Pipelines, Practicalities, And The Politics Of Oil

Newfoundland’s Potential Energy Solutions

(One of my blindspots, as an odious wannabe Laurentian Elite, is energy policy. Given the nature of the national debate, I decided to tap in frequent Scrimshaw Show guest and friend of mine, Newfoundland’s finest Ben Oates, to write about some of the complexities. He’s a Young Liberal, he’s a Mechanical Engineering student at MUN, and he’s forgotten more about both the practicalities and the politics of energy policy than I’ve ever known. I’m grateful for his expertise.)

Seven years ago, I found myself in the middle of the Fridays for Future protest, marching from my high school to the provincial seat of government to persuade the government to dissuade any future government investments in offshore oil and gas. This is how I cut my teeth in politics, and how I got into contact with many of the folks I know today. It’s also the pivotal thing that shaped many of our political careers - realising that reason, circumstance and nuance matter significantly more than some elements of our political spectrum let on. I will now attempt to articulate why government investment in offshore oil and gas is exactly what Canada needs. Life comes at you fast. But that’s the nature of politics, a consequence of the dynamism, and a strength of the Liberal brand - the ability to pivot and adapt when new factors come into play.

We are not in the same position we were in 2018, and nor am I the same person. I am at the cusp of graduating engineering, with two years’ internship experience in traditional and renewable energy sectors, and a fresh, galvanised perspective. The world is in a far darker place, with authoritarian Russia to our north, barbaric Saudi Arabia to the east, and an increasingly imperial United States to our south. While the argument against further carbon-emitting projects could confidently be made back then, it cannot be made now. The water on the beans has changed for a multitude of reasons, and we must recognise that while global demand still exists, it’s better that we supply it, rather than a more nefarious foreign power. This can be done simultaneously (and to benefit!) development of renewable energy solutions, electrification of industry, and innovation in new technologies. We can use petrochemical products and their derivatives as a backboard from which we can make an easy layup. Ask any basketball player - it’s easier to make a layup rather than a Hail Mary half-court shot. And in this metaphor, we are without the backboard, and we need the layup.

The standard Conservative talking point has been beaten to death, with calls for a spaghetti of new pipelines flowing every which way but south. Danielle Smith went so far as to jeopardise the national response to the US in order to push this talking point. And while westbound pipelines that give access to Pacific tidewaters as well as a domestic replacement for Enbridge Line 5 to Ontario and Quebec are logical avenues to pursue, as a Newfoundlander, I would be remiss if I did not point out the sheer lunacy of taking Energy East so far as New Brunswick.

For some inexplicable reason, Newfoundland & Labrador Grand Banks offshore developments have been excluded from the national energy discussion. My guess is that the culprits are the firehose of information flowing from our south, combined with some clever (albeit damaging) leveraging done by the Alberta premier. To continue with the basketball metaphor, they are on a full-court press, and it’s time someone boxes them out. How’s your geography? What about your chemistry? Then consider two scenarios for a moment. What is the smarter, more economical, more environmentally and geographically sound idea - dragging a heat-traced, high-temperature pipeline across five provincial jurisdictions, one of which has shown to be opposed to such a development, in order to sell thick, sour, Alberta tar to Atlantic tidewaters, or further developing the Golden Goose that is the Grand Banks, which has tidewater access built in, and produces a cleaner product that fetches a higher price on the market?

Critics of Newfoundland and Labrador’s offshore industry are often quick to point out that our average production capacity is a mere percentage of Alberta’s (250k bbl/day vs. 4M bbl/day), and that developing Newfoundland oil and gas to meet such capacity is too costly of an exercise. Sure, if you exclude both the increased market price it sells at, as well as operating costs over the lifetime of the project, and you’re only focused on liquid crude. But what do markets really want right now, and in the near future? Liquefied natural gas - of which there is an abundance on the Grand Banks (12.5 trillion cubic feet of proven reserves, with an estimated 60 trillion cubic feet left undiscovered). The four (soon to be five, maybe even six) installations currently operating offshore reinject the lion’s share of the gas they produce thanks to a provision in the Atlantic Accords which prohibits excessive flaring.

This means that every single installation already has the equipment onboard to compress and export natural gas - all that’s needed is somewhere to send it, along with liquefaction equipment to chill the product for transportation. Initial hesitation for this capability to be developed was due to three reasons - economics, political will, and uncertainty around how subsea pipelines would behave in the subarctic, ice-prone region (all platforms are located in Iceberg Alley). The technical challenge has been largely resolved thanks to extensive research and testing by industry and academia at Memorial University of Newfoundland. Political will surrounding these sorts of projects rapidly coagulated in the face of American meddling, and the economic issue is resolving itself, and can be helped along by smart government investment.

If the federal government is looking for a project to throw capital at, run a cost-benefit analysis on the development of an offshore LNG export platform for the Grand Banks. Examples of such are being developed for the Gulf of Mexico (see the Sea Port Oil Terminal). Such a platform would be centrally located between all installations in the Grand Banks and accept export gas lines from each installation, and have the necessary infrastructure onboard to clean, compress, liquefy, and offload the gas to waiting LNG carriers for export globally. It would likely have to be a consortium of a Crown corporation (maybe the same one that built Transmountain?) and the operators. The elevator pitch to the operators would be pretty easy, I’d imagine - they spend time and money to compress and reinject the gas, and such a platform would allow them to sell it.

The Crown corporation would cough up the necessary capital to kickstart the project; operators & other investors would soon follow. Tidewater access to European and Mediterranean markets is built in, and demand is ever-increasing. Political will to overcome the regulatory & governance challenges is growing. Simply put, build it, and they will come. It is a far sounder investment and far quicker project to execute (in my professional and personal opinion) to do this.

We have a cleaner product, with less regulatory snarls, political arm-twisting, technical and logistical challenges, and tidewater access built in. And, as an equity-holding partner, the returns would flow into Canadian coffers, as well as providing badly-needed employment to an economically abused region of Canada. Political considerations have meant we’ve prioritized western oil, but the reality is we must prioritize what makes sense over what is politically expedient. Rather than more fighting about pipelines, we must take advantage of the proven resource that’s sitting right there off Canada’s East Coast.

Or, at the very least, run the numbers and tell us why we can’t.