July 2018, Vol. 245, No. 7
Editor's Notebook
Why Canadians Should do the World a Favor and Build More Pipelines
The Canadian federal government just lent its full force behind Kinder Morgan’s TransMountain pipeline by taking a stake in the project, promising to push through construction despite fierce provincial resistance from British Columbia. Activists and politicians in BC did not waste time condemning the move.
To be sure, pipeline projects put a disproportionate burden on certain First Nations and municipalities. But from a national interest, economic, humanitarian, and even environmental standpoint, there is a strong case for Canadian pipelines. This includes establishing a natural-gas export corridor from Prince George to Prince Rupert, completing the Trans Mountain loop and Keystone expansion, and freezing future pipeline development. The world will thank Canada for it.
Two billion people from mostly developing countries will be added to the global population in the coming decades. Access to cheap and reliable energy sources will raise their quality of life. To demand nothing but clean renewable energy is impractical and disingenuous, even cruel. Consider also the global environmental footprint. Canada has among the highest environmental standards for oil and gas development. When a big consumer like China buys from Canada, it takes demand away from dirtier coal and reduces the net carbon footprint. A hypothetical 800-kilometer, multiple-pipeline corridor would require about 400 square kilometers of restorable land. Contrast that to the nearly 9,000 square kilometers (22 times) of land consumed in a single forest-fire season in British Columbia last year.
The world is rapidly moving toward cleaner and renewable-energy sources due to falling costs and advancements in solar, battery technologies and demographic trends. Canada should bank the money while it can. In 20 years, there may no longer be talk about new fossil-fuel investments.
Currently, constrained export pipelines are causing Canadians to subsidize American shale producers by selling at a consistent discount. Canadian producers have had to load more oil on railcars, which are less safe and more energy intensive. “Turning off” oil and gas will have huge repercussions. Job losses and reduced social benefits will hurt the lives of millions of lower-income Canadians. Moreover, by developing policies unpredictably and discrediting decisions by legitimate institutions such as the National Energy Board, the governments risk destroying Canada’s credibility to investors in all industries and undermining rules-based democracy in favor of populism. In the age of protectionism, Canada should secure all its revenue streams. Natural resources must be strategically managed. Good fortune has been squandered for too long and Canada needs to build a Norwegian-style sovereign wealth fund. This fund can be used for research, prize programs for innovations, sustainable social welfare and job-training programs to prepare Canadians for the future.
There is nothing hypocritical about denying resource revenues from illiberal countries. Canada can accelerate meaningful reforms while pursuing worthy causes in many places. For too long Canada has punched below its weight on international affairs. By supplying more energy, Canada can support its peaceful projection of power, forge closer ties with its trading partners and reduce everyone’s reliance on corrupt regimes.
To paraphrase a former Saudi oil minister, “The Stone Age did not end because of a lack of stones.” The demise of fossil fuel will come from better technologies and economics, and it will be a gradual process. The notion that stopping resource development now would force us into renewable energies is a myth. Many people have been lured into ideological purity, false expectations of a quick solution, or worse, activism for activism’s sake. Discussions should instead be directed at the responsible use of oil revenues and ways to enhance Canadians’ quality of life.
Canadians should be proud to provide the world with a reliable and cleaner source of energy. By the same token, Canadians should be embarrassed that, after decades of oil and gas production, no lasting legacy is visible from this one-time gain. Opportunities were squandered, but aren’t lost forever. Now is the time to step up and do us all a favor, Canada. P&GJ
Author: Jeff Lee is a commodity trader and a trained engineer with experience in oil & gas capital projects, investment advisory and management.
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