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article imageOp-Ed: Canada's national energy strategy: Alberta oil to east coast

By Karl Gotthardt     Feb 3, 2013 in Environment
Edmonton - With the XL Keystone and Northern Gateway pipelines in limbo, Alberta's Premier Alison Redford is looking at markets in Central and Atlantic Canada. In an effort to market Alberta oil, Redford is developing a national energy strategy.
Blaming declining oil revenues, Alberta's Premier Alison Redford is focusing on markets in eastern Canada and hoping to develop a National Energy Strategy (NES) in conjunction with Canada's first ministers.
With a glut of conventional crude from the US and middle east markets, Alberta bitumen oil is valued at approximately $40 less per barrel. To expand development of the Alberta oil sands, a method to bring Alberta oil to markets is an urgent requirement.
According to the Global News, the perfect storm for Alberta's oil industry is the nixing of the XL Keystone pipeline, which would move Alberta crude to US refineries, and the delay in building the Northern Gateway Pipeline to Canada's west coast.
For Alberta's oil industry, here's the perfect storm. The Obama administration nixes the proposed Keystone pipeline south to the U.S. Gulf Coast after the 2012 elections and the Gateway pipeline to the West Coast gets bogged down for years in messy hearings.
How then does all the oilsands bitumen get to market?Look East, say some high-profile public policy experts. Sending more Alberta crude to eastern refineries, then shipping it across the Atlantic - where there is already lots of tanker traffic - could mean better prices for the product. From the East Coast, tankers could carry the oil to booming Asian markets through the Panama Canal.
In what Redford depicts as a conversation with Albertans, she announced that Alberta is facing a $6 billion shortfall, approximately $75 million a day, which is causing her government to make some difficult decisions to bring spending in line. Targets for her $3 billion deficit reduction could be physician salaries, a provincial sales tax, and cuts to government programs. Redford says she is committed to families and communities. Part of resolving the financial woes is to take on additional debt, disguised in the form of bonds.
Faced with a $6 billion oil and gas revenue shortfall, Redford started, according to her, a conversation with Albertans, and held a town hall teleconference with Tory supporters. She floated a sales tax, health care premiums and bonds for new revenue.
Reality is trumping fantasy in Alberta. Premier Alison Redford is facing the reality of a real revenue flow and fabricated overestimated revenues, based on unrealistic high oil prices. Anyone who knows the volatility of global oil prices could see the writing on the wall. In her quest for the most powerful position in Alberta, Redford passed a pre-election budget, which counted on a revenue flow of $40.3 billion, of which 27.8% was based on oil and gas royalties.
It should be no surprise then that Redford is trying to convince premiers across Canada to sanction a proposed national energy strategy, which would use existing pipelines to deliver Alberta oil to refineries in Atlantic Canada. During a first minister's conference in Halifax in November, Redford engaged in talks with Canada's premiers to help support her strategy.
Redford, during the summit, met for the first time with Quebec's Premier Pauline Marois, and agreed to form a joint working group to explore the idea of moving Alberta’s oil east to Quebec.
Although, Ms. Marois made it clear this was strictly a deal between her province and Alberta, other premiers, like Manitoba’s Greg Selinger, are viewing it differently.
“It’s part of a national strategy,” Mr. Selinger told The Globe and Mail as the meeting wrapped up Friday. “I think we have greater energy security in Canada by having a pipeline in Canada that goes to the east coast.”
New Brunswick’s David Alward has been meeting for several months with Ms. Redford about the idea of bringing Alberta’s heavy oil to the Irving refinery in Saint John. He told reporters he spoke to Ms. Marois “about the importance we believe this resource could bring to all of Canada.”
Ms. Redford noted that her discussions with Ms. Marois were not “exclusive.”
“The opportunity to work with any province ... is something that we welcome,” she said. “I see this as another component in the development of a longer-term plan that very easily involves everyone.”
The federal government also supports two projects, which would transport Alberta oil to Atlantic Canada. Natural Resources Minister Joe Oliver said that he has given a tentative nod to a proposal during a meeting with Iriving Oil in New Brunswick (NB).
"I met with Arthur Irving (Irving Oil's chairman) and expressed the support of the government of Canada, in principle, for this initiative," Oliver said.
Irving Oil operates a refinery in Saint John, with a current capacity of 300,000 barrels a day. In the current proposal TransCanada Corps wants to convert a current underused natural gas pipeline and convert it to deliver oil from Western Canada to Quebec and New Brunswick.
Oliver said that both TransCanada and Irving Oil have built a solid case for their proposal and that the federal government supports the plan. Final approval would have to come from Canada's National Energy Board.
Western oil producers are enthusiastic about the proposal, since it would deliver oil to markets that pay world prices, New Brunswick Premier David Alward has endorsed the $5 billion pipeline plan and will be traveling to Alberta next month to meet with Alison Redford.
Quebec's Premier Pauline Marois is open to the idea, but environmentalist are providing push back on the idea. From their prospective, reversal of Enbridge's line 9 and the conversion of the TransCanada line would only open a way to transport, in their words, Alberta dirty oil to eastern markets.
The situation for Alberta bitumen based oil is not likely to improve, without a means to get oil to markets. The US, according to SUN News is projecting vast increases in production from the Dakotas' Bakken formation. That will result in a lower demand for Alberta's oil and thus makes approval of projects to eastern markets a necessity.
Redford seems to have been able to get the Premier of Manitoba and New Brunswick on side for a national energy strategy. She met with Ontario;s Premier Kathleen Wynne last week and Quebec's Premier Pauline Marois is open to the idea.
With the support of the federal government and no major impact on the environment, due to existing pipelines, it will be up to the National Energy Board to approve the project. While this may not be as sensitive and issue as the Northern Gateway or XL Keystone pipeline, make no mistake that environmentalists will do whatever they can to block any further development of the Alberta oilsands.
This opinion article was written by an independent writer. The opinions and views expressed herein are those of the author and are not necessarily intended to reflect those of
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