In a recently released study, we reviewed the economic consequences of insufficient pipeline capacity to ship western Canadian crude oil to refiners in the U.S. Gulf Coast and to ocean ports with access to markets overseas. Greater capacity to reach U.S. refiners via pipeline transportation would increase the profitability of producers by reducing dependence on higher-cost transportation alternatives such as rail and truck.

With pipeline access to ports, Canadian-based companies could sell crude oil at higher prices in overseas markets than in the U.S. mid-continent region where oil prices are under pressure from increasing production. Which means more production, more jobs for Canadians, and greater benefit to Canada’s economy.

For example, if Canada were able to export, say, one million barrels (bbl) of conventional heavy oil and oilsands bitumen per day to markets accessible from ocean ports—with the lion’s share of exports continuing to flow to U.S. oil markets—substantial incremental revenues could be realized. At an average price of US$60/bbl we estimate that these additional revenues could reach C$4.2 billion annually. If higher returns from markets accessed via tidewater were realized by all Western Canada heavy oil production, at US$60/bbl the annual benefit could exceed C$18 billion.

Because royalties on oil production are determined by the price of oil as well as production volumes, governments of oil-producing provinces would also benefit substantially if higher prices were realized from access to more lucrative markets. As indicated in the study, depending on the exchange rate and production volumes, a US$7/bbl increase in the average crude oil price could increase annual Alberta and Saskatchewan oil royalties by more than C$1 billion.

These estimates indicate the scope of some of the economic benefits and government revenues available from increased oil pipeline transportation capacity from Western Canada. Increased revenues from oil production would also benefit oil-producing companies and their shareholders (including public pension funds) and grow corporate income tax revenues and government revenues. And again, re-investment of much of the incremental oil revenues in new and expanded oil production facilities would generate employment and labour income which, along with the indirect and induced effects, would boost overall economic activity.

TransCanada’s proposed Energy East Pipeline, Kinder Morgan’s proposed Trans Mountain Pipeline Expansion, and the Enbridge Northern Gateway Pipeline project would enable about two million barrels per day of western Canadian crude to access coastal U.S. and overseas markets. But all three projects face environmental and other challenges from First Nations and various communities despite the fact that pipelines pose less risk than rail or truck transport. While the Northern Gateway project has been approved, a list of onerous conditions must be met. Moreover, the project will be derailed if the federal government deems oil shipments from the proposed marine terminal unacceptable. As for the Energy East and Trans Mountain projects, the government has introduced changes to the environmental review process. As a consequence, the time for a decision on the Trans Mountain project has been delayed from August to December 2016. In the Energy East Pipeline case, six months has been added to the NEB review phase and three months to the time for the government to reach a decision.

Windows of opportunity for access to new markets are time sensitive, and the economic consequences of delays can be very costly, so shortening regulatory review and government decision-making processes should be a priority. Provincial and federal governments should consider establishing standing “streamlining” committees charged with achieving meaningful reductions in the times allocated for regulatory processes. Policymakers should also consider ensuring “one-stop shopping” where any given project is overseen by only one regulatory agency. The costs of such undertakings will surely be offset by the benefits from enabling projects to proceed sooner than otherwise.

If Canadians are to continue to prosper from the development of oil and gas resources, every effort must be made to expedite pipeline project assessment, environmental reviews, and decision-making before windows of opportunity for access to new markets are pre-empted by competitors. If the legislated regulatory review process threatens to become protracted, the federal government should help resolve impasses and introduce enabling legislation if required.