Canada’s $40 million daily gift to America

On oil, world markets and the cost of having our resources 'landlocked'

How would you like to take $40 million a day, wrap it in a nice ribbon and send it to President Obama?

Because that is what we in Canada are doing now, every single day.

The energy sector is Canada's strongest export sector by an overwhelming margin, with a value approaching $100 billion a year. It is predominantly made up of electricity, coal, natural gas and oil. The energy industry, together with its hundreds of thousands of employees and tens of thousands of suppliers, represents one of the most important components of the federal government’s tax base.

A relatively small economy like Canada's needs things which it can trade. Canadians trade wheat, natural resources, and manufactured goods, and Canadians trade energy. Without trade, imports become expensive and the country's participation in the global economy diminishes.

The commodity Canada is currently having trouble trading is oil. We can't get it to world markets and consequently are captive to the US market. At the moment, a barrel of oil worth $120 on the world market is selling in the US midwest at $70 – $80 a barrel. This discount helps the US and hurts the Canadian economy to the tune of $40 million a day. Obama wants that cheap oil of course, as would any loyal American.

The $40 million loss impacts all of Canada, which is why the federal government, with the national interest in mind, is outspoken in its support of oil exports.

There's an argument being proposed that it's better to keep the oil here in Canada because it keeps Canadian energy prices low. The argument is an argument against trade. Should Canada keep its wheat home too? And forest products?

Canada needs to trade and the best place to trade at the moment is with Asian markets. The US economy is flat and Europe is flatter.

To get its full value, Canadian oil needs to be able to get to Asia – and there's the challenge. To reach Asia, the pipelines need to go through BC, and onto tankers at the BC coastline.

There are two proposals in play at the moment to ship oil from BC, Enbridge's Northern Gateway proposal and Kinder Morgan's Trans Mountain pipeline expansion proposal.

Enbridge plans to ship 550,000 barrels a day by pipeline to a terminal at Kitimat, where it will be loaded onto tankers, which will use Douglas Channel to reach open water. They have stated that they are open to considering an alternate terminal at Prince Rupert.

The Enbridge proposal is currently in the hands of the National Energy Board, whose job is to determine two issues: whether Enbridge's plan is environmentally safe and whether it is in the public interest.

The second proposal, still in the early part of the consultation and development phase, is Kinder Morgan's plan to ship 850,000 barrels a day to its terminal in Burrard Inlet, then by tankers out of the Port of Vancouver. Formal hearings are still about two years away.

The Kinder Morgan (Trans Mountain) pipeline has shipped oil to the Port of Vancouver since 1953. Currently about 300,000 barrels a day arrive in the lower mainland and between 5 and10 tankers a month carry the oil to various destinations. The increased supply will need about 20 tankers a month.

Port Metro Vancouver is Canada's largest port and is the primary gateway to the Asia-Pacific. It plays a vital role in getting Canadian goods to market and serves a critical national interest. It prides itself on its safety record and considers itself a model for other ports around the world.

The port require all loaded tankers to be escorted by two tugs and have two pilots aboard. The tankers are double hulled and have multiple compartments, so if one is compromised the oil can be pumped into others. The tankers have been moving in and out of the Port of Vancouver since 1953 without incident.

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It is not surprising that people in Vancouver are extremely unenthusiastic about more tankers in Burrard Inlet. We have a beautiful city in a spectacular natural setting. There's too much risk, it is said, and too little benefit to Vancouver. Local mayors have already concluded, at this very preliminary stage, that they are strongly opposed.

There is no question that we need to be very careful about moving oil in BC waters. Any spill will cause damage and a large spill would be shattering to local economies and to the environment. Government regulatory agencies need to be extremely cautious in their approach.

But that caution does not require that local governments should, at this point, stand in front of the pipeline and the ships, arms crossed. The proponents should have the opportunity to develop their proposal and present their case. With the information available at that time, governments, regulators and the community can make an informed decision as to whether the risks are too great.

And we can decide as well whether our daily grant to the USA should continue.

For more information:

– post by Suzanne Anton

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  • Steven Forth

    VLCCs and ULCCs will not be navigating Burrard Inlet, so the current Kinder Morgan proposal does not help with expanding access to Canadian markets in Asia. Is it possible to have the pipeline run to a better located facility?

    The issues with both pipelines are allocation of risk, reward costs. Environmental costs are real costs and shifting them from the private sector to the publicis one way we provide massive subsidies. I heard the spokes person for Kinder Morgan say that if there was a tanker accident (and there will be leaks and spills, to say that there have been no incidents ignores the seepage that occurs every day) that this would be the responsibility of the shipping company. In all liklihood that will be a vessel under a flag of convenience operated by a company that can be put into bankruptcy in case of an ‘incident’. One hopes that this kind of risk containment strategy is addressed in the reviews.

