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OTTAWA – The tariff war with the United States could have been very different if Canada had decided to build the Energy East and LNG Quebec pipelines over the past decade, according to a new study by the Montreal Economic Institute.
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Both pipelines could have redirected $38.4 billion worth of energy products per year to markets other than the United States and the institute argues that the construction of pipelines between Eastern and Western Canada “would have helped diversify Canadian export markets” significantly.
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In 2023, Canada exported 97 per cent of its crude oil to the United States.
“Canada’s high level of dependence on U.S. trade is not unavoidable. It is the direct result of years of policy decisions that have delayed or actively impeded major infrastructure projects,” said Gabriel Giguère, senior policy analyst and author of the report at MEI.
Giguère noted in his study that based on its transport capacity of 1.1 million barrels per day, commissioning of the pipeline Energy East could have diverted 27.7 per cent of Canadian oil exports from the United States to Europe, an amount worth $36.7 billion per year.
Energy East, a 4,500 km pipeline from Alberta to the Irving refinery in New Brunswick, was proposed in 2013 by TransCanada (TC Energy) and abandoned in 2017 due to regulatory hurdles in Canada and strong opposition from environmental groups. The project was estimated at over $15 billion at the time.
It was expected to be operational by 2021. The revival of the project has not yet been announced. In fact, TC Energy doesn’t even build pipelines for heavy crude oil anymore, having moved its heavy oil operations to South Bow.
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In an interview with the National Post, the chairman of Strathcona Resources said that moving crude oil from Alberta to New Brunswick is not an easy task.
“There would have to be, not only pipelines built to the east, but there would have to be refining capacity configured to be able to receive heavy crudes,” said Adam Waterous.
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Energy East was also unpopular in Quebec at the time. The provincial government never signed on to it because it saw few benefits and the pipeline route would have to cross several rivers, which raised concerns among Quebecers.
Another project, GNL Québec, was blocked by the Quebec government due to environmental concerns in 2021. The project was a $14-billion pipeline with a terminal in Saguenay-Lac-Saint-Jean.
Based on its transport capacity of 46 million cubic meters of gas per day, its implementation could have diverted 19 per cent of Canadian gas exports to Europe, representing $1.7 billion worth of goods per year.
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According to a recent poll, both projects now receive a tremendous amount of support from Quebecers and both Liberals and Conservatives support pipeline construction in the context of a trade war with the United States.
Former Prime Minister Stephen Harper recently said that Canada should immediately build a pipeline “in the east so we can supply our own country with energy.” Mr. Harper was speaking Tuesday during a panel on energy at the Raisina Dialogue, India’s largest geopolitical conference.
However, the costs of building such infrastructures have risen considerably.
“The cost to build the infrastructure is what drives the competitiveness of the product in each market. Going west is a quarter the distance of going east, therefore going west will always be more cost competitive than going east,” said TC Energy’s CEO François Poirier in an interview with the National Post.
“And so that is where I think as a nation, in terms of diversifying our markets, both in crude oil and natural gas, we need to be looking west,” he added.
National Post, with additional reporting from Rahim Mohamed and Christopher Nardi
atrepanier@postmedia.com
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