Keystone or Bust

There are several reasons why I’m going on about Keystone this issue. One, it is very important to Canada. Two, it has been subject to a huge misinformation campaign and blatantly incorrect statements (some by Obama himself). Three, because we are struggling internally with several important pipeline projects. And fourth, because Keystone’s fate can impact Canada/U.S. relations for years to come.

As most everyone understands, Canada’s Alberta-based energy riches are dependent on transportation infrastructure growth commensurate with the growth in production. Currently, everything we are producing is finding its way to market, but not as efficiently or safely as possible. The efficiency problem means extra costs to our producers and this translates into lost revenue for them and the various levels of government which collect taxes and royalties. Remember, it’s the hugely important energy sector that has been responsible for the majority of economic growth in this country since the 2008/09 recession. Current oil prices, while delightful to consumers everywhere, require the industry to become more focused on finding more efficient ways to transport their product to markets.

The misinformation about Keystone is so widespread that it’s difficult to know where to start. Let’s begin with the president’s assertion that this is all about Canada and that all the oil is only going to the Gulf Coast so it can be immediately exported. He’s wrong on both counts. Many of the Alberta-based producers are U.S.- owned (e.g. Imperial Oil) and all have a significant number of American shareholders (Suncor’s largest is Berkshire Hathaway). As the pipeline winds its way to the Gulf Coast, it will collect a significant amount of Bakken production in North Dakota. When it finally arrives on the coast, it will be refined by the companies there whose infrastructure is suited to heavy oil. Then, Alberta and Bakken oil will replace similarly heavy oil coming mostly from Venezuela. Thanks to the incompetence of successive political regimes there and the nationalization of everything in sight, production in Venezuela has been falling dramatically (yes, in the country with the world’s largest oil reserves). Not only do the U.S. refiners want to become less dependent on Venezuelan crude, but you would have thought Canada would be perceived by the White House as a better ally.

Some other very relevant points: Canada and Alberta have pretty strict environmental controls, such that the industry has spent heavily on reducing both its carbon footprint and its environmental impact. How much money do you think Venezuela has spent in this regard? And oh yes, where is the most carbon intensive oil production currently resident in North America? In Nancy Pelosi’s backyard — the Belridge field in California. As for the concerns about Keystone running over the top of the huge aquifer in Nebraska? There are already 40,000 km of pipeline running over the same aquifer and some of it more than 50 years old. You can imagine the difference in safety and security with the advances in sensing equipment, automatic shut-off valves and better construction techniques. The President’s concern over the environmental impact of any pipeline is admirable, but no mention is made of the thousands of miles of pipeline approved by U.S. regulators since the Keystone application was first made.

We Canadians are guilty of our own hypocrisy. While lobbying for U.S. approval of Keystone, we are trying desperately to win internal consent for pipelines to both our coasts. This infrastructure is vital to the growth of our energy sector and to reducing our dependence on the U.S. market. Any pipeline construction must be environmentally responsible and respect the rights of our First Nations people. But those rights and that respect should not give any native group the privilege of blocking a national imperative. Fair compensation is one thing, veto rights are another. Frankly, I find it offensive to suggest that a buried pipeline can be unduly threatening to any reasonably minded person — or animal for that matter.

Sometimes I wish Canada wasn’t so … Canadian. Yes, we should continue to listen, be respectful and accommodating, but not to the point where we are incapable of proceeding in a responsible manner.

As for the future of Canada/U.S. relations, perhaps there won’t be any lasting impact from the president playing politics with Keystone. Bill Clinton told me that he thought it was all nonsense and the pipeline should be approved. Let’s hope he has his wife’s ear. Warren Buffett in a recent interview also said it should be approved, for fear that failure to do so might discourage Canada from helping the U.S. at some future time — presumably when California runs out of water. But no, we’re Canadian, we wouldn’t do that. Or would we?

John Risley
About John Risley

John Risley, president of Clearwater Fine Foods Inc., regularly engages in policy debate as a member of the World Presidents' Organization, the Chief Executives Organization and as a director on the Board of the Canadian Council of Chief Executives.

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