In a world where Donald Trump is vowing to apply a punitive 25 per cent tariff on all Canadian imports — and with U.S. protectionism surging — it’s time for Canada to secure more energy customers
Premier Danielle Smith mused this week about finding ways to “derisk” the moribund Keystone XL pipeline project that would ship more oil into the United States, but without putting government money on the table.
Here’s a better idea.
Instead, Alberta and the federal government should examine ways to kick-start Canadian projects that move oil and gas in a different direction — to the West Coast for export to the world.
And a good place to start would be moving forward on developments such as the second phase of LNG Canada or the proposed Ksi Lisims LNG, or enhancing future pipeline capacity to transport more oil to the Pacific coast for export by tanker.
“I hope this tariff nonsense helps us understand we shouldn’t push Keystone XL. We should build Northern Gateway instead,” Heather Exner-Pirot, director of natural resources, energy and environment at the Macdonald-Laurier Institute, wrote on X this week. She was referring to the now-dead pipeline proposal that aimed to move oil from Alberta to Kitimat, B.C.
“We should be pursuing multiple outlets off the West Coast for LNG in a much more rapid pace than we are right now,” Ian Anderson, former CEO of Trans Mountain Corp., said Thursday.
“You’ve got to believe in the resource richness of our country, the global demand for what we have and providing access to that. And I think for both oil or LNG off the West Coast is what we should be pursuing.”
It won’t be easy.
For those who have forgotten the tortuous history of three unsuccessful pipeline developments last decade, Keystone XL intended to move more Canadian crude to the U.S., Energy East proposed shipping western Canadian oil to New Brunswick.
Northern Gateway wanted to move oil to the B.C. coast for export.
Back in 2016, on the same day the Trudeau government gave TMX the green light, it officially terminated the $7.9-billion Northern Gateway project, keeping a Liberal campaign promise to ban oil tanker traffic along the northern coast of British Columbia.
Proposed by Enbridge, Northern Gateway aimed to move 525,000 barrels of oil per day from Bruderheim to Kitimat, B.C. Much like TMX, it would have helped reduce Canada’s near-complete reliance on the United States as its only customer for oil.
An expanded Trans Mountain has opened new trade routes for Canadian oil to Asia — including China — although much of the product is destined for California and Washington state.
Many energy analysts believe tariffs won’t be placed on Canadian oil and gas imports, as it would push up American pump prices. However, Smith told reporters on Thursday that there’s “every reason to believe it applies across the board to every product.”
With oil and natural gas making up $133 billion of Alberta exports shipped to the United States, it highlights how much is at stake.
Canada supplied a whopping 60 per cent of American oil imports last year, up from one-third a decade earlier.
More energy infrastructure that can reach more customers is a sound diversification policy.
Now, there’s no question Northern Gateway had its own challenges.
It was approved with 209 conditions by the former federal Conservative government in 2014. Two years later, the Federal Court of Appeal overturned the approval, ruling Ottawa had failed in its duty to meaningfully consult with Indigenous communities.
Given the long passage of time since Northern Gateway was derailed, a new project would have to be developed — if the governments could find a way of attracting private sector capital to build it.
There’s also the question of future demand for oil and gas — the International Energy Agency says it will peak this decade — in a world growing more concerned about climate change.
University of Alberta energy economist Andrew Leach rightfully points out that Canada has a tariff problem that needs immediate attention. Large infrastructure such as a new oil pipeline would take years to complete.
“The thing to remember is that the biggest market for our crude on the West Coast is still the United States,” he added.
“You don’t try to lump your other solutions onto the current problem. The current problem is understanding what it is that Trump is looking to negotiate.”
But others think this is precisely the time to reflect on future Canadian energy development.
Exner-Pirot said more pipeline capacity will be needed to grow Alberta oil production, but the private sector in Canada has indicated it’s not interested in taking on the level of political risk tied to Keystone XL.
The provincial government lost an estimated $1.3 billion backstopping construction to begin on KXL, before its cross-border permits were cancelled by U.S. President Joe Biden’s administration in 2021.
While Trump might want to revive KXL, a new version of Northern Gateway would remain within Canadian oversight, and also access growing international markets.
“We all know Asia is where there’s going to be oil demand growth,” she added.
“Strategically, if I was going to be derisking anything and prioritizing anything, then obviously it would be Northern Gateway, so that we are not a regional oil power but a global oil power.”
Anderson believes additional export capacity from the West Coast makes sense.
“It’s a long putt to resurrect KXL,” he said.
“You’ve proved that you can go to the West Coast.”
Chris Varcoe is a Calgary Herald columnist.