Canadian federal cabinet minister Joe Oliver is pointing to the Mackenzie Gas Project as the worst-case example of how badly things can turn out in Canada for energy megaprojects.
The natural resources minister said the failed attempt to start shipping gas from the Canadian Arctic to southern markets is a clear warning that resource projects can easily die on the shelf.
In a speech to provincial and territorial energy ministers in Yellowknife, Northwest Territories, Oliver said the proponents — operator Imperial Oil, ExxonMobil, Shell Canada and ConocoPhillips — have abandoned their plans to ship up to 1.8 billion cubic feet per day from the Mackenzie Delta, even though the consortium has yet to officially cancel the project.
But Oliver said opposition to the MGP, which was reborn in the late 1990s and submitted to regulators in 2004, is proof of what can happen.
He said the MGP represented a “tremendous opportunity for aboriginal partners, but the regulatory review took almost a decade to complete” — a period when the shale gas boom in North America overpowered a C$16 billion project that was already faced with shaky economics.
“By the time (the regulatory phase was completed), the opportunity had passed, (resulting in) an irretrievable loss for an entire generation,” he said.
Pivotal moment
Oliver warned that Canada is now faced with a “pivotal moment when we decide whether to take advantage of an enormous opportunity to supply burgeoning (oil and LNG) markets in the Asia-Pacific region and elsewhere, or let it pass us by.”
At stake are C$650 billion in resource projects over the next decade that could create 1.8 million jobs and boost the Canadian economy by 18 percent, while exports of oil, gas and minerals could feed C$30 billion a year into government coffers, he said.
“It is a strategic imperative to diversify our export markets, since virtually all of Canada’s oil and gas exports go to the United States, whose recent discoveries mean it will need Canadian resources less in the future,” Oliver said.
“A pre-condition of diversification is the construction of infrastructure to bring those resources to tidewater.”
He said Canada is well positioned to play a role in meeting the expected 35 percent increase in global energy demand from 2010 to 2035.
Oliver said the Canadian government is also putting in place building blocks to meet the legitimate concerns of Canadians over the environmental impact and the safety risks of advancing export projects and ensure that projects go ahead with a “social license.”
Pipelines in holding pattern
The worry for governments and industry is that a host of oil sands and conventional crude pipelines out of Western Canada are in a holding pattern.
He made special mention of the push by Enbridge (through its Line 9 reversal) and TransCanada (through its Energy East project) to deliver crude from Western Canada to refineries in Ontario, Quebec and Atlantic Canada.
“These are important initiatives that, subject to regulatory approval, would enhance Canadian energy independence, create jobs and reach international markets,” Oliver said.
“At the same time, we are hearing objections from those who see resource development and responsible environmental stewardship as an either/or zero-sum game,” he said.
“Let me be clear, I am not talking about the many Canadians, including our aboriginal peoples, who have legitimate concerns about environmental safety and are open to fact- and science-based discussions.
“My objection is to those who oppose virtually every form of resource development, whose opinions are not based on facts and whose vision is simply too limited.”
He said Canada has a chance to turn its opportunities into “decades of prosperity.”
Glimmer of hope
A glimmer of hope for his position came from an unlikely source, when Quebec Premier Pauline Marois defended Enbridge’s Line 9 plan which would serve refineries in her province.
For the first time, she echoed one of the strongest arguments in support of Line 9 and Energy East, saying the Enbridge project “would supply our refineries at a better price that what we pay for oil from Algeria, northern Europe and other places.”
Marois said Quebec is about to start a formal examination of Line 9, which currently delivers imported Middle Eastern and African crude from Montreal to a refinery at Sarnia, Ontario, and determine whether the project is in the interest of Quebecers or too big of a risk.
She insisted her government caucus is solidly behind the proposal despite intense opposition from environmentalists, who are determined to block shipments of crude from the Alberta oil sands.
Marois has also agreed to weigh the benefits and environmental risks of piping Alberta crude by the Energy East pipeline across Quebec to Atlantic Canada.
