Oil, pipelines, the economy, and the environment – Issue Of The Month

by | Dec 3, 2018 | Issue Of The Month

We are living in a challenging time with respect to energy. We have been living on fossil fuels for the last 150 years and have been slowly making our way towards sustainable and “green” energy. Although we’ve made great strides in recent years, we will be dependent on fossil fuels for decades to come.

We need to reduce the amount of fossil fuels that we are using and we need to move to a model of more sustainable and green energy sources. That is not in dispute. What is troubling is what the Liberals are doing about that. In the next election the Liberals will be able to say “we have done something” but they won’t be able to say “we have done something right“.

We have to move forward and strengthen both the environment and the economy at the same time. We can’t have a clean environment that nobody can afford to live in, and we can’t have a lucrative economy where nobody can breathe the air or drink the water. We have to move forward on both at the same time. This takes a lot more thought and a lot more planning than the Liberals have put in to it.

There are four major pieces to the balancing act of the oil situation in Canada:

  1. Canada produces more oil than it consumes, sells it to the US below fair market price, and buys it from Saudi Arabia the market price;
  2. There is no progress on the Trans Mountain pipeline, Trudeau cancelled the Northern Gateway pipeline, and the Energy East pipeline is dead, all despite an impressive safety record;
  3. The Liberals are introducing the carbon tax, which will do nothing to reduce pollution but instead will raise the cost of everything that we buy;
  4. The Liberals have upset relations with Saudi Arabia, which could really hurt our oil imports.

Canadian Oil Production

The Liberals are limiting oil production in Canada by cancelling pipelines and by introducing rules that make it nearly impossible to develop pipelines. Pipelines are the cheapest way to move the oil, and yet we have to move the oil across the country by road and rail. Road and rail are more expensive than pipelines, are not as safe, and produce more pollution.

We are producing plenty of oil but have a hard time moving it because of the cost of transportation. This has meant that we truck it to the west coast and sell it at a massive discount in order to remain competitive.

In fact we produce more oil than we consume, but still have to import oil in Atlantic Canada because we can’t move it across the country. Using road and rail is expensive and so it is cheaper for us in Atlantic Canada to buy overseas oil than it is for us to buy Alberta oil, and the main supplier of Atlantic Canadian oil is Saudi Arabia. This makes absolutely no sense.

In fact — oil production has just been slowed down, in Alberta, because we are storing too much oil right now — Oil cuts a necessary evil for a province wounded by Ottawa

International Imports

At the same time that they making Saudi oil a better option than Canadian oil for Atlantic Canada, the Liberals are damaging relations with Saudi Arabia.

If Saudi Arabia manages to sever ties with Canada then Atlantic Canada will have to pay a premium for Alberta oil, and that will cost more than Saudi oil.

I do support standing up against human rights abuses, but we have to recognize the impact from that stance and plan for it. That’s what I have the most trouble with — a complete lack of planning on the part of the Liberals.

But what about the Carbon Tax?

The carbon tax is hard to justify, especially in Nova Scotia where we are expected to pay the highest carbon tax in the country. By 2022 we are expected to pay more than $1,120 per household per year in this tax. This estimate is based on the current cost of oil that we get from Saudi Arabia. But the carbon pricing is expected to increase, and so once it crosses $100 per tonne of CO2 we will be expected pay $2,240 per year.

If the price of oil goes up, because we have to truck it in from Alberta, then the carbon tax will go up as well.

We have also recently learned that the Liberals are planning to add HST to the Carbon Tax. This means that we will be paying a tax on a tax. Any increase in the cost of oil will increase the carbon tax and will also compound the HST that is charged on top of it.

Carbon Tax Estimate, per household, per year:

 Initially  Expected
 $ per tonne $50 $100
 Carbon Tax $1,120 $2,240
 With 15% HST $1,288 $2,576

The Liberal carbon tax has not been thought through except as a way to take more money of of the pockets of Canadians. There is no long term plan to fight pollution, but the Trudeau Liberals are able to say that they have done something.

It’s not the right thing. It doesn’t help Canadians now or in the future. It’s not going to achieve it’s stated goals. But the Liberals can say that they’ve done something.

The carbon tax will not achieve its stated goals because it will tax the consumer and not the producer. The price of something at the grocery store will go up because the cost of transportation will go up. The consumer has absolutely no control over the cost of transportation, but they will still have to pay for it. We can ship oil through a pipeline, which makes it safer and cheaper, but we can not do the same thing with apples. Apples have to be moved by truck or rail.

So what should we do?

We can’t sit around and wait for things to happen. I firmly believe that we have to balance our strengthening our economy while at the same time strengthening the environment. We do need to take action, but we need to take the right action and ensure that we will not damage either the economy or the environment. And that’s where the Liberals fail. Their action, without a lack of a plan, damages both.

  1. We should move forward with the development of pipelines. This should be recognized as a short term but necessary solution.
  2. We should invest more in the development of green energy. This investment should be done as tax credits rather than the government giving grants or loans to any company. By using tax credits that are measured against specific, achievable, and cumulative results we are encouraging companies to invest their own money.
  3. We should develop more infrastructure, as a nation, that supports sustainable or electric transportation and heat sources. For example by having electric trains (including cargo trains) that can run across the country we reduce or eliminate the need for diesel trains. We can then focus our infrastructure efforts on producing clean electricity.
  4. Those companies who use clean energy should receive tax credits. The net result of that change is that it still costs companies more, on their balance sheet, to use fossil fuels. It also means that a consumer is able to pay less to those companies who use the clean infrastructure.
  5. We should recognize that the development of this green energy and the infrastructure is going to take time, and we should develop a long term plan that incorporates the strategies listed above and others. The Liberal carbon tax has been released as an incomplete plan that nobody knows or understand the details of.

Conclusion

We can reduce our dependence on fossil fuels. We have to. But we have to develop and implement green energy responsibly. We also have to make sure that we don’t starve any part of Canada while we do this.

We have to move forward and strengthen both the environment and the economy. We can’t have a clean environment that nobody can afford to live in, and we can’t have a lucrative economy where nobody can breathe the air or drink the water. We have to move forward on both at the same time.

That is part of what I will work towards.

 

Sources:

Canada’s Oil Production, Export, and Import

Pipelines

Carbon Tax

Relations with Saudi Arabia

Canada’s Oil Suppliers