The Saga of Market Access

Without pipelines, countless homes across Canada would go without heat, and refineries without feedstock, which would potentially create massive shortages for many day-to-day petroleum-based products Canadians rely on, not to mention the lost employment opportunities and public/private sector revenues that go with them.

According to the Canadian Energy Pipeline Association (CEPA), transmission pipelines have generated more than $1 trillion to Canada’s GDP since 2005. Additionally, the energy sector contributed $219 billion (10.2%) to the nominal gross domestic product in 2019.

“The production of Alberta hydrocarbons, oil sands derived oil, and natural gas exported as LNG is a tremendous economic opportunity for Canada to seize, and at the same time these resources, especially the oil sands, have been vilified by the environmental movement,” says Dennis McConaghy, a former TC Energy executive with 30 years experience in the oil industry. He also helped oversee the commercial development of the Keystone XL pipeline.

“They were able to use the regulatory process to frustrate the approvals and the operations, and the construction of some key elements of pipeline infrastructure for Keystone XL.”

TC Energy announced the project’s cancellation in June. That followed U.S. President Joe Biden’s cancellation of a key permit within hours of taking office earlier this year.

Keystone XL became a kind of iconic project because of how valuable it was to Canada, Alberta and the industry, explains McConaghy. It was a direct link to the most lucrative market for Alberta heavy oil, which is the U.S. Gulf coast refineries that are optimized to run on heavy oil.

It also morphed into an iconic opportunity for the environmental movement, he continued, demonstrating that by motivating Democratic politicians and Democratically-appointed jurists to resist the installation, it can dictate the terms of how resources are developed. It had the additional advantage that it was thwarting a Canadian resource.

McConaghy went on to list other defeated projects: Enbridge’s Northern Gateway, a twin pipeline between Bruderheim, AB. and Kitimat, B.C., “capriciously rejected” by Prime Minister Justin Trudeau days into his leadership; Energy East, an oil pipeline going from Alberta to the Maritimes bogged down by resilience in Quebec, which had the veto of the project; and Petronas Asia withdrew its application for LNG facilities because of a regulatory process that was “so protracted and so fundamentally unreasonable” for investors they couldn’t continue with it.

Pipelines are enormously important, he described, to avoid unnecessary constraints on the oil sands because world oil demand is projected to keep rising until at least 2035.

“Canada has world-class oil and natural gas reserves along with the talent and technology to produce some of the most responsible energy resources in the world,” states Jay Averill, CAPP spokesperson. “Credible forecasts foresee continued record growth in energy demand, including oil and natural gas. Within this global context, there is a great opportunity for Canada to grow its market share if we can gain efficient access to markets.”

The Canadian Taxpayers Federation predicts Canada could lose $6.6 billion in tax revenues from a lack of pipeline capacity between 2019-2023.

Averill adds greater market access for Canada’s resources benefits all Canadians by creating jobs and generating significant revenues for governments to support social and environmental programs.

“To that effect, CAPP and its members support efforts to increase market access for Canadian energy, including CEPA’s work to improve access to domestic and overseas markets.”

As one of Canada’s largest integrated energy companies, Suncor Energy recognizes market access as critical, and in the national interest, says Leithan Slade, Suncor spokesperson.

“We need to ensure we’re getting full value for our production to drive further investment in jobs, education, and healthcare.

“Although Suncor has the required pipeline access to send all of our production to market, we support the development of pipeline infrastructure that provides access to markets, including expanded connectivity to the United States.”

Despite having the highest environmental, human rights and climate standards, Cody Battershill, founder of CanadaAction, adds Canada has been forced to sell its energy at a discount due to a lack of pipeline capacity, forfeiting further economic opportunities.

“Building pipeline capacity is the solution to make sure we get full value, support local prosperity, and make sure the world can access the most responsibly produced energy.”

In McConaghy’s opinion, Bill C-69, titled “The modernization of the National Energy Board and Canadian Environmental Assessment Agency”, which was introduced in February 2018, serves as another challenge to pipeline development.

However, Natural Resources Canada (NRCan) defends the bill saying it puts strong rules in place to protect the environment, and provides greater clarity in how decisions on resource development are made.

Through these changes, the National Energy Board was replaced with the Canada Energy Regulator (CER).

