Minister of Energy and Natural Resources Jonathan Wilkinson speaks on Parliament Hill, in Ottawa, on Jan. 8.Justin Tang/The Canadian Press
Canada should have a national conversation about whether a new east-west oil pipeline is needed given protectionist threats from the United States, Natural Resources Minister Jonathan Wilkinson said.
U.S. President Donald Trump on Monday delayed plans to impose steep tariffs including 10-per-cent levies on Canadian energy until March 4, but has threatened to proceed with them if Canada fails to demonstrate sufficient attention to securing its side of the shared border with his country.
Canada has not ruled out export taxes on energy if Washington proceeds with the tariffs.
Mr. Wilkinson, speaking to reporters after meetings with U.S. lawmakers in Washington, said Canada needs to consider better ways to reach new markets and supply areas of the country that rely on American oil, given the uncertain future of an existing pipeline carrying Western Canadian oil to Central Canada that is routed through the U.S.
“I think Canadians have been shaken by the actions and the words of the President of the United States, and I think it is certainly an important time for us to reflect on the long-term implications of that,” he said.
“In the worst case, where tariffs do go into play, and we respond – the government of Canada will have to respond if in fact that kind of aggressive action is taken by the United States – it’s not entirely clear where this ends,” Mr. Wilkinson said. “We are not interested in escalating, but we do need to be reflecting on the path forward,” he said. “Being so dependent on the United States for the export of oil is a vulnerability.”
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It’s been nearly eight years since a proposed east-west pipeline in Canada was cancelled. The Energy East pipeline, which would have shipped oil from Western Canada and the northwestern U.S. to Eastern Canada, was scrapped in 2017. Also abandoned were plans for an export terminal in New Brunswick to transport the oil to foreign markets.
“Building large-scale infrastructure like pipelines is not simple. It takes a long time, and there are issues that you have to address around social acceptability that very much includes engagement with First Nations and others,” Mr. Wilkinson told reporters. “I’m not being prescriptive in terms of saying necessarily we need to do this, but I do think it’s a conversation the premiers and the Prime Minister will want to have.”
Mr. Wilkinson mentioned risks facing the Line 5 oil pipeline operated by Calgary’s Enbridge Inc., which supplies Ontario and Quebec but is routed through the U.S. The 1,038-kilometre line is a crucial conduit for Central Canada that carries up to 540,000 barrels a day of Alberta and Saskatchewan petroleum through Great Lakes states before re-entering Canada at Sarnia, Ont.
Its future is uncertain after Michigan Governor Gretchen Whitmer ordered the pipeline shut down over fears of an oil spill where it crosses the Straits of Mackinac waterway in her state. It remains in operation, however, and Enbridge is seeking a permit to build a tunnel deep under the straits to shield the Great Lakes from possible accidents.
“If you think about oil and some of the vulnerabilities from an energy perspective, in the context of not being certain about where the United States may go on some of these issues, some of the areas in Ontario and Quebec that are served, for example, by Line 5, the pipe runs down into the United States and comes back up,” the minister said. ”That creates some degree of uncertainty.”
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Mr. Wilkinson did not express concern about Canada’s ability to reach new markets for natural gas. He cited a number of liquefied natural gas export projects, such as LNG Canada’s first facility, to ship the commodity to Asian markets, which he said would be operating “within the next number of months.” A second LNG facility, Woodfibre LNG, is also proceeding, he said. Mr. Wilkinson said LNG Canada’s expansion plans “will come for some kind of final investment decision within the next 12 months.”
Keith Stewart, a senior energy strategist at Greenpeace Canada, recommended that Canada reduce its reliance on oil exports. “Doubling down on new pipelines when the rest of the world is moving to electric vehicles and heat pumps would be like buying a Blockbuster franchise as Netflix is taking off.”
In a statement, deputy Conservative leader Melissa Lantsman blamed the Liberals for the demise of Energy East, and cast doubt on whether a Liberal government would support an east-west oil pipeline. She said the Conservatives “have supported these nation-building projects from the start.”
When contacted by The Globe and Mail, South Bow Corp., the oil pipeline company spun out of former Energy East proponent TC Energy, would only say that the project was terminated in 2017.
Mr. Wilkinson also took aim at the Trump administration’s concern about the U.S. trade deficit with Canada, where Americans buy more from Canada than Canadians purchase from them. For merchandise alone, that deficit has averaged a little over $100-billion annually for the past three years on around $1.1-trillion in annual two-way trade. The trade deficit is smaller when services are taken into account.
He said the American trade deficit disappears if Canada’s energy exports – which are of enormous benefit to the U.S. – are removed from the equation.
“If you strip out energy, the United States has a $50-billion trade surplus with Canada, mainly in manufactured goods,” Mr. Wilkinson said.
“To be honest with you, there are ways that you could look to shrink the trade balance that would make no sense. For example, approximately half of the Trans Mountain pipeline oil goes to California,” Mr. Wilkinson said. “You could shrink the trade balance by simply saying, ‘We’re not going to sell oil to California, sell it all to Asia.’ But that’s really not productive for California or for the United States.”
With a report from Emma Graney