Written by Jillian Johnson

In today’s socially conscious world, the development of new pipeline projects has become extremely controversial. The first two articles in this series focused on how pipelines work and what products they move; the third installment of Pipelines 101 will explore why pipelines matter to Canada – and to young professionals working in the energy industry. Pipelines are inextricably linked to the energy sector in Canada and have significant benefits for both the Canadian economy and Canadian society. This cannot be ignored when discussing the approval of proposed pipeline projects.

Pipelines contribute to a prosperous Canada

The prosperity of our energy industry is directly linked to the prosperity of Canada and to the quality of life of Canadians. The revenue generated by a pipeline-connected energy industry represents a significant economic benefit to Canadians in the form of economy-boosting capital projects and jobs as well as social benefits funded by industry-paid taxes and royalties.

This impact is seen both within the pipeline industry itself and in industries and local economies that support the pipeline industry. In 2016, the energy sector – including pipeline transportation – contributed just under 10% of Canada’s GDP, the third biggest single contributor to Canada’s economy after manufacturing and real estate. In 2015, Canadian Energy Pipeline Association (CEPA) member companies paid $1.5 billion in government tax (including income, property, fuel, and carbon taxes). CEPA members also spent $4.8 billion purchasing goods and services in local communities alongside pipeline routes across the country.

Pipelines play a key role in the success of Canada’s energy industry, which is here to stay

A common argument against pipelines is that the world is (or should be) moving away from fossil fuels and that Canada needs to diversify, which is seen as synonymous with slowing or stopping development of oil and gas resources. This argument misses the mark, however, because in many ways diversification is a separate issue.

Although the world and economy may be in a stage of transition towards renewable energy sources (and Canada should not ignore renewable energy technologies) oil and natural gas still represent over 50% of the world’s primary energy supply (with coal accounting for another 29%) and that will not change overnight. Canada’s energy resources will be needed to continue to provide a significant portion of the world’s energy needs and pipelines, which transport 97% of Canadian production, play a key role.

The energy industry in Canada is raising the bar on environmental performance and social responsibility

The Canadian energy and pipeline industries have some key accomplishments to be proud of in terms of social and environmental responsibility. In 2014, Canada was the 4th largest producer of crude oil and 5th largest producer of natural gas globally. As one of the top 10 producers of both oil and natural gas, Canada is one of the few energy superpowers setting the benchmark for environmental standards. Examples include global-leading collaborations to accelerate improvements in environmental performance within oil sands development and high standards for transparency concerning pipeline incidents. Improving the safety of Canadian pipelines with new systems and technologies, such as smart pigs and enhanced corrosion reduction techniques, is a constant and ongoing priority.

A discussion of currently proposed pipeline projects in Canada

To maintain its contribution to Canada’s social and economic prosperity, our energy industry needs access to more markets in Eastern Canada, the US, and overseas; hence, the need for the development of new pipeline projects.

Each new pipeline project provides a number of the same key benefits: Canadian jobs, the purchase of goods and services that boost the economy, taxes and royalties paid to all levels of government, and increased access to international markets for Western Canadian oil. Access to new markets is predicted to result in higher returns on Western Canadian oil because the current price is discounted due to limited access to market.

New pipeline projects also face a number of the same objections: critics say increasing pipeline capacity will increase development in the oil sands (leading to increased greenhouse gas emissions) and that new pipelines will increase the potential likelihood and consequences of a spill.

The risks and benefits of each new project must be weighed to determine the best course of action for Canadians, the environment, and the economy. The following projects: Kinder Morgan's Trans Mountain Expansion Project, TransCanada's Energy East, and TransCanada's Keystone XL pipeline, represent a few of those currently being proposed for development, and arguably some of the most controversial.

Kinder Morgan's Trans Mountain Expansion Project

Proposal Pipeline expansion paralleling the existing Trans Mountain Pipeline; includes 980km of new pipeline and reactivating 193 km of existing pipeline. To support the expanded pipeline 12 new pump stations, 19 new storage tanks, and three new berths at Westridge Marine Terminal will also be constructed.