“A key component of the CER’s mandate is to address process effectiveness and efficiency challenges of former regimes, as the energy industry’s success and prosperity demands a predictable process and timely decisions in a way that does not compromise public consultations, Indigenous reconciliation or environmental stewardship and sustainability,” points out Alycia Sevigny, NRCan spokesperson.

While some pipeline projects have not moved forward, others have. Within the last year, she cited, the government approved three federally regulated natural gas pipelines in Western Canada: Nova Gas Transmission’s (NGTL) system expansion project, including NGTL 2021, North Corridor, and Edson Mainline.

Geography of this massive country presents an expensive proposition in building a west-east oil pipeline; however Ontario and Quebec already source oil from Western Canada, primarily via existing pipelines such as Enbridge’s Lines 3, 5, 78 and 9.

“At the heart of the environmental movement on climate is that there is no accommodation for fossil fuels,” clarifies McConaghy. “In the world of Alberta, stifling pipelines became a way of stifling production.”

Meantime, producers have increasingly turned to rail as an alternative transportation method, which has spurred near pre-COVID levels of production.

While some pipeline projects die, he recalls Trudeau stepping in to “save” the TransMountain Expansion (TMX) project citing the valuable economic contribution and job-creation opportunities. Trudeau also committed its earnings to furthering his carbon policy.

The $4.5 billion sale in 2018 was through the Trans Mountain Corporation, a subsidiary of the Canada Development Investment Corporation, a Crown corporation.

“He far too glibly appropriates zero net emissions without any regard to how much it’s going to cost this country to come anywhere close to that,” McConaghy points out.

By moving forward with the TMX, Sevigny argues, the government is protecting and creating thousands of jobs, diversifying markets, accelerating Canada’s clean energy transition, and opening up new avenues for Indigenous economic prosperity.

“This project will support higher prices and returns for Canadian resources through market diversification, and lower transportation costs for shippers.”

Plus, she said, the Trans Mountain Corporation has committed more than $1.6 billion over the life of the project for continued employment and training, commitments and procurement for Indigenous businesses. The federal government is also engaging Indigenous communities on further economic participation in the project.

Canada recognizes the importance of safe and efficient infrastructure to access existing, new and growing markets for Canada’s natural resources, including oil and gas pipelines.

Pipelines, said Sevigny, remain the safest, most efficient, and most cost-effective means for large-scale transportation of hydrocarbons, to which McConaghy readily agrees.

“Pipelines are demonstrably the safest way to move hydrocarbons. Everyone knows this. This isn’t even worth debating, but it gets debated as it’s all part of the desire to resist the projects.”

As Alberta’s Minister of Agriculture and Forestry Devin Dreeshen said in a statement earlier this year: “Just as grain should be on trains, oil should be in pipelines.”

After more than eight years of planning, engagement, regulatory review, legal challenge, and construction, a major piece of critical oil export infrastructure went into service on October 1.

Enbridge Inc. announced on September 29 its Line 3 Replacement Project was substantially complete and ready for service. 

This step marks the full replacement of the entire 1,765-kilometre-long pipeline from Edmonton, AB. to Superior, WI. With new state-of-the-art, thicker-walled pipe, its completion ensures a safe, reliable supply of North American crude oil to U.S. refineries, helping fuel the quality of life for millions of people.

“We are pleased that Line 3 is complete, and will soon deliver the low cost and reliable energy that people depend on every day,” said Al Monaco, Enbridge president and chief executive officer. “From Day 1, this project has been about modernizing our system, and improving safety and reliability for the benefit of communities, the environment, and our customers.”

Reclamation is complete along the 1,070-kilometre Canadian pipeline right-of-way.

First announced in 2014, construction of the $5.3-billion Canadian portion of the Line 3 Replacement Program was completed, and began commercial service in December 2019.

Following legal challenges by environmental groups and Indigenous communities, construction began in December 2020 on the 542-kilometre Minnesota portion of the project. Though the Minnesota Court of Appeals affirmed the approvals granted by regulators allowing the construction to begin, opponents could still appeal the decision.

The project was to replace aging infrastructure first built in the 1960s.

“Line 3 was developed and executed with the most state-of-the-art approach to design, construction and environmental management,” Monaco added in the September 29 announcement.

