From the Canadian Energy Centre

By Deborah Jaremko

ARC Energy Institute leaders highlight the need for a new approach in a new reality

Despite Canada’s status as one of the world’s largest oil and gas producers, more than half of the country’s own population does not have true energy security – uninterrupted, reliable access to the energy they need at an affordable price.

Even though Western Canada produces much of the oil consumed in Ontario and Quebec, in order to get there, it moves on pipelines that run through the United States.

“It’s only energy secure if the Americans are our partners and friends,” leading energy researcher Jackie Forrest said on a recent episode of the ARC Energy Ideas podcast.

Amid rising trade tensions with the United States, energy security is taking on greater importance. But Forrest said the issue is not well understood across Canada.

“The concern is that in the worst-case scenario where the Americans want to really hurt our country, they have the ability to stop all crude oil flows to Ontario,” she said.

That action would also cut off the majority of oil supply to Quebec.

The issue isn’t much better for natural gas, with about half of consumption in Ontario and Quebec supplied by producers in the U.S.

“Tariffs or no tariffs, there is a real vulnerability there,” said Forrest’s co-host Peter Tertzakian, founder of the ARC Energy Research Institute.

The issue won’t go away with increased use of new technology like electric cars, he said.

“This isn’t just about combustion in engines. It’s about securing a vital commodity that is an input into other parts of our manufacturing and sophisticated economy.”

Oil: The Enbridge Mainline

The Enbridge Mainline is the main path for oil from Western Canada to reach refineries in Ontario and Quebec, according to the Canadian Association of Petroleum Producers (CAPP).

Originating in Edmonton, Alberta, the Enbridge Mainline moves crude oil, refined products, and natural gas liquids through a connected pipeline system. At Superior, Wisconsin, the system splits into Line 5, going north of Lake Michigan, and Lines 6, 14, and 61, going around the southern tip of the lake. The two routes then coalesce and terminate in Sarnia, Ontario, where it is interconnected with Line 9, which is terminated in Montreal, Quebec. Source: Canadian Association of Petroleum Producers

Originally built in 1950 from Edmonton to Superior, Wisconsin, in 1953, it was extended to Sarnia, Ontario through a segment known as Line 5.

CAPP said that at the time, politicians had pushed for an all-Canadian path north of the Great Lakes to increase energy security, but routes through the U.S. were chosen because of lower project costs and faster timelines.

In 1979, an extension of the pipeline called Line 9 opened, allowing oil to flow east from Sarnia to Montreal.

“Line 9 was built after the oil crisis and the OPEC embargo as a way to bring western Canadian crude oil into Quebec,” Forrest said.

But by the 1990s – before the massive growth in Alberta’s oil sands – there was a lack of crude coming from Western Canada. It became more economically attractive for refineries in Quebec and Ontario to import oil from overseas via the St. Lawrence River, CAPP said.

A reversal in 1999 allowed crude in Line 9 to flow west from Montreal to Sarnia.    

By the 2010s, the situation had changed again, with production from the Alberta oil sands and U.S. shale plays surging. With more of that oil available, the offshore crude was deemed to be more expensive, Forrest said.

In 2015, Line 9 was reversed to send oil east again from Sarnia to Montreal, displacing oil from overseas but not resolving the energy security risk of Canadian pipelines running through the U.S.

CAPP said the case of Line 5 illustrates this risk. In 2020, the Governor of Michigan attempted to shut down the pipeline over concerns about pipeline leak or potential oil spill in a seven-kilometre stretch under the Straits of Mackinac.

Line 5 has been operating in the Straits for 72 years without a single release.

Enbridge is advancing a project to encase the pipeline in a protective tunnel in the rock beneath the lakebed, but the legal battle with the State of Michigan remains ongoing.

Natural gas: The TC Canadian Mainline

The natural gas pipeline now known as TC Energy’s Canadian Mainline from Alberta was first built in 1958.

The TC Canadian Mainline (red dashed line) transports natural gas produced in Western Canada to markets in Eastern Canada. Red lines show pipelines regulated by the Canada Energy Regulator, while black lines show pipelines regulated by the United States. Source: Canadian Association of Petroleum Producers

“This pipeline brought gas into Ontario, and then it was extended to go into Quebec, and that was good for a long time,” Forrest said.

“But over time we built more pipelines into the United States, and it was a better economic path to go through the United States.”

The Mainline started running not at its full capacity, which caused tolls to go up and made it less and less attractive compared to U.S. options.

According to CAPP, between 2006 and 2023 the Mainline’s deliveries of gas from Western Canada to Ontario and Quebec were slashed in half.

“We should have said, ‘We need to find a way for this pipeline, over our own soil, to be competitive with the alternative’. But we didn’t,” Forrest said.

“Instead, we lost market share in Eastern Canada. And today we’re in a big bind, because if the Americans were to cut off our natural gas, we wouldn’t have enough natural gas into Quebec and Ontario.”

A different approach for a new reality

Forrest said the TC Mainline, which continues to operate at about half of its capacity, presents an opportunity to reduce Canada’s reliance on U.S. natural gas while at the same time building energy security for oil.    

“Those are the same pipes that were going to be repurposed for oil, for Energy East,” Tertzakian said.

“The beauty of the thing is that actually, I don’t think it would take that long if we had the will… It’s doable that we can be energy secure.”

This could come at a higher cost but provide greater value over the long term.

“That’s always been the issue in Canada, when it comes to energy, we always go with the cheapest option and not the most energy secure,” Forrest said.

