get a better price and this would contribute to a positive balance of trade for Canada. Unfortunately most eastern refineries are unable to handle the heavy oil sands derived crude without blending with lighter grades. That means a bitumen pipeline to New Brunswick would likely end at an export terminal just like the one proposed for Kitimat by the Northern Gateway project. Because of refining requirements, bitumen isn’t the complete solution for any of our refineries; no cheap refinery feedstock and no cheap gas at the pumps.
The pipeline’s predicted 7,500 construction jobs are unlikely to go exclusively to New Brunswick workers. A pipeline would be built by pipeline contractors who will bring their crews in from the last job. Some excavation contractors would get work. But the construction period will be short and intense. Construction would occur simultaneously from “spreads” situated at regular intervals along the pipeline route.
If not jobs, what about taxes? Using the Northern Gateway as a guide, tax revenues from the New Brunswick portion of a pipeline could be in the range of $20m to $30m/yr. over thirty years. That would represent about a tenth of the province’s 2011/2012 deficit. That won’t exactly swell the treasury, but might be enough to cover the added costs of public services to the pipeline and marine terminal. That is, provided we don’t give the pipeline a tax break like some others we’ve done.
While we understand Alberta’s plight, New Brunswickers need to know if the arguments many are making against The Northern Gateway are also valid here. In British Columbia concerns have been raised about diluted bitumen spills along a route that crosses mountainous regions, many BC rivers and streams, and through challenging coastal waters, much of which includes sensitive habitat for endangered wildlife and the lands from which many First Nations derive a living.
Is there something about New Brunswick’s lakes and rivers and our coastline that make them immune from the issues raised in BC? What would a major spill of diluted bitumen do to the upper Saint John River watershed? How much more marine traffic will be created by shipments from a marine terminal at the New Brunswick end of a West-East export pipeline?
Will a substantial increase in tanker traffic in the Bay of Fundy, and through the Georges Bank off southern Nova Scotia, result in any conflicts with the fishery or create threats to marine habitat or species at risk like the North Atlantic Right Whale?
While Irving Oil have done an exceptional job in routing their tanker traffic to avoid disturbing the whales, will an increase in traffic be met with opposition from concerned citizens and environmental groups as well as fishermen who have succeeded in having governments maintain a drilling moratorium on the Georges Bank?
If the Premier is a proponent of the project before these questions are answered, how will he represent our interests in any process to resolve them?
Finally, how does this pipeline position the province for what will happen globally in the coming decades?
In its 2012 World Energy Outlook, the International Energy Agency states that amid a changing world supply picture, there is one constant, “the world is still failing to put the global energy system onto a more sustainable path.”
While access to new unconventional petroleum resources have turned the world supply dynamic on its head, the reality is that if we consume more than one-third of proven petroleum reserves by 2050, the IEA predicts that we will exceed the CO2 targets that scientists have warned us will result in a greater than 2 degree global temperature increase and potentially catastrophic climate change.
The IEA reports that, “If action to reduce CO2 emissions is not taken before 2017, all the allowable CO2 emissions would be locked-in by energy infrastructure existing at that time”. Keep in mind that the IEA serves as a policy advisor to its member states, which includes Canada. It is not an ad hoc environmental advocacy group.
We really do need to ask ourselves if a carbon intensive development that fails to consider the IEA’s warnings will be viable in future decades. We must certainly exercise caution in making investments that are out of step with what will be an inevitable world-wide consensus on reduction of carbon emissions, one that will be with us as early as 2017.
This is not to suggest that we should reject the pipeline outright or ignore the potential benefits that may come with it in the short run and we shouldn’t arbitrarily interfere with Alberta’s need to get its resources to market. It is worrying, however, to see a growing parade of politicians endorse a concept that has implications for this province’s future before the risks and benefits are critically assessed by experts and through the lens of a more sustainable future.
