John Ivison: Thomas Mulcair offers Alberta an updated version of a bad idea

John Ivison | Nov 14, 2012 8:19 PM ET | Last Updated: Nov 14, 2012 9:05 PM ET

Tom Mulcair cast himself as a latter-day Sir John A. Macdonald when he talked in Calgary about his vision of Western Canada oil being shipped by pipeline to central and eastern provinces to be processed and then sold domestically.

It would be a nation-building project on a par with railway construction in the 1800s, “a win-win situation,” he said.

But the net effect of supplying Eastern consumers with cheaper Western oil would be closer to a less celebrated federal initiative — Pierre Trudeau’s late and unlamented National Energy Program.

Mr. Mulcair was not specific and it’s not clear how much government intervention in the process he is proposing. But if he is talking about landlocking Canadian oil and supporting the domestic refining industry with discounted Western crude, it starts to look very much like a back-door transfer from one group of Canadians to another.

The New Democratic Party leader said he is not opposed to exporting Canadian oil, as long as the country’s own energy needs are taken care of first.

Ottawa’s command and control of the oil industry didn’t end so well last time out: Albertans still blame the federal government for a 40% drop in house prices in Calgary and Edmonton, and a bankruptcy rate that rose 150%.

Given the entrenched opposition to the Northern Gateway pipeline, which would export oil sands’ crude from British Columbia’s Pacific coast, the idea of a west-east pipeline has gained currency.

Some of the infrastructure already exists and there are proposals to pipe Western crude as far east as Saint John, N.B. Enbridge Inc. has applied to reverse the flow of its pipeline between Ontario and Montreal to facilitate the movement of Alberta crude to the East.

This is an entirely viable Plan B, if the Northern Gateway fails to win the necessary support. From Saint John, the oil could be exported to refineries on the Texas Gulf coast or even processed locally.

The Irving Oil refinery there already processes imported oil, which costs $22 a barrel more than the price producers get in the West. Lower input costs would make the refinery industry in central and eastern Canada more competitive, according to industry expert like Roger McKnight, senior petroleum analyst at En-Pro International.

Albertans still blame the federal government for a 40% drop in house prices in Calgary and Edmonton, and a bankruptcy rate that rose 150%

But ideas that this product be land-locked or that the federal government should attempt to build up the domestic refinery business to service the Canadian market are at odds with the prevailing economic winds. Demand for petroleum products in North America is declining and the costs for a new refinery are prohibitive.

“Let’s say you wanted to build a 400,000 barrel-a-day refinery in Eastern Canada, it would cost you $7-billion. The paperwork alone would cost $100-million and you wouldn’t see a drop of product for 10 years,” Mr. McKnight said.

“Refineries can’t be guaranteed specs on emissions, so it is easier to bring [gasoline] in from China and India. No one wants to build new refineries.”

Mr. Mulcair was in the West to attend a rally for Dan Meades, his candidate in the Calgary Centre byelection. In a nod to regional politics, he resisted the temptation to talk about “Dutch disease,” though he did mention his “polluter pay” plan. His comments about “adding jobs here” has a certain populist appeal, even if they are based on shaky economic foundations.

Rather than beating the drum of economic nationalism, the NDP leader’s energies would be better directed toward ensuring oil sands’ producers get world prices for their crude — the $22 a barrel discount costs the country about $20-billion annually. A 7% drop in commodity prices since the March budget was a major contributor to the larger-than-expected deficit unveiled by Finance Minister, Jim Flaherty this week in his fiscal update.

One clear way of doing that would be to support the Northern Gateway, giving Western producers a route to world markets.

The only consolation is that Mr. Mulcair has not lost the plot altogether, unlike Quebec’s environment minister, Daniel Breton, who expressed his misgivings to La Presse about Albertans “bringing [their oil] onto our land, without our consent.”

That’s the kind of boneheaded comment likely to make Albertans wonder why they each send about $700 a year to have-not provinces such as Quebec via equalization.

If Mr. Mulcair’s view were to prevail, it might wreck the NDP’s chances of getting elected in the West. If Mr. Breton is heeded, Quebecers might end up freezing in the dark.

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