Energy East Will Not Live Again, Here’s Why – A Quebec Perspective: Jean-François Thibault

Russia’s invasion of Ukraine, which began on February 24, has reignited the debate in Canada over Canadian oil and natural gas exports to Europe.

Under the pretext of the risk posed by Europe’s (and in particular Germany’s) dependence on Russian gas, the Canadian oil and gas industry and its allies have been hammering home the same message in recent weeks: Canada could replace Russia as the supplier of oil and gas resources that Europe needs. This would benefit Europe, which geopolitically would have more sovereignty over Russia, which currently uses the profits from its gas sales to European countries to finance its war against Ukraine.

In the field of principles, this narrative makes sense. In practice, however, it involves reviving a debate that periodically comes up in the Canadian public space, namely that of building the infrastructure needed to export Canadian oil and gas resources.

An old debate

Access to foreign markets has been one of the two main issues facing the industry for a little over a decade, the other being obviously the climate issue. It is to remedy this resource export problem that several pipeline projects have been promoted since the 2010s, including the Northern Gateway, Keystone XL, Energy East and Trans Mountain projects. However, three of these four projects failed to see the light of day, with Trans Mountain remaining the only pipeline project still active. Four liquefied natural gas (LNG) export projects are currently being promoted in British Columbia on the natural gas side. The most advanced is the LNG Canada project, itself connected to the Coastal GasLink pipeline, which is a project that was recently the subject of a criminal  attack that threatened the lives of several employees.

Pipeline projects have a hard time in Canada, to say the least.  However, it should be noted that the projects that work in the face of adversity are all projects that involve only Alberta and British Columbia. In addition, exporting Canada’s oil and gas resources westward appears feasible, depending on the circumstances. However, it is not so much of interest if you want to export Canadian resources to Europe.

All in the east!

So, what about the options for exporting to the east? In short, they all failed. First, the Energy East pipeline project was abandoned in 2017. Then, in July 2021, the Quebec government rejected the GNL Québec project, which aimed precisely to export LNG to foreign markets, mainly Europe. Finally, although Pieridae Energy is currently considering reactivating its Goldboro project in Nova Scotia, nothing has been confirmed so far. Moreover, not only would it take years for the project to be implemented if it were authorized, but the gas pipeline supplying the liquefaction terminal would certainly cross Quebec, making it an essential stakeholder in the project. This, in the end, considerably reduces the chances of the project seeing the light of day.

If you believe that international policy considerations could turn the tide and allow pipelines to be built in Quebec, you are wrong! We are still talking here about a people who opposed conscription during the two world wars (yes, even the one against the Nazis). The Quebec provincial Legault government has also indicated (not surprisingly) that it will not reverse its decision on the GNL Québec project despite recent events in Ukraine. “The opinion given about GNL-Québec is final,” reiterated the office of the Minister of the Environment last March.

Quebec context

I did my master’s thesis on the Energy East pipeline project. I briefly served on the board of directors of an oil and gas exploration company with concessions in Quebec. I know better than many people the key issues developers face in Quebec. Let me tell you: in the current circumstances, no provincial or federal political party with a strong deputation in Quebec would be comfortable with the idea of authorizing a pipeline project crossing Quebec territory. This has less to do with Quebecers’ opinion of the hydrocarbon industry (which is not so negative, contrary to what one might think) than with the lack of political interest in defending projects that cannot be approved consensually without making waves.

Generally speaking, in Quebec, a provincial or federal political party that refuses an industrial project contested by a mobilized minority does not lose votes. Conversely, a party that approves a contested project has a good chance of losing votes, at least to have its environmental credibility attacked. As proof: in Quebec, Justin Trudeau’s Liberal government (federal) is more publicly criticized than that of the CAQ’s (provincial) in environmental matters. Why? The Trudeau government nationalized the Trans Mountain oil pipeline and approved the Bay du Nord oil project, while the Legault government did not approve anything like this, quite the contrary: on April 12, it adopted Bill 21 that closes the door to all oil and gas exploration in Quebec. Now imagine if Mr. Trudeau had approved projects crossing Quebec, such as Energy East…

Strategy

A collectivist Quebec culture partly explains Quebec’s distinct social and political context within Canada in energy matters. However, Quebec is also a relatively wealthy, therefore comfortable, and risk-averse society. No political party wishing to have electoral success in Quebec has an interest in demonstrating too great an appetite for projects perceived as risky.

On the other hand, while Canada’s oil and gas industry is a national one, its public relations have quite never been. The media presence in Quebec of organizations responsible for publicly defending the industry has never been solid nor constant. Some energy executives should ask themselves questions along these lines rather than blaming Quebecers they do not understand. Also, politicians risking out their reputation in Quebec to defend the industry should ask themselves if it is their duty (and in their interest) to do so.

Ultimately, Canadian energy companies and politicians who support the energy industry should strategically focus on projects to export hydrocarbon resources westward rather than eastward. It would be a wiser investment of their time, money and political capital, despite what some opinion leaders say these days.