Oil Pipelines, Canadian Nationalism, and Martha Hall Findlay

Energy fuels Canada’s economy and enervates its politics.

As with Saudi princes, dumb luck has made it less urgent for Canadians to confront their country’s shortcomings and reconcile Canada with big changes in the neighborhood. As commodity prices peak, Canadian politicians continue re-circulating ideas that soured when prices soured before.

Martha Hall Findlay has been branded by the Editorial Board of the Globe and Mail as a “policy-oriented” candidate for the leadership of the Liberal Party of Canada. She also lives in Toronto.

So, it’s not surprising that she secured free space in that paper to write about Canada’s energy industry and its pipeline infrastructure. There’s no other intellectual center in Canada further removed from the action yet more determined to sound more thoughtful about energy.

In her column, Hall Findlay joined an alliance of pinstriped bankers, pipeline engineers, cash-strapped politicians, and Canadian nationalists who believe that it would be inspiring, profitable, and incredibly sophisticated to lay more steel pipelines across Canada. The country, she claims, needs a “national strategy for energy infrastructure.” She sees the need, but never identifies who would pay—only that the federal government should have a “key facilitating and brokering role.”

Underpinning her seemingly inexpensive platitudes, however, are a couple of hot new truths that are more dangerous than true.  

“Canada has an abundance of energy – and the world wants it. Yet, Canada is a captive supplier to the U.S., which results in a significant discount in the price we receive. And with the International Energy Agency’s prediction that America will become the world’s largest oil producer by 2020, our reliance on the U.S. market is even more worrisome.”

The numbers "2020" and the letters "USA" all by themselves seem to inspire dark visions in rather ordinary Canadians.

But Canada isn’t a “captive supplier” to the US. Today’s price discount is caused by a temporary bottleneck in US regional infrastructure, not because the US per se is a lousy customer. In addition, Canada isn’t just a supplier. It also buys oil from the US and overseas. Western Canadian oil moves north and south, and out of Canadian ports as well.

One forecast by the IEA and the delay by President Obama of one pipeline project will not close the US market for future Canadian exports and do not automatically make new east-west, all-Canadian oil pipelines necessary or commercially wise.

Furthermore, even if the US were to become a net seller rather than a net buyer of oil, there would be no strategic or commercial reason why American ports and refineries wouldn’t be able and willing to export Western Canadian oil to China and elsewhere, while continuing to transport American oil to Eastern Canadian refineries.

If economics were to decisively favor giving up on the US market, the private capital markets and Canadian regulators will facilitate the construction of appropriate alternative east-west infrastructure.

Conventional energy projects only need premiers’ conferences, prime ministers, think-tank endorsements, and "new strategies" by federal governments when the merits of the projects are moot.

Fortunately, Martha Hall Findlay and, more importantly, Stephen Harper don’t need to concoct a new strategy.

North Americans have a perfectly good one now. Continental free trade, continental investment protections, and a shared Canadian-US policy of allowing global competition to drive energy markets have made both countries spectacular energy leaders—and their consumers the envy of the world.

There’s no guarantee oil prices will always favor Canadian sellers. There’s no chance high prices won’t lead to new competitors and tougher competition for Alberta and Oklahoma oil producers. And there’s no way environmental concerns will fade away.

Shifting commodity-market realities, however, don’t demand that Canada rewrite its policies and give up on a continental vision that enriches both countries right now. 

An energy policy "no-brainer"—Why?

The single—albeit arguable—reason for un-elected legislative bodies is to make sure that the pressures of faddish and shallow opinions don’t drown out complex, difficult ideas. The quarter of a billion dollar Canadian Senate supposedly exists as a refuge for sober second-thought, by sober if not necessarily popular men and women.

That’s the theory.

Then what’s the point of an un-elected Senate that produces a 68-page “Now or Never” energy report that advertises its most significant recommendation—enhanced east-west energy infrastructure—as a “no-brainer"?

Click on: www.theglobeandmail.com/report-on-business/industry-news/energy-and-resources/senate-energy-committee-backs-sending-western-oil-east/article4427616/?cmpid=rss1

The report also acknowledges that it’s important that Canada do a much better job of containing C02 emissions. On this important concern, the committee is unanimous. Neither a majority nor a minority of Senate committee members, however, offers a straightforward position on any effective means to meet that goal—a carbon tax or pricing mechanism, for instance.

