Why Canada needs west-to-east pipelines

Aug 07, 2015   | Categories: Economy, Energy, Fuels, Refineries

Western Canada produces the lion’s share of the country’s oil. Quebec and Atlantic Canada are home to a quarter of our refineries. The two sides, however, have no pipeline connection.

While pipelines have been making headlines for the last few years, it has not been widely understood until recently that these Eastern Canadian refineries have virtually no pipeline access to Western Canadian oil.

It’s an infrastructure problem that pipeline companies are trying to solve, to the benefit of the entire Canadian economy.

Among the biggest issues is that Eastern refineries outside Ontario are forced to rely  mainly on imported oil, largely shipped from the United States but sometimes from halfway around the world. Some crude oil from Canada’s east coast is also used as feedstock, but the majority is imported.

In fact, Canadian imports of American crude hit a new record of 573,400 barrels per day in May, according to Statistics Canada. Because American crude exports are heavily regulated, a large proportion comes to Canada and is returned to the U.S. as refined products.

Building or repurposing pipelines to carry oil from west to east would solve many problems. It would create efficiencies on both sides of the country, while strengthening the competitiveness of Eastern refineries.

West-to-east pipeline projects under review

Eastern Canada has four refineries beyond Ontario. They include Irving Oil’s 300,000 barrels per day (b/d) facility in Saint John, New Brunswick; North Atlantic Refining Ltd.’s  115,000 b/d Come By Chance refinery in Newfoundland and Labrador; and Valero’s 265,000 b/d Jean Gaulin refinery and Suncor’s 137,000 b/d Montreal refinery, both in Quebec.

There are two pipelines presently under regulatory review that would reach these refineries from Western Canada.

Enbridge has proposed re-reversing its pipeline, called Line 9, between North Westover, Ont. and Montreal. The line has been in place for about 40 years, but Enbridge is reconfiguring it to flow crude eastward to Quebec refineries. It presently flows westward.

The National Energy Board (NEB) was expected to provide a decision on this project in March, but the project remains under review. In June, the NEB has required Enbridge to do hydrostatic testing – essentially blowing water at high pressure through the line – at three locations near heavily-populated areas, to ensure its safety.

A second pipeline, TransCanada’s Energy East, would see an existing natural gas line reconfigured to carry crude from Montreal to Saint John, New Brunswick.

Quebec’s environment department has struck a panel to evaluate TransCanada’s proposal, before it goes to the NEB.

Pipelines better for Canada

It is a paradox that Western Canada is flowing with oil that cannot reach  its Eastern industry compatriots, except by rail.

While Western Canadian oil producers are selling their oil at a discount, Eastern refiners must pay premiums for foreign crude. Pipelines would improve the market conditions for both.

In our next blog, we’ll take a deeper look at how pipelines would benefit Canada, coast to coast.

Want to know more about the role of refineries in Canada? Check out these blog posts:

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