Current Status As of December 2016, Trans Mountain Expansion is approved with 157 conditions.

Major Objection

  • Trans Mountain is currently the only pipeline connecting Western Canadian oil to the West coast. Increased capacity will increase shipping traffic and, therefore, the potential for a spill along the coast, which could have widespread environmental and financial consequences.
  • Part of the route travels through densely populated areas, which increases the likelihood of a spill due to the level of activity with the potential to cause pipeline damage.

Benefit to Canada

  • An estimated $46.7 billion in taxes and royalties will be paid to the governments of Alberta, British Columbia, and Canada during construction and the first 20 years of operation.
  • Community benefit agreements have been signed with communities along approximately 95% of the pipeline corridor, contributing a total of $8.47 million to those communities.
  • Mutual benefit agreements have been signed with 51 Aboriginal communities, contributing a total of $400 million to those communities.

TransCanada's Energy East

Proposal 4,500 km pipeline from Alberta to refineries in Eastern Canada, ending at a marine terminal in New Brunswick. 3,000 km of existing natural gas pipeline will be converted to transport crude oil and 1,500 km of new pipeline will be constructed (see map).

Current Status As of January 2017, the Energy East hearing with the National Energy Board is restarting from the beginning.

Major Objection Energy East will increase shipping traffic in the Bay of Fundy and, therefore, the potential for a spill along the East coast, which could have widespread environmental and financial consequences.

Benefits to Canada

  • Energy East will connect Western Canadian oil with refineries and markets in Eastern Canada to reduce imports of foreign crude oil. Reducing imports benefits the economy, as well as the environment due to the higher environmental standards in Canada compared to most African and Middle Eastern countries from which oil is currently imported.
  • An estimated $10 billion will be paid in taxes during construction and the first 20 years of operation.
  • This project will contribute an estimated $55 billion to Canada’s GDP during construction and the first 20 years of operation.

TransCanada's Keystone XL

Proposal 1,897 km pipeline from Alberta to Nebraska. The portion of the pipeline within Canada is significantly shorter than the portion in the U.S. There is a pipeline currently in operation between the two locations but Keystone XL will follow a more direct route and increase capacity.

Current Status The portion of the pipeline within Canada was approved by the National Energy Board in 2010. As of January 2017, a Presidential Permit application was resubmitted to the U.S. Department of State for approval of the pipeline through the U.S.

Major Objections

  • Part of the proposed route through Nebraska was identified as a fragile ecosystem by the U.S. State Department so alternate routes had to be explored.
  • Keystone XL became a focal point for political and ideological views in the U.S. opposed to the development of oil and gas resources, especially the oil sands.

Benefits to Canada

  • Keystone XL will connect Western Canadian oil with refineries in the central U.S. and refineries and ports on the gulf coast.
  • Building this pipeline is predicted to reduce U.S. and Canadian dependence on imports of foreign crude oil. Reducing imports benefits the economy, the environment, and energy security.

What Now?

As these pipelines and others are debated in the public sphere it is important as professionals in the energy industry to be informed of the facts – both the potential benefits and the potential consequences of these and future energy projects. No energy project is without drawbacks and informed discussion is necessary if Canada is to ensure both economic prosperity and the continued protection of the environment.

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Jillian Johnson is an EIT with a passion for sustainability and renewable energy. Jillian currently works in the pipeline industry at PBOK Consulting and the Centre for Pipeline Knowledge. She is a strong advocate for logical and reasoned discussion on sustainable (socially, economically, and environmentally) energy development. Jillian holds a bachelor’s degree in Mechanical Engineering from the University of Calgary and a master’s degree in Energy Science and Technology from ETH Zurich. She lives for being in the outdoors and spends summers hiking and backcountry camping, and winters cross-country skiing and commuting to work by bike.