By Murray Hidlebaugh, SES Board Member
The public arguments used by the proponents of the Gateway are that the pipeline will reduce Canada’s dependency on the market to the States. It will enable Canadian producers to ship 500 thousand b/d to China at a higher price than the Americans pay. And it will have tremendous economic value and minimal environmental impact. These arguments have three significant limitations. One is the conditions of the North American Free Trade Agreement (NAFTA). The second is the total amount of Canadian oil available now and in to the future. The third is the long term economic benefit and cost of the development and operation of the pipeline.
Firstly, Canada only produces enough oil to meet current its current obligations under the NAFTA (Chp. 6, Art. 605) of 2.1 million b/d to the States for the next 3 years. A summary of Canada’s total oil production from all sources for 2011 was 2.9 million b/d. 1.6 million b/d was produced from the oil sands. Canadian domestic use is about 500 thousand b/d and growing as our economy grows. At the same time Canada’s conventional oil production (sources other than oil sands) is declining by about 10% to 15% per year. This means that at 2011 rates we have an export surplus for oil of about 300 thousand b/d. Any projected surplus is based on the assumption that United States oil demands won’t increase and that Canadian supplies will.
Secondly, there is no credible evidence that the production in the oil sands will be able to be increased to make up for the energy short fall that is expected to continue to occur in conventional production. This means that there would be about 300 thousand b/d of oil available for export to China. So unless the Canadian government intends to rescind the NAFTA, the argument that Canada will cut off exports to the States and export 500 thousand b/d to China is simply not credible.
Thirdly, the construction of a pipeline benefits very few people over a very short period of time. On the other hand a pipeline, like any other mechanical device, will break down. It’s just a matter of when. So the risk of an oil spill is not only foreseeable it is inevitable. The pipeline will just make it easier, cheaper, and safer to transfer oil through Canada then have it freighted to the under used refineries in California. This looks like Canadian long-term risk with American long-term benefit. And China is just a convenient diversion.
Please Note: This is a personal viewpoint and does not necessarily represent the views of ses.
