The ugly face of pipeline obstructionism in Canada

The ugly face of pipeline obstructionism (complete with violence) broke out yesterday at a hearing of the National Energy Board, which was taking public comment and testimony regarding the Energy East pipeline.

The meeting was cancelled after an anti-pipeline activist charged at the three-member panel of Energy Board commissioners, and had to be forcibly restrained. CBC reports that the table in front of the commissioners was “almost” knocked over.

As we point out in a new study, The Costs of Pipeline Obstructionism, Canadians already lose billions of dollars as our oil is sold into a glutted U.S. market at a significant discount—we get 25-30 per cent less per barrel than other types of crude oil sold internationally. And as we expect oilsands production to grow as global demand picks up, and oil prices firm up, there’s still more to lose.

If Canada were able to export 1 million barrels of oil per day to markets accessible from ocean ports—with the lion’s share of heavy oil and bitumen exports continuing to flow to U.S. oil markets—substantial incremental revenues could result. At a US$40/bbl price this could be as high as $2 billion per year (in Canadian dollars) compared with selling into the flooded U.S. market. At an average price of US$60/bbl, it could reach C$4.2 billion; and at US $80/bbl, C$6.4 billion. If higher netbacks from markets accessed from tidewater connections were realized by all Western Canada heavy oil production, at the US$40, US$60, and US$80/bbl price levels the annual benefits could reach C$8.9 billion, C$18.5 billion, and $C28.2 billion, respectively.

Both the oil price and the volume of production drive the Alberta and Saskatchewan crude oil royalty formulas. The importance of the price factor is underscored by the impacts of much lower prices on royalty revenues. In the Alberta October 2015 budget, royalty revenues were projected to plunge to $1.5 billion in 2015-16 from $5.0 billion. Royalties from conventional oil production were estimated at $0.5 billion compared with $2.2 billion in 2014–15 (Alberta, 2015a). Saskatchewan’s February 2016 Budget Update projected oil royalty revenue of $347.9 million in fiscal 2015-16—38.5 per cent less than previously (Saskatchewan Ministry of Finance, 2016a).

Opposition to pipelines comes with real costs, economic as well as safety. As we have shown in the past, moving a given volume of oil a given distance by rail is 4.5 times more likely to lead to an incident or accident than moving that same oil that same distance by pipeline. Yes, both modes of transport are very largely safe, and both are needed, but to the extent that pipeline opposition drives more oil movement to rails than markets would do otherwise, pipeline obstructionism does no favours for either people or the planet.