Maybe we shoulda fought for 54-40 ... stop the B.C. pipeline!

If North America is independent in crude oil production and crude exports are banned, then supply or demand shocks in the rest of the world will have no effect on U.S. prices. Prices will still be as high as they are now, but price volatility can be greatly reduced. Awesome!

Matt Yglesias, a smart guy, issued a really dumb tweet on this issue. He then blogged, “But unless you're planning to actually isolate North America from worldwide commodity markets, you're not ‘independent’ of anything.” Well, yes! Sweet Mary, why not isolate North America from worldwide commodity markets? Aaaarrrgh!!! Noooooo! The neoliberal brain eater gets another one! Expand your mind, Matt!

Still, there is a real rub. It is unlikely that North America will achieve oil independence without Canada, that poses a dilemma. Enbridge is trying to build the Northern Gateway pipeline from Alberta through British Columbia. Build that pipeline, and North America will still be linked into global markets. The benefits from crude oil independence will be lost.

We have established that the President can stop hydrocarbon exports from the U.S. Unfortunately, because we totally lost the War of 1812 back in the day, the President cannot stop hydrocarbon exports from Canada. Does that mean that the battle is lost?

Nope. First, the pipeline runs through B.C., but the oil is produced in Alberta. B.C. is holding Alberta hostage for more money. The B.C. government can afford to walk away: the revenues from the deal as-is are that low.

Second, the First Nations are sitting in a catbird seat. The land law is a mess. Consultations could stretch on forever. Payoffs are tough, because there are around forty different groups.

Third, while Ottawa could step in, the federal incentives are not clear. Equalization payments do spread around some of the bounty of Albertan production, of course. But there is an alternative that would give Alberta a new market and let Canada enjoy the benefits of “isolation from worldwide commodity markets”: ship the stuff east! Right now, eastern Canada imports oil from Algeria and Venezuela, which is a little crazy when you think about it. Eastern Canada, then, is at best indifferent to Enbridge and at worst mildly hostile.

Finally, the New Democratic Party in B.C. has already gone all-in against the pipeline. It will be next to impossible to walk that back if the NDP wins, and why would they want to anyway? 56% of voters in B.C. oppose the pipeline, and the NDP looks set to kill the Liberals at the next provincial election.

(I have no idea if U.S. oil companies are trying to sabotage the pipeline. It would be in their interests, but it also might set a bad precedent for Keystone. I suspect not, therefore.)

In short ... this pipeline could very easily not happen. That is the way I would bet. Call it 2:1 odds. Answer your question, Bernard?

Comments

[Randy McDonald]

"[T]here is an alternative that would give Alberta a new market and let Canada enjoy the benefits of “isolation from worldwide commodity markets”: ship the stuff east! Right now, eastern Canada imports oil from Algeria and Venezuela, which is a little crazy when you think about it. Eastern Canada, then, is at best indifferent to Enbridge and at worst mildly hostile."

I don't think that option will work politically; the psychological aftermath of the National Energy Program in Alberta remains strong, continues to drive provincial policy, and isn't something that a governing federal Conservative Party deeply rooted in Alberta can afford to ignore. "Let those eastern bastards freeze in the dark" was a rather popular saying at the time.

Will Albertan desires to have secure foreign markets be overcome by appeals to Canadian unity and solidarity, never mind North American unity and solidarity? I doubt it. If you're hoping for the end of the Northern Gateway pipeline, it's better to hope for British Columban opposition and First Nations' land claims.

[Noel Maurer]

Let me be a little clearer. If going east isn't an option, then the federal government has incentives to step in and support Northern Gateway. (And federal help would matter a lot; not least in using eminent domain.) As it is, it doesn't --- it's strategy can be to sit it out an then, when the project collapses, build pipelines east.

It's hard for me to imagine the provincial stopping that, even if they could ... the oil companies would scream bloody murder.

I take your point, of course; what I don't see is Alberta credibly threatening "Northern Gateway or nothing!" Does the above miss something?

[Randy McDonald]

A new pipeline connecting Alberta to central Canada, or even the Maritimes? That is an option I've honestly not heard being mentioned at all. Quick reaction: getting the consent of multiple jurisdictions would be a significant challenge.

The federal government getting involved in British Columbia is much more likely.

[Noel Maurer]

I put in a link where I wrote "ship the stuff east." It isn't my idea! It's the Senate energy committee's idea. You can find the full report at: http://www.parl.gc.ca/Content/SEN/Committee/411/enev/rep/rep04jul12-e.pdf.

Legally, the federal government has the right to step in to build pipelines. Moreover, the eastbound right of way already exists until you hit the last miles to the Ontario and Quebec refineries. If Saskatchewan and Manitoba really hated it, I agree that the federal government probably wouldn't use its authority ... why do you think their governments would be opposed?

[Bernard Guerrero]

Seems like it would make more sense for Alberta to pay off BC to get the provincial government on-side. Why is this fairly straightforward option precluded, given the results keeping it all in NA would have on prices?

[Noel Maurer]

I defer to someone who knows more about Canadian politics for a real answer.

But if you want a guess, it's that Alberta's reservation price isn't that high. First, right now the price differentials between the U.S. and Asia aren't that big for the kind of heavy crud that Alberta produces. Second, they can always throw their support behind an eastern pipeline. (I assume here that it is really the oil companies and Enbridge that would make the offer to B.C., not the provincial government of Alberta.)

[Bernard Guerrero]

Second question (though again dealing with the Canadian politics of the situation): Why would the folks in BC have strong objections to an NG pipeline? Is this enviro driven? Because while I'm in favor of cheap energy or the U.S. (to the point where I'm almost on board with this otherwise dirigiste concept), I can see that this would have some ugly consequences for, say, renewables production.

[Noel Maurer]

Sorry about the delay, Bernard. AFAICT, the objection is environmental. Canadian oil sand production is particularly nasty stuff.