The one legislative body that is supposed to tell us about hard things, in fact, tells us that complex issues are simple and doesn’t explain that changes in energy transportation and consumption could cost us dearly.

Intelligent energy policy, in fact, isn’t a “no-brainer.” The last thing Canada needs at the peak of a commodity boom is an enthused committee of Senators offering patriotic bromides.

Canadian Senate reform, on the other hand, is a “no-brainer.” Let’s do it.

The China card and Canada’s frayed affair with America

Stephen Harper must have kicked something when he learned that Barack Obama had decided to delay the Keystone XL pipeline project. It’s been some time since he won anything significant for his political base in Alberta, and this $7 billion project would have greatly enhanced Alberta’s long-term economic credibility.

Yes. Harper too has made politically expedient decisions to secure his own majority—for instance, arbitrarily blocking the foreign sale of Potash Corporation of Saskatchewan. Nevertheless, as prime minister, Harper has taken, without reservation, numerous real political risks to bolster Obama’s foreign policy—on Afghanistan, border management and security, Israel, Libya, and, most recently, Iran.

Harper, however, left it to others to vent in public.

The Minister of Natural Resources, Joe Oliver, characterized the Keystone delay as a “wake up call” and then started dreaming about China.

“. . . Diversifying away from the US, particularly in energy, is right at the centre of our thinking. . . .It is a major fundamental strategic objective for Canada.”

Click on: www.theglobeandmail.com/news/politics/canadas-trade-vision-shifts-beyond-the-united-states/article2235094/

As a rhetorical gesture, the statement works.

It sounds big and elevates the strategic importance of the Enbridge Northern Gateway Project, an even more environmentally controversial system of pipelines across British Columbia and oil tankers down its exquisite west coast. Indeed, one retired Canadian strategist warned that Canadians not get too excited. “You can’t change geography,” Colin Robertson acknowledged. The US “is still the biggest market in the world.”

As a true description of what holds the strategic attention of the Harper Cabinet, however, Oliver’s statement is distressing.

Trade diversification is a natural outcome of globalization—the Americans, the Europeans, and the Asians are widening their markets even faster than Canada. But it doesn’t measure up as a comprehensive economic, ethical, or geopolitical strategy for Canada. Trade expansion builds on a strong economic base; it doesn’t substitute for one.

Canada’s geographic location isn’t regrettable; it’s a blessing.

Making Canada richer by being less North American is a lazy, vain idea. As a whole, Canada will only continue to prosper globally by improving its performance in North America and, yes, by helping the US remain a successful great power.

Two hundred oil tankers a year sailing off to China will not create for Canada a better trading partner than it has now or a more respectful American neighbor. The US is not on its knees to secure vast additional supplies of unconventional Canadian oil. A slice of China’s energy market will not make China any less ruthless as a superpower or the loss of North American markets less painful.

The 100 largest US cities alone are economically bigger than China; they are growing as markets and they already practice business, commercial law, and politics like Canadians. At the same time, Canada’s share of their imports is shrinking drastically.

“The numbers are devastating. Between 2001 and 2010, Canada’s share of U.S. imports has fallen to 9.1 per cent from 25.1 per cent in furniture, to 5.4 per cent from 10.1 per cent in electrical equipment, to 4.8 per cent from 10.3 per cent in beverages and tobacco products, to 2.2 per cent from 6.8 per cent in textiles, to 17 per cent from 30.3 per cent in printing, to 10.3 per cent to 18.1 per cent in fabricated metal, and to 19.9 per cent from 31.1 per cent in plastics and rubber.”

Click on: www.theglobeandmail.com/report-on-business/economy/economy-lab/daily-mix/stunning-loss-of-canadian-market-share-in-us-report/article1842144/

Canada isn’t failing as a communicator, it’s failing as an innovator—a competitive producer of goods and services that can create high paying jobs in its own wonderfully liveable cities.

Canada’s Maclean’s Magazine well represented a new confident Canadian nationalism with the headline “I thought we were friends. Obama’s backpedalling on the Keystone pipeline is just the latest slap in the face of Canadians. We do have other friends, you know.”

Is lovable Canada looking elsewhere for love?