With little possibility for additional western and southern pipeline expansion, some in the Canadian oil industry, as well as economists and commentators, are once again looking to eastern Canada. This post looks at the prospects for new pipeline projects in Québec.
For and Against
Recently the Montreal Economic Institute, a centre-right think tank, published a piece advocating a rethink of Canada's pipeline strategy by emphasizing the role of new pipelines, considered the greenest and safest way to transport oil.
The economic case for increasing oil exports from Canada is compelling when viewed in a global context. World oil consumption is expected to grow for a few more decades before eventually diminishing, leaving much of the world reserves stranded and much reduced in value. There is also the national security case for reducing imports from the U.S. Recent history has shown that the U.S., when confronted with an emergency, will typically prefer a national over a North American approach.
However, when viewed from a Québec standpoint, the case for increased pipeline capacity and oil exports remains largely unsympathetic. In 2014, the Québec government identified seven conditions for pipeline expansions in Québec (listed at the link). While it has been only seven years since Québec clarified its conditions, the position of the Québec government on this matter has since likely hardened against eastern pipeline expansion – at least in part for the following reasons:
Québec's "green" image
The Québec government is building its economy on the bedrock of renewable electricity and wants to reduce oil consumption in Québec. Expanding oil pipelines would send the wrong message at a time when Québec is trying to build a "green" economy.
Environment
There is a broad consensus among Québec voters regarding the need to protect Québec's large water resources, including the St. Lawrence River. The idea of new pipelines crossing waterways and increased tanker traffic is highly unpopular and would be a very difficult political sell for Québec provincial and federal politicians.
Economic prospects
The Québec economy is diversified and doing relatively well. Québec believes that it has many avenues along which to continue expanding its economy and greater reliance on fossil fuels is not one of them. The muted provincial and regional support afforded to Énergie Saguenay's LNG (liquefied natural gas) export terminal and pipeline project is instructive in this regard.
Disruption: Potential Impact on Québec's Position
So: short of disruption in the current supply system, the likelihood of Québec voters accepting oil pipeline expansion over their province is slim.
But disruptions may occur. Enbridge's Line 5 oil pipeline, which supplies Ontario and Québec, crosses the Straits of Mackinac in Michigan, connecting Lake Michigan and Lake Huron. Michigan's governor wants to terminate Enbridge's right of way for environmental reasons. Enbridge and others are contesting the matter. Should Michigan be successful, Québec and Ontario would have to find new supply routes. The existing pipelines from the West being full, oil would have to come by rail from the West or imported by ship. This would mean a sharp increase in tanker traffic on the St. Lawrence, as it is unlikely that the unused Portland to Montreal pipeline with a capacity of slightly over 200,000 bpd (barrels per day) could swing back into action as Portland (and other cities), NGOs, and individuals are against any future use of the pipeline, regardless if it is used to bring oil to Québec or export oil from Canada.
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