Approvals put Canada back in the oil game

  • 30 Nov 2016
  • Saskatoon StarPhoenix
  • Financial Post

Approvals put Canada back in the oil game

A decade lost to confrontation and missed opportunity, writes Claudia Cattaneo

For Western Canada’s oil producing regions, Tuesday’s approval of two major pipelines marks the beginning of the end of a decade of uncomfortable confrontation and missed opportunity.

It’s been that long since the first major and probably most attractive projects, Keystone XL and Northern Gateway, were proposed, in good faith, to transport growing oil production.

Opposition by environmentalists, aboriginals and local communities led to a flurry of other options: Kinder Morgan’s Trans Mountain expansion, Enbridge Inc.’s Line 9 expansion and reversal (in operation since last year), TransCanada’s Energy East, Enbridge’s Line 3, plus a big buildup in costly and dangerous oil transportation by rail. Meanwhile, there were bottlenecks, regulatory gridlock and losses in investment and income.

On Tuesday, Prime Minister Justin Trudeau said he is approving the Trans Mountain expansion and Line 3. But he also rejected Northern Gateway and moved to formalize a ban on oil tankers along B.C.’s northern coast.

The approval of the Trans Mountain expansion, in particular, was a courageous step. Trudeau stood firm against dogged opponents in the Vancouver area and elsewhere, arguing he won’t be swayed by political argument.

“If I thought the project was unsafe for the B.C. coast, I would have rejected it,” he said. “It is safe for B.C. and the right one for Canada.”

Reflecting Alberta’s mood, NDP Premier Rachel Notley welcomed the arrival of “some morning light.”

“Our province has been brutally slammed by the collapse in commodity prices,” she said in a statement. “It has been a long, dark night for the people of Alberta as a result. We are getting a chance to break our landlock. We’re getting a chance to sell to China and other new markets at better prices. We’re getting a chance to reduce our dependence on one market, and therefore to be more economically independent. And we’re getting a chance to pick ourselves up and move forward again.”

Trans Mountain and Line 3 could add nearly 1 million barrels a day of capacity by 2019.

The new capacity means Canada will have greater control over its oil trade, making OPEC price shocks easier to absorb. It will also mean billions a year in additional revenue.

“This is very positive for Canadian oil,” said trader Tim Pickering, founder of Auspice Capital Advisors Ltd. Oil investors will turn their attention to Canada as it gains access to tidewater and to take advantage of higher returns, he said.

That’s assuming the projects are actually constructed in a timely manner: Ottawa’s next job is to stand behind its decisions while opponents continue to disrupt the projects at construction sites, in the courts and at other political levels. Indeed, some B.C. organizations immediately vowed to keep fighting to prevent the project from being built.

“Today’s decision by the federal government to reject the Enbridge Northern Gateway pipeline and tankers proposal is an important and hard-fought victory, one that paves the way for communities to put a stop to the Kinder Morgan Trans Mountain project,” Westcoast Environmental Law said in a statement.

The approvals won’t come cheap. Albertans are facing a costly carbon tax and a cap on oilsands emissions that will limit production growth unless there are technological breakthroughs. Enbridge will have to come to terms with the loss of Northern Gateway, after it and its partners spent more than half a billion getting it through the regulatory review. Enbridge said it is now looking at its options.

Still, they demonstrate Canada is moving forward, and that it’s back as a responsible oil producer.

 

 

 

About prosperitysaskatchewan

Consultant on Saskatchewan's natural resources.

Posted on November 30, 2016, in economic impact, oil, political. Bookmark the permalink. Leave a comment.

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