School of Public Policy Executive Fellow Richard Masson speaks with Alberta Primetime host Michael Higgins about a National Energy Corridor.
This interview has been edited for clarity and length.
Michael Higgins: What might a National Energy Corridor look like? How do you look upon such a project? Is it realistic?
Richard Masson: The challenge with trying to get a pipeline approved is you’ve got to consult with all the stakeholders. You need to be able to prove that it’s commercially required. It takes a lot of time and effort.
The engineering has got to be done, the environmental assessments, all those things. If you’re going to try and put in place a corridor without saying exactly what’s going to be in it, and it might be pipelines or rail or energy transmission, then you would have to think about all those things, what their environmental impacts might be. The commercial justifications might be hard to make because you don’t have proponents lined up.
The routing would be probably difficult to land on, because these things come from different places and go in different directions, and so it seems to me that this is a concept that people are floating where there’s really not a practical idea on how to make it happen, and so I’m not sure it’s going to work.
MH: How different a regulatory dynamic would be needed?
RM: In the existing regulatory framework, the proponent is responsible for doing the engineering, and for doing all the environmental studies, and for doing all the consultation, and making sure that it’s done properly.
Which proponent would be the one who’s going to do this? Is it a government? Because governments typically don’t do these things and don’t have the skill set to do them. Energy companies, like Enbridge or TransMountain, they know how to deal with local stakeholders, they know how to make commercial arrangements with them. Governments have a pretty limited track record with that.
In fact, the federal government got into trouble twice on the west coast pipelines for not doing consultation properly. So I have a whole bunch of questions in my mind with how this might work.
MH: In terms of striving for economic independence where the energy sector is concerned, are there the markets? Is there the demand to warrant east-west infrastructure of this nature?
RM: I think this is a better question for us to focus on. In my mind, our vulnerability is the refineries in Sarnia. There are four refineries there processing about 400,000 barrels a day. They supply all the feed stock to the Ontario market, and they only get product oil from Western Canada through two Enbridge pipelines that go through Michigan.
So this is the challenge of those refineries that depend on oil that goes through the U.S. and if we’re worried that the U.S. might cut off those supplies, we need a way to deal with that in a hurry.
In my mind, the only practical way to do that is rail, and in Alberta, we already have a facility in Hardesty that takes the diluent out of the looted bitumen, so that what you ship is called rail bit, and it moves as a non-hazardous good.
You can have trains of oil or rail bit moving from western Canada to eastern Canada, if the U.S. ever puts its elbows up relatively quickly compared to something like an energy corridor.
MH: How are the Americans likely to respond if there were to be a build out of east-west infrastructure?
RM: This is the challenge. I think we’re really talking here about an insurance policy, because those big refineries in the Midwest and the Gulf Coast are designed for the quality of crude that Alberta makes, and unless they put a drastic tariff, like 25 per cent, very likely we will continue to ship them oil.
It only really comes to a problem if we start trying to impose export taxes, or reduce the supplies to those refineries, and they retaliate by trying to cut off our refineries in Ontario and Quebec. So this is an insurance policy because we’re vulnerable right now with the system that we have.
We need something in that instance that we can put in place relatively quickly. I think there’s a whole bunch of things. I like the idea that we’re trying to facilitate infrastructure. I think we need to do that. I think we need to reduce regulatory burdens and make things much more streamlined, but I think we need to really talk about what problem are we trying to fix so that we can really focus on it.
MH: If this is a long term discussion, and we use TMX as a case in point, building pipeline infrastructure, it costs billions upon billions upon billions of dollars. What would investors need to hear down the road to have confidence in moving projects forward?
RM: We’ve got a very deep hole to dig out of, based on our track record of Northern Gateway, Energy East, TransMountain, cost overruns, all those things just scare investors away.
Right now, there are no pipeline proponents proposing an oil pipeline and so what we need to see is, we want to see growth in production, because that’s what new pipelines are required for, is for new volumes.
We need some assurance that’s going to happen. So that would be things like the emissions cap being either removed or implemented in a way that isn’t likely to restrict growth. We need to see things like the west coast tanker ban taken away.
We don’t have tanker bans on the east coast. Tankers move oil to refineries on the east coast all the time. We now have tankers moving oil out of Burnaby all the time, and so we don’t need a northern BC tanker ban. It’s just one more thing that gets in the way.
So there’s a whole bunch of regulatory changes and policy changes that we could put in place that would make the environment better to allow for growth from our oil sands. We can still capture the CO2 through the Pathways Initiative, those types of things, but that’s the kind of thing that would need to be there to backstop new oil pipelines.
Otherwise, I just don’t think this, this idea is practical.
MH: So a question around timeline then would be well off into the future?
RM: It’s been many years, 10-plus years for typical projects, and many of them died. Under the existing Impact Assessment Act process, the federal cabinet has the ability to deny a project, even if it’s gotten approvals all the way up to that point, based on the mood at the time. Which could be five, ten years from now.
So we need to remove these risks that we have put in place, they don’t help us, and absolutely, we need more infrastructure but we need to do it in a way that’s competitive and allows for a level of planning and certainty that companies will bring back their private capital.