    One can advocate for more local, value-added processing and more local use while supporting robust enagegment in international trade. Canadian resource companies are deeply integrated into value webs that ensure that most of the profit goes elsewhere. Passive acceptance of this will ensure that this pattern of development continues.

  • Jacko

    I saw some literature from TM which showed they had a pipeline out to the airport. Just wondering why this couldn’t be used and extended to Roberts Bank which would make it uneccessary for ships to enter the Burrard Inlet.

  • marc eliesen

    Ms. Anton’s analysis is wrong. All you have to do is look at the latest 1st quarter reports of Canada’s large oil producers, who are all reporting huge profit increases.

    First, the majority of our oil shipments to the US is the lower quality oil sands bitumen which obtains a much lower price. And even because of the oil glut at the Cushing Oil terminal in the US midwest, caused in part by major US oil production increases( the Baken play ), which is causing a price differential between the WTI and Brent ( world ) prices, Canada’s oil producers make up for the difference by the higher margins at the refinery level. Now some may rightly say this is ” gouging ” the consumers; in any case our oil producers are not giving any million dollar discounts.

  • Piker

    Love the story on Global that the Port wants to raise the height of the Lions Gate bridge for cruise ships. Complete BS: the bridge needs to be rebuilt in order to accomodate larger tankers to ship oil from Kinder Morgan’s Burnaby facility.

  • Karla Sofen

    This is the kind of common sense lacking in our elected representatives. This is why all those American “charities” are donating to Canada’s environmentalists – to co-opt them; to manipulate them, and to make sure this gift keeps on giving.

    Canada’s environmentalists are being played for fools and the Mayor is playing up to the fools too – because he was co-opted by those same American interests long ago.

    One thing not mentioned in the article is that even with all the existing safety measures – the tankers can’t operate at night or in inclement weather adding even more safety.

    Get the pipelines built with the highest safety standards possible and keep the tanker traffic as safe as it has been for the last 50 years. All Canadian green effort should be focused like a laser beam on this goal.

    Support Canada! Every barrel of oil we can sell on the world market is a barrel of sales profit denied to brutal dictatorships that subjugate women as property and where being gay means the death penalty. The dictators who have manipulated the greens in Canada care nothing about the environment. You don’t know about the pollution, oil spills, and rape of the land and waters going on there — because they are dictatorships with no free press to report it and they execute people if the talk to the west.

    But yet, our Canadian greens are all too willing to do the bidding of the most evil regimes on Earth instead of supporting Canada and putting the middle-east out of business in North America. Sad. It’s sad that good people with noble motives are being used as pawns. Sad that green efforts perpetuate wars in the middle-east in spite of their good intentions.

    Even sadder still is the leader of the Green Party, Elizabeth May is completely handcuffed. Her flock literally forces her to toe the party line and espouse all manner of illogical, unscientific, counter-productive and anti-Canadian efforts by greens nationwide. If she dared to even try to be constructive or logical or reasonable, she’d be run out of town on a rail and the green village would be running for their torches and pitchforks.

    It’s just sad our greens can’t make the very best out of a very good situation that can really save the planet and continue to worship at the idol of long ago disproved canards and their own leaders are helpless to lead them even if they were disposed to do so – which they aren’t. Heavy Sigh!

    Sad, sad, sad. We’re losing out on untold generations of social welfare programs and paying more for taxes than necessities. Irrational, unreasoning green efforts are to blame. There are real green issues to deal with. But the money coming in from Canada’s enemies and competitors has bought and paid and manipulated the greens beyond redemption.

    • The Thought of The Day

      “Canada’s environmentalists are being played for fools and the Mayor is playing up to the fools too – because he was co-opted by those same American interests long ago.” – Karla Sofen

      I couldn’t have said it better.
      I’ll add the following, though:
      “But they knew that already, Karla! It’s a game of kissing up. And they are doing it for the same reason… money!

      Here’s my thoughts from a year back (Part I: Smart City vs Green City; 26 Sep 2011; Daniel in Editorial)
      The Thought of The Day

      ‘A Green Job is the new euphemism for A New Racket Job. Think ‘Renewal Fund’ instead of ‘Vulture Fund’. Sounds innocent, most definitely it will cost you more to upkeep, but it will make you feel much better when the time for that flight to New York would fall into your taxpayer funded travel and entertainment budget. I wonder…what would Andrea Reimer do?’

      ‘La verite, la dure verite!’ – ‘The truth, the harsh truth’ Danton
      (I wish I said that!)’

