Pipelines are crucial to national prosperity

By Steve Lafleur
and Ashley Stedman
The Fraser Institute

The governments of Alberta and British Columbia are waging an intense trade dispute over the proposed Trans Mountain pipeline expansion, which would run between Edmonton and Burnaby. But the implications extend far beyond those two provinces.

Steve Lafleur

Ashley Stedman

The details of the feud have been well-documented. After B.C.’s NDP government, led by Premier John Horgan, said it wants more time to review the project (which has federal approval), Alberta’s NDP government, led by Premier Rachel Notley, announced a ban on B.C. wine imports and halted talks about electricity imports from its western neighbour.

While this issue is often framed as Alberta (and its interests) versus B.C. (and its interests), in reality, the benefits of Alberta’s natural resource sector extend beyond provincial borders.

This isn’t a debate about whether oil will get to market, but how the oil will get there, and that has crucial economic and environmental implications. That means thinking about how to maximize the benefits of Canada’s natural resources while prudently managing environmental risks.

Due to pipeline constraints, Canadian oil producers sell unrefined bitumen at a fraction of the price many competitors receive. Western Canadian Select has long fetched lower prices per barrel than West Texas Intermediate for a variety of reasons, but the Canadian crude discount recently reached $27.50 per barrel.

Increasing pipeline capacity would reduce this discount by cutting export constraints. The Trans Mountain expansion would increase access to tidewater and higher prices in the world market, rather than relying so heavily on the United States.

Collecting less revenue per barrel means less money to create jobs and less tax revenue for government services and/or future tax relief. This is crucial given the outsized role Alberta plays in Canada’s economy. Between 2004 and 2014, Alberta contributed 18.8 per cent of national gross domestic product despite having 11.6 per cent of the country’s population. The province also accounted for nearly one in three jobs created in Canada during that period, resulting in a net total of 270,926 jobs.

But perhaps most impressive is that Albertans paid $221.4 billion more in federal taxes (including Canada Pension Plan payments) than they received in programs and transfers. One can argue about whether that volume of net payments is excessive. But in an economic federation such as Canada, younger, more productive parts of the country subsidize the older, less productive parts. However, that deal only works if we think about key national infrastructure issues as a country, rather than as isolated provinces.

On the environmental front, the case for moving oil by pipeline is equally strong. Despite rhetoric from pipeline opponents, blocking a pipeline doesn’t mean Canada’s oil producers will stop producing. In reality, they will find other – riskier – modes of transportation, mainly rail. In fact, pipelines are 2.5 times safer (less likely to experience an oil spill) than rail transport. So anyone concerned about the environment and human health should support pipelines over rail.

Whether the B.C. government likes it or not, the federal government has the legal jurisdiction over interprovincial pipelines. B.C. followed a process and went along with the results, before a new government took power and decided the federal process wasn’t good enough. This is not a valid reason to oppose a long-delayed pipeline project.

Due diligence is important but that due diligence is long done.

While environmental issues are serious and emotional, costs and benefits must be weighed when evaluating resource projects. And that process has already taken place.

That doesn’t mean Alberta has won and B.C. has lost. Both benefit from Alberta’s resource development. That’s the point of an economic union. When Alberta prospers, all of Canada – including B.C. – prospers.

Steve Lafleur and Ashley Stedman are analysts at the Fraser Institute.

The views, opinions and positions expressed by columnists and contributors are the author’s alone. They do not inherently or expressly reflect the views, opinions and/or positions of our publication.