Politicians, stop the magical pipeline talk and do your job

“Radical acceptance” means accepting reality as it is  — facts about the past and the present are the facts, even if you don’t like them. Canada is being defeated by its inability to radically accept two things: markets dictate oilsands growth and global climate change action is accelerating.

Radical acceptance during Trump’s chaos also means recognizing that infrastructure decisions must be based on long-term economic realities, not short-term political anxieties. Yet, we see knee-jerk reactions from our leaders suggesting uneconomic pipelines as protection from Trump tariffs. A 10 percent tariff on oil, largely paid by U.S. consumers and reversible at Trump’s whim, does not justify tens or hundreds of billions of dollars in pipeline investment. The tariffs might be absurd, but responding with a pipeline would be even more absurd. 

Beyond tariffs, our inability to accept the facts of the past and the present means politicians continue to talk about pipelines as if by magic they can transform our high greenhouse-gas, poor-quality, high-capital oilsands into a commodity the world needs a lot more of.  

Pierre Poilievre says he’s going to build pipelines in every direction of the compass. Natural Resources Minister Jonathan Wilkinson has indicated he’s open to discussions about reviving Keystone XL or possibly building a West-East pipeline. Danielle Smith is shilling for Energy East and Northern Gateway. After a recent Mark Carney speech, I asked him if he meant bitumen pipelines when he said he wanted to encourage energy infrastructure. He said, “Maybe one more … not Energy East … not through the U.S.” I think that leaves us with either an unbelievably expensive West-East line through the Canadian Shield or, even more alarmingly, Northern Gateway. 

For this frenzied discussion to make any sense, two things have to be true. First, there has to be no more space or expansion capability on current pipelines. And second, oilsands growth has to be limited by existing pipelines. Neither of those things is true. 

Capline, a 1.2 million barrels per day monster of a crude line running from the U.S. Midwest to Louisiana, has over 80 per cent spare capacity. It’s tied into the Louisiana Oil Port (LOOP), which can load ships three times the size of those serving TMX in Vancouver. Enbridge has said if there is a need to get more crude into Capline, they can expand their system to do that. There’s room in existing systems and Enbridge has their own expansions to deal with short-term growth as well. 

The oilsands boom of the 2000s stopped in the 2010s, but not because of Trudeau, lack of pipelines or over-regulation. It stopped because U.S. fracked crude oil began to be produced in huge volumes. That crude is better quality, less capital intensive, and closer to key markets than the oilsands. No major oilsands project has been announced since 2013. That doesn’t mean there won’t be short-term growth — there is and will be for a while through efficiencies and expansions of existing facilities. But there won’t be a boom, and growth is not in the cards for the long-term. Accept it: our tarry, hard-to-extract bitumen is not at top of the global list to be developed much further. 

If we ignore that fact, which our politicians seem to want to do, the other problem with new oilsands production facilities and pipelines is the extremely high upfront capital costs. This means that you need a long life for the asset to get your money back. The International Energy Agency (IEA) and the Canadian Energy Regulator (CER) predict global peak oil shortly due to the economic advantages of renewables, followed by a steep decline to 2050 if the world meets their net-zero targets. Nobody wants to build major new facilities and end up with stranded assets. Well, nobody except some politicians. 

If we accept reality and stop talking about pipeline delusions to re-create an oilsands boom, then we can talk about opportunities that might exist long-term for this resource. This discussion requires radically accepting a different fact: there will be crude production in 2050, just a lot less than today.  

The IEA says the global crude being produced in that time period is primarily for asphalt and chemicals, not for combustion.The CER forecasts Canadian crude production to drop over 75 per cent to around one million barrels per day by 2050 in a net-zero world. What role can Canadian crude play in that world?

A couple of ideas come to mind.  

Some of the oilsands crude produces high-quality asphalt and needs very little processing. That isn’t true of most crudes. It’s an oilsands advantage. Is it possible to make oilsands-based asphalt in a net-zero world? Maybe, maybe not.

The IEA also believes some petroleum-based jet fuel and diesel will still be used in 2050 in a net-zero scenario. Our synthetic crude plants upgrade bitumen to something that can be turned into jet fuel and diesel. Today, much of that material goes into places like the U.S. Midwest to finish refining. What if, instead of exporting less refined material, our plants were encouraged to complete the refining process here at home? Can these plants still operate in a net-zero world? Maybe, maybe not. 

But talking about products that are expected to exist is much better than talking about building pipelines for imaginary crude demand. 

Please, leaders of Canada, accept the reality that another oilsands boom is not going to happen and we don’t need more pipelines. Instead, start talking about how to position Canada for prosperity in the future. The issues are large and the energy transition is real. Do your job.