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Even if you don’t build pipelines, they will come

A ship receives its load of oil from the Kinder Morgan Trans Mountain Expansion Project's Westeridge loading dock in Burnaby, British Columbia, June 4, 2015.

JONATHAN HAYWARD/THE CANADIAN PRESS

We all ponder existence once in a while.

Over the past four years in this space, I've devoted thousands of words to things that don't exist.

A recurring theme has been Canada's obsession with oil and gas pipelines, a love-hate relationship that elicits the most extreme emotions. Each pipeline has its own objective, whether it's to reach previously inaccessible markets, expand existing ones or improve prices for the energy that would flow through it. It's about nation-building, supporters say.

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Each also faces its own opponents, who have their reasons: worsening climate change or bringing the threat of oil spills or infringing on First Nations land rights. A right of way to the dirty, old economy, according to detractors.

But the vast majority of the pipelines we've agonized over have one glaring commonality: non-existence.

As a nation, we argue incessantly, not about pipelines but about pipeline ideas. Some Canadians, and people outside the country, now wonder if the country's energy industry and political leaders have the wherewithal to deal with environmental concerns, live up to constitutional requirements and offer a strong enough economic case to actually build one of many multibillion-dollar proposals that have been studied for so long.

Over the past 20 months alone, non-existent pipelines have cost more than $3.8-billion – accounting for impairment charges to the earnings of the companies that have proposed them and actual dollars spent.

The United States has also had its share of controversy surrounding pipelines. But in this country, we set the standard.

This column began in 2013 in a very different political and diplomatic world, questioning why the former Conservative government of prime minister Stephen Harper had been expending public resources to help TransCanada Corp. sell the Keystone XL pipeline in president Barack Obama's Washington. The proposal had already been five years in the U.S. study stage, but it was on its way to eventual rejection by Mr. Obama. He said it did not reflect U.S. efforts in the battle against climate change.

With the election of President Donald Trump, the $8-billion project got a new lease on life. However, it still faces a backlash among landowners along the proposed route in Nebraska. The current view is that the ground is fertile for approval, but it has been before.

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While the politics of Keystone XL dragged on, TransCanada launched the $15.7-billion Energy East pipeline to Atlantic Canada from Alberta. The idea was to get oil sands-derived crude to the massive Irving Oil refinery in New Brunswick and on to tankers for export. It was met with opposition from environmental groups and First Nations communities.

It was a National Energy Board screw-up that pushed the Energy East application off the road, when regulatory panel members recused themselves after revelations that two of them had a private meeting last year with former Quebec premier Jean Charest, who at the time was a paid consultant to TransCanada. A new panel is weighing the project, having started the process again, but the market may well be moving on, especially if Keystone XL becomes a reality.

Enbridge Inc.'s Northern Gateway line to the Pacific became a flashpoint after another line run by the company leaked heavy oil into the Kalamazoo River in Michigan, prompting a cleanup that cost more than $1.2-billion. Enbridge struggled to sign up British Columbia First Nations, despite a conditional green light from the NEB and the federal cabinet. In the end, Prime Minister Justin Trudeau gave it a thumbs-down , saying the northern coast was no place for oil tankers.

But he approved Kinder Morgan Canada's $7.4-billion Trans Mountain pipeline expansion. The nod pleased the energy industry and Alberta Premier Rachel Notley, but since then B.C.'s new NDP government has come out against the project. It is seeking to join Indigenous groups, environmentalists and municipal governments in a federal court action against the expansion. Hence, construction is not assured.

TransCanada aimed to build a pipeline to Prince Rupert to supply a massive liquefied natural gas facility planned by Petronas, the Malaysian state oil company. It was scrapped last month when Petronas cancelled the LNG plant.

The only major projects to proceed over the past couple of years are those that previously existed: Enbridge's Line 3 to the U.S. Midwest, a replacement project that has just started, and its Line 9 between Sarnia, Ont., and Montreal, a reversal in the direction of the flow. Even then, there was lengthy argument.

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Investment types say attracting capital to Canada's energy industry has been a tough slog as commodity prices have languished and quicker payouts have been possible in U.S. shale oil deposits. Indeed, there's been an exodus of global energy companies from Western Canada of late. The discussion inevitably turns to questions about whether the industry can build the infrastructure it desires before market conditions shift, rendering projects useless.

John Lennon would hate being paraphrased like this, but in Canada, life is what happens to you when you're busy debating pipelines.

Editor's note: This is Jeffrey Jones's last entry as western business columnist. In September, he begins a new assignment covering mergers, acquisitions and private equity for The Globe and Mail.

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About the Author
Mergers and Acquisitions Reporter

Jeffrey Jones is a veteran journalist specializing in energy, finance and environment for The Globe and Mail’s Report on Business, based in Calgary. Before joining The Globe and Mail in 2013, he was a senior reporter for Reuters, writing news, features and analysis on energy deals, pipelines, politics and general  topics. More

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