Enbridge boasts that from 2010 through 2019 inclusive, it transported more than 27.2 billion barrels of crude oil, with a safe delivery record of 99.99976% and a recognition it has to do better.  “The completion of Enbridge’s Line 3 replacement is a significant milestone for Alberta, Canada, and all of North America. It’s fantastic news for our province’s economic recovery,” said Alberta Premier Jason Kenney. “Line 3 is also a big part of Alberta’s Recovery Plan, a bold plan to diversify the economy and create jobs. Our government will continue to fight for all projects that help bring our oil to market because we owe it to Albertans to get full value for our resources.”

He added that Alberta has been, and will continue to be, a stable, secure and responsible energy supplier to the U.S., a relationship that is particularly important as our economies recover from the COVID-19 pandemic.

“We look forward to seeing the positive impact Line 3 has on this important industry and will continue to stand up for Alberta’s energy sector and all of its workers,” added Sonya Savage, Alberta’s minister of energy.

Enbridge acknowledges that many labour groups, including the International Union of Operating Engineers, Laborers’ International Union of North America, United Association of Plumbers and Pipefitters, and the International Brotherhood of Teamsters, and communities along the right-of-way made the successful completion of the project possible.

Additionally, over 1,500 Indigenous people worked on replacing Line 3 in the U.S. and Canada. Specifically, in Minnesota, where Native Americans made up seven per cent of the Line 3 workforce, over US$300 million went directly to Native-owned contractors, Indigenous community investments, and training and hiring Indigenous individuals. In total, the company invested CDN$750 million with Indigenous communities, individuals, and businesses.

To be respectful of tribal sovereignty throughout the project, 30 Indigenous communities participated in the consultation process with the U.S. Army Corps of Engineers in Minnesota. The project included a first-of-its-kind Tribal Cultural Resource Survey led by the Fond du Lac Band of Lake Superior Chippewa, which employed tribal cultural experts who walked the full route identifying and recording significant cultural resources to be avoided. Construction was completed under the supervision of tribal monitors with the authority to stop construction to ensure the protection of important cultural resources.

A line was drawn in the sand around the Line 5 controversy in early October as Canada invoked the 1977 Transit Pipelines Treaty.

The 1,000-kilometre pipeline owned by Enbridge Inc. moves up to 540,000 barrels of oil, and natural gas liquids daily from Wisconsin to Sarnia, ON., where it is shipped to other refineries in Ontario and Quebec.

It is also in the crosshairs of Michigan Governor Gretchen Whitmer who is concerned with what she calls the company’s “troubling environmental record.”

In November 2020, Whitmer and Department of Natural Resources Director Dan Eichinger notified Enbridge that the 1953 easement allowing it to operate dual pipelines in the Straits of Mackinac to transport petroleum and other products was being revoked and terminated. The notice required Enbridge to cease operations of the dual pipelines in the straits by May 12, 2021, allowing for an orderly transition that protects Michigan’s energy needs. 

She also wants the pipeline permanently decommissioned. 

They have also filed a motion to have the case moved back to state court from the federal court.

Michigan stopped participating in U.S. federal court-ordered mediation to settle the dispute in September.

“We have spoken with government officials on both sides of the border as the State of Michigan has let parties know it is not committed to further mediation,” explains Ryan Duffy, strategist, Enbridge corporate communications and media relations.

“Enbridge has continued to participate in the mediation process in good faith, and still is hopeful that a negotiated resolution will continue to provide consumers and industry in the region with safe, reliable energy, and advance the quick construction of the tunnel at the Straits of Mackinac.”

He is referring to the $500 million Great Lakes Tunnel to be built under the straits. According to Enbridge, it reached an agreement with the Mackinac Straits Corridor on the future of Line 5 at the straits in December 2018. The tunnel is to be bored through rock as much as 100 feet below the lakebed and is pending receipt of necessary permits and approvals.

Whitmer has publicly called the dual pipeline a “ticking time bomb that could lead to an oil spill in the Great Lakes, which would put families and small businesses across the region at risk.”

Duffy, however, maintains, Line 5 has operated safely for more than 68 years in the straits providing the Midwest and the Great Lakes Region with a much-needed source of energy. To have that threatened by a single governmental entity creates concerns about energy security as winter approaches, and the economy as the region looks to re-emerge from the pandemic.