      I never fancied the empty words (like ‘green’ or ‘organic’ or ‘sustainable’ or ‘affordable’…), idling talk, publicity filled airtime…you get the point. When I mentioned earlier the term ‘Vulture Fund’ that was not just for the sake of my narrative, or because it sounded intriguing.

      No, I meant it.

      It was the summer of 1970 when Milton Friedman wrote in the New York Times “The Social Responsability of Business is to increase its Profits” His position was clear: “the principal objective of a company is to optimize its profits and therefore to return to the shareholders their investment, while respecting the laws of the country in which it operates”
      In our days few CEO’s will have the cohones to make this statement. On the contrary they would rather portray themselves as social investors and philanthropists.

      Enter the ‘chosen ones’ Around The Law in 80 Charities and Investment Funds. All Green! Greenest city, greenest food, greenest attitude, ‘greenest’ air and water…

      Again, let me rephrase that.

      In our days, the Whole Green Days, Solomon, Newell,etc., can always pretend some responsibility for the social well-being of their stakeholders, all that’s left though…is fair game.

      Here’s one story on the Ms. Carol Newell and her new found board game of Vanopoly played around the table by her Hollyhock friends (go look up at… the secret millionaire) for the fun of it, the story of a Princess turned Cinderella turned Greedzzela.

      Together with Joe L. and other good Solomaritans they pulled their veil of sanctity and preached out to the peons “It’s not about the money. We don’t talk or care about the money around the kitchen table in here. It’s all about you and the environment and the food and the air and the juice…”
      Complete and total Pish.

      Considering for a start, the generous remuneration they are paying each other, for basically no work, through intricate accounting moves, donations, loans, investments, dividends, or through highly paid tax payer funded jobs obtained through pure intimidation, jobs with hidden clauses and massive separation agreements, inside the first corporations they could lay their bony hands on.
      City Hall of Vancouver is one of their casualties, the citizens of Vancouver it’s collateral damage..

      And now to end on a high note, a memento, from one of my old 16mm Arriflex shot, home movies, a favourite scene of mine, the one where we all sit around the table (Carol, Joel, Linda, Gregor, Andrea, Geoff, Aufochs, Penny…and myself, in character) not discussing about money, or politics , or the 500 year plan. Not discussing.

      I am the well spoken, down to earth, good looking one!

      We live in Vancouver and this keeps us busy.
      Glissando Remmy replied to comment from Barb Justason | September 27, 2011 11:33 AM

      • Ned

        Glissy puts his modesty aside and says:
        I am the well spoken, down to earth, good looking one!”
        But all we knew that, from your writings and your avatar! 🙂
        FYI, both comments (Glissando and Karla)’s … from your lips to Vancouver’s citizens ears!

    • chris

      “Local mayors have already concluded, at this very preliminary stage, that they are strongly opposed.”
      City politicians…just don’t trust them. Maybe the “high density” bs they continually feed us and their opposition to Kinder Morgan’s expansion is being staged, cause it just doesn’t add up. As far as this Vancouver dweller can tell this empty-condo (and in some hoods empty-houses and schools) city needs Asia to continue doing very well. If that means staying chummy and selling them our natural resources, shouldn’t we just do it? A true mayor who is truly concerned about the enviro risks and what is in the best interests of Vancouver would be extremely busy learning all he can about the proposal and insisting on meeting green standards. All this “opposition” talk is just a big waste of time and more bs.

      Great column!

    • Pat Johnstone

      Karla: what an amazingly uninformed rant.

      To think that everyone fighting to preserve the tattered remains of environmental protection legislation in Canada is somehow a hapless dupe of American Special Interests, while at the same time arguing that Multinational Oil Companies have our best interests is mind shows a stunning level of cognitive dissonance. That is almost as ridiculous and uninformed as Ms. Anton suggesting we are “giving” Americans $40 Million a year because we sell them low-grade oil that doesn’t get the same price as Gulf Light Sweet Crude (or that we would get a better price for it in China).

      To suggest that Canadian oil somehow “replaces” Saudi or Yemeni or Nigerian oils also shows a lack of basic understanding of how global energy markets operate. Canada still imports oil from Nigeria, from Yemen, from Saudi Arabia, supporting those dictators you so despise, while at the same time exporting unrefined oil, in order to marginally increase the profit margins of those Multinational Oil Companies you hold above all others. Someone is doing dictators’ bidding, and it ain’t the environmentalists.

      Then when you suggest that Elizabeth May is “completely handcuffed” by her party, at this point it is clear you have lost touch with reality, and have not read anything she has written or said since taking office a year ago. She appears to be the only constructive, logical and reasonable person on Ottawa, while the governing party obstructs parliamentary procedure, avoids justice, dodges accountability, and lies to parliament.

      I cannot fathom how someone can be so wrong at every point of a conversation. Have you been watching Sun “News” again?