TransCanada Corporation, a leading pipeline company, announced this week that it has figured out how to convert its Alberta-to-Montreal natural gas pipeline into a crude oil pipeline. It has already started soliciting business from Alberta oil producers and eastern Canadian refiners. This Montreal option for shipment of Alberta oil may shift the logic of the hotly contested pipeline projects that would connect Alberta oil fields to the United States and to the West Coast.
Mining of the oilsands in northern Alberta has created a glut of oil in Alberta for want of means to ship either bitumen or oil to customers in the U.S. and overseas. The proposed Keystone XL pipeline (another TransCanada project) was blocked by U.S. President Barack Obama in January after prolonged street protests in Washington a year ago. That project is still alive while TransCanada seeks a more acceptable route around the Nebraska Sand Hills. Enbridge Corp.'s proposed Northern Gateway bitumen pipeline through the British Columbia mountains to Kitimat has encountered stiff opposition from First Nations along the route, from the B.C. public and from B.C. Premier Christy Clark. That project is currently a subject of hearings by a panel acting for the National Energy Board and the Environment Department.
TransCanada estimates the capital cost of its project at $5 billion to build 375 kilometres of new pipeline and connect it to 3,000 kilometres of existing line across the Prairies and the Canadian Shield. The Northern Gateway project would cost about $6 billion for 1,177 kilometres of line for transmission of bitumen and diluent across the mountains.
The eastern route is likely to be much less controversial. Most of the pipeline already exists and has been operating for half a century. Natural gas is now so abundant and so cheap in all parts of North America that TransCanada has little demand for its Canada Mainline gas network. Converting it to oil service solves a problem for the company, for Alberta oil producers and for refiners and consumers in Quebec and the Maritimes. Once you can get Alberta oil to tidewater, it can be offered to buyers around the world.
U.S. opposition to the Keystone XL pipeline was based partly on a conviction that the Alberta oilsands should not be developed and people should stop burning oil. An oil pipeline to Montreal will show that the oilsands can be mined and the oil can be shipped, with or without Keystone XL. The Alberta-B.C. dispute over the Enbridge project has been super-heated by Albertans' feeling they were being held hostage by B.C. and B.C.'s feeling that their salmon streams and coastal ecosystems were being sacrificed and taken for granted. If it becomes clear that the oil can just as easily go to Montreal, the political heat may be cooled so that the Enbridge project can be evaluated on its merits.
By this curious turn of history, the energy market may be constructing in another form the National Energy Program that former prime minister Pierre Trudeau tried to force upon Alberta in 1980 in order to exempt consumers in Eastern Canada from high world oil prices. Alberta producers now would be happy to have an outlet to the east with negotiated prices and TransCanada's project may be able to provide it.