“I am profoundly disappointed that today the Government of Canada chose to invoke Article IX of the 1977 Transit Pipelines Treaty in a bid to help Enbridge, a private oil company, keep crude oil running indefinitely through Michigan’s Straits of Mackinac,” said Whitmer in a statement released October 4. “So long as oil is flowing through the pipelines, there is a very real threat of a catastrophic oil spill in the Great Lakes. I have made it clear to Enbridge that it cannot use our state-owned lakebed for these pipelines, but Enbridge has refused to stop. Moreover, rather than taking steps to diversify energy supply and ensure resilience, Canada has channelled its efforts into defending an oil company with an abysmal environmental track record.”

While she acknowledged that Michigan is, and will remain, a strong partner with Canada on a range of issues, she will not remain silent when the fate of the Great Lakes and Michigan hangs in the balance. The straits connect Lake Michigan and Lake Huron.

“I had expected that Canada, a nation that prides itself on its commitment to environmental protection, would share my interest in protecting the Great Lakes.”

Instead, she added, it has sided with the oil company responsible for the 2010 Kalamazoo River oil spill in Michigan, one of the largest inland oil spills in the nation’s history.

“I remain confident that Michigan will prevail in its legal efforts with respect to Line 5, regardless of today’s action, and I will continue to fight to get the pipelines out of the water. I call on Prime Minister Trudeau to reverse his decision.”

Duffy notes Enbridge has invested more than $100 million on safety enhancements to Line 5, and to better assure the safety of the dual pipelines in the straits until the tunnel is built. The straits’ current safety measures include Enbridge’s Straits Maritime Operations Center, electronic messaging to large vessels, and fixed cameras monitoring vessel traffic.

The Canadian government has also asked the court to hold its proceedings in abeyance while the treaty process is ongoing. The first step in this process is formal negotiations, which Canada has now requested.

“We previously voiced our support for this strong action, and we are pleased the federal government has listened, and followed through,” stated Alberta Premier Jason Kenney. “The shutdown of a safely operating pipeline could potentially set a dangerous precedent for future infrastructure projects. This cannot be allowed to happen. As we continue to manage the devastating impact of the COVID-19 global recession, it’s more important now than ever that Canada and the U.S. work together to support a continental energy strategy.”

Line 5 delivers 65% of the propane that heats Upper Peninsula homes, and 55% of Michigan’s propane needs.

In her statement, Whitmer said she and the Michigan Public Service Commission launched the MI Propane Security Plan to protect jobs, and diversify and expand the state’s renewable energy resources to ensure Michigan’s energy needs are met. Her administration has been preparing for potential alternatives to ensure energy security for both of Michigan’s peninsulas in the event of a Line 5 closure since early in 2019. 

“The continued operation of Line 5 is non-negotiable because it is a major piece of North America’s integrated energy system,” added Sonya Savage, Alberta’s minister of energy, in Kenney’s press release.

More importantly, she noted, thousands of families and businesses on both sides of the border rely on Line 5. It supplies energy to heat homes in Michigan’s Upper Peninsula, while also providing neighbouring states, Ontario and Quebec with reliable, safe energy.

“We greatly appreciate the efforts of ‘Team Canada,’ from the Government of Canada to the provinces of Ontario, Quebec, Alberta, and Saskatchewan for their commitments, and efforts to keep Line 5 open, which is a critical source of energy for the Great Lakes region on both sides of the Canadian-U.S. border,” added Duffy.

“We also greatly appreciate their desire to advance the timely construction of the Great Lakes Tunnel Project.”

Contributor | + posts

Carol Christian loves to write and tell people’s stories. She is a former journalist with a few awards, but no Pulitzer…yet…and loves being behind the camera catching awesome smiles and beautiful landscapes. 

She is a strong believer in teamwork and helping others, and lives by the Golden Rule. Always engaged with her community, Carol is a long-time volunteer who always gives back. She thoroughly enjoys the outdoors, and all the pursuits that go with it … hiking, camping, and kayaking, and so on.

Carol is a human slave to two furry felines, believes music and books are amazing. 

With a love of exploring, travelling is a big part of her life… and why her credit cards are always maxed out.

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