Financial Post: Resource riches pull Canada into geopolitical battle it can’t afford to lose
An ocean of natural gas and oil surrounds tiny Inuvik in the Northwest Territories, but this summer officials had to truck in propane from Alberta because the village’s only producing natural gas well is running out.
The economic potential of the region’s energy resources could fizzle long before the drill bits hit rock, industry players warn, amid regulatory snafus and competition from shale plays located closer to consumers and infrastructure in southern markets.
Inuvik’s Mayor quipped to a Post colleague: “It’s like me ordering up a truckload of ice from Alberta.”
While a zany story, Inuvik’s untapped resources, and non-existent infrastructure to develop or deliver them, is becoming a metaphor for Canada itself. This is a country with energy, metals and minerals galore, that the world wants, but a country that cannot get its act together.
The latest, most egregious example of this problem revolves around the lack of strategy, politics and recurring media flashpoints concerning pipelines and, to a lesser extent, power generation infrastructure.
The anti-infrastructure forces are so out of control that recently dozens of people in Ontario and Quebec were arrested protesting pipeline projects: Not new pipelines but pipelines that have been in operation for decades and merely want to reverse direction.
The Pipeline Bogeyman is the New Baby Seal Hunt – a cause celebre for environmentalists and their fellow travelers as varied as meddling movie stars or Middle Eastern oil sheikhdoms that finance anti-development, anti-fracking, anti-oil sands efforts.
My favorite example of the hidden and cynical geopolitical forces aimed at stifling Canada’s economic development was the cinematic flop against natural gas fracking called “Promised Land” starring Matt Damon and financed by Abu Dhabi, the world’s third biggest oil exporter.
The point is that Canada is a geopolitical battleground and it’s a nation-threatening battle. If pipelines or power plants cannot be built – the bloodstream of the energy industry that underpins our living standards – the body itself will whither.
Here are three pipeline battles that must be won and the geopolitics behind each one:
1. Two pipeline proposals through British Columbia for export to Asia carrying up to 800,000 barrels per day. These projects are not the problem but the symptom of the fact that federal and provincial governments have never solved the First Nations land claims issues. Only a handful of treaties in that province have been settled and dozens have languished in courts as the feds and province do nothing substantive.
Unless the First Nations issues are settled there, Alberta’s oil sands will be blocked for years from moving westward, possibly forever.
The only solution is conciliation and fast-tracking land claims then giving First nations a piece of the action along with B.C. taxpayers.
2. Keystone XL from Alberta to the U.S. Gulf coast, up to 800,000 barrels per day. This pipeline has become the whipping boy for environmentalists and their allies south of the border but there is another geopolitical reason why it’s not been allowed and remains in limbo.
Keystone distracts the environmental movement from fracking, and masks the fact that the President and the Democrats are facilitating the aggressive move to become energy independent through fracking.
The geopolitical objective for the United States is to withdraw from the Middle East, economically and militarily.
Unless Canada comes up with a face-saving set of conciliations on emissions or on unrelated issues, Keystone will just dangle there for months longer. It keeps environmentalists busy, makes the Democrats look green and is a bargaining chip to extract cooperation from Canada in a number of other, border-related issues.
3. Energy East, a proposal to convert natural gas pipelines from Alberta to oil lines and extend them to New Brunswick, up to 800,000 barrels of oil per day. This is of strategic importance to Canada and deserves top priority.
This is because an oil pipeline to the Atlantic will replace oil imports into Eastern Canada with Alberta crude oil, removing Canada’s dependence on the Middle East.
Canada’s Eastern region is a huge oil importer (roughly 723,000 barrels per day in 2012, half from OPEC). As the Americans get out of the Middle East, those still dependent upon it for oil supplies will face security of supply and price stability problems in future.
As pipelines face increasing opposition, railways are going to have to pick up the slack despite the Lac-Megantic tragedy this summer when a runaway train destroyed a village and killed 47 people.
Estimates are that by 2015, railcars from Edmonton will be shipping the equivalent of the Keystone XL pipeline capacity to many markets or nearly 800,000 barrels a day.
Lastly, one of the best pipeline projects might be the old Mackenzie Valley Gas Pipeline easement that could carry oil to markets via the Beaufort Sea.
This appears to be more possible since a major discovery of tight oil near Norman Wells. Some estimate 3 billion barrels are there, just 400 miles south of Inuvik. And there’s already a seaport in nearby Tuktoyaktuk that could be built into a major shipping point.
These are the issues that governments across this country should be seized with, not fooling around with gender references in the national anthem or whether Justin Trudeau should retract the fact that he smoked marijuana.
Pipelines are Canada’s biggest challenge, as important as the building of the Canadian Pacific Railway in the 19th century to creating a viable economy.
Ironically, the easiest pipeline project could be the northerly one along the Mackenzie Valley. If so, then tiny Inuvik will not only become energy self sufficient but be able to take its place with Norway, Russia and Alaska by developing its arctic endowment.