“And why? Because we always trusted our American neighbor to never do anything that will impact the flow of that energy. And I think we’re waking up to a new reality.”

From the Canadian Energy Centre

By Grady Semmens

Expansion work underway takes on greater importance amid trade dispute

Last April, as the frozen landscape began its spring thaw, a 23-kilometre stretch of newly built pipeline started moving natural gas across northwest Alberta.

There was no fanfare when this small extension of TC Energy’s Nova Gas Transmission Limited (NGTL) system went online – adding room for more gas than all the homes in Calgary use every day.

It’s part of the ongoing expansion of the NGTL system, which connects natural gas from British Columbia and Alberta to the vast TC Energy network. In fact, one in every 10 molecules of natural gas moved across North America touches NGTL.

With new uncertainty emerging from Canada’s biggest oil and gas customer – the United States – there is a rallying cry to get new major pipelines built to reach across Canada and to wider markets.

Canada’s Natural Resources Minister Jonathan Wilkinson recently said the country should consider building a new west-east oil pipeline following U.S. President Donald Trump’s threat of tariffs, calling the current lack of cross-country pipelines a “vulnerability,” CBC reported.

“I think we need to reflect on that,” Wilkinson said. “That creates some degree of uncertainty. I think, in that context, we will as a country want to have some conversations about infrastructure that provides greater security for us.”

Many industry experts see the threat to Canada’s economy as a wake-up call for national competitiveness, arguing to keep up the momentum following the long-awaited completion of two massive pipelines across British Columbia over the last 18 months. Both of which took more than a decade to build amidst political turmoil, regulatory hurdles, activist opposition and huge cost overruns.

On May 1, 2024, the Trans Mountain pipeline expansion (TMX) started delivering crude oil to the West Coast, providing a much-needed outlet for Alberta’s growing oil production.

Several months before that, TC Energy finished work on the 670-kilometre Coastal Gaslink pipeline, which provides the first direct path for Canadian natural gas to reach international markets when the LNG Canada export terminal in Kitimat begins operating later this year.

TMX and Coastal GasLink provide enormous benefits for the Canadian economy, but neither are sufficient to meet the long-term growth of oil and gas production in Western Canada.

More oil pipeline capacity needed soon     

TMX added 590,000 barrels per day of pipeline capacity, nearly tripling the volume of crude reaching the West Coast where it can be shipped to international markets.

In less than a year, the extra capacity has enabled Canadian oil production to reach all-time highs of more than five million barrels per day.

More oil reaching tidewater has also shrunk the traditional discount on Alberta’s heavy oil, generating an extra $10 billion in revenues, while crude oil exports to Asia have surged from $49 million in 2023 to $3.6 billion in 2024, according to ATB analyst Mark Parsons.

With oil production continuing to grow, the need for more pipeline space could return as soon as next year, according to analysts and major pipeline operators.

Even shortly after TMX began operation, S&P Global analysts Celina Hwang and Kevin Birn warned that “by early 2026, we forecast the need for further export capacity to ensure that the system remains balanced on pipeline economics.”

Pipeline owners are hoping to get ahead of another oil glut, with plans to expand existing systems already underway.

Trans Mountain vice-president Jason Balasch told Reuters the company is looking at projects that could add up to 300,000 barrels per day (bpd) of capacity within the next five years.

Meanwhile, Canada’s biggest oil pipeline company is working with Alberta’s government and other customers to expand its major export pipelines as part of the province’s plan to double crude production in the coming years.

Enbridge expects it can add as much as 300,000 bpd of capacity out of Western Canada by 2028 through optimization of its Mainline system and U.S. market access pipelines.

Enbridge spokesperson Gina Sutherland said the company can add capacity in a number of ways including system optimizations and the use of so-called drag reducing agents, which allow more fluid to flow by reducing turbulence.

LNG and electricity drive strong demand for natural gas

Growing global demand for energy also presents enormous opportunities for Canada’s natural gas industry, which also requires new transportation infrastructure to keep pace with demand at home and abroad.

The first phase of the LNG Canada export terminal is expected to begin shipping 1.8 billion cubic feet of gas per day (Bcf/d) later this year, spurring the first big step in an expected 30 per cent increase in gas production in Western Canada over the next decade.

With additional LNG projects in development and demand increasing, the spiderweb of pipes that gathers Alberta and B.C.’s abundant gas supplies need to continue to grow.

TC Energy CEO Francois Poirier is “very bullish” about the prosect of building a second phase of the recently completed Coastal GasLink pipeline connecting natural gas in northeast B.C. to LNG terminals on the coast at Kitimat.

The company is also continuously expanding NGTL, which transports about 80 per cent of Western Canada’s production, with more than $3 billion in growth projects planned by 2030 to add another 1 Bcf/d of capacity.

Meanwhile Enbridge sees about $7 billion in future growth opportunities on its natural gas system in British Columbia.

In addition to burgeoning LNG exports from Canada, the U.S. and Mexico, TC Energy sees huge potential for gas to continue replacing coal-fired electricity generation, especially as a boom in power-hunger data centres unfolds.

With such strong prospects for North America’s highly integrated energy system, Poirier recently argued in the Wall Street Journal that leaders should be focused on finding common ground for energy in the current trade dispute.

“Our collective strength on energy provides a chance to expand our economies, advance national security and reduce global emissions,“ he wrote in a Feb. 3 OpEd.

“By working together across North America and supporting the free flow of energy throughout the continent, we can achieve energy security, affordability and reliability more effectively than any country could achieve on its own.”