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Joel Wood is a senior research economist with the Fraser Institute in Vancouver and author of the forthcoming study “Lifting the Moratorium: The Costs and Benefits of Offshore Drilling in British Columbia.”
Feds should horse-trade for Northern Gateway
Following the U.S. government’s delay in approving the much-hyped Keystone XL pipeline, many pundits turned their attention to the possibility of a new pipeline from the oil sands to B.C.’s West Coast that would allow Canada to ship larger amounts of oil to world markets, which currently offer a premium price relative to the U.S. Midwest.
Securing higher prices for oil sands oil would bring tremendous economic benefits to Canada. However, as is often the case in a federalist country, domestic provincial considerations have complicated the viability of the proposed Northern Gateway pipeline project, which would bring oil from northern Alberta to Kitimat on the B.C. coast.
One major barrier to the development of the Northern Gateway pipeline, as well as a second pipeline from Alberta to Vancouver, is the parochial interests of B.C.’s premier, Christy Clark, who has demanded a “fair share” of the benefits from the pipeline. Constitutionally, the premier has little to no ability to block the pipeline. However, politically she has a big microphone and is using it, particularly as she is facing re-election next year with dim prospects and an electorate and opposition party generally opposed to the pipelines.
To date, the federal government has remained relatively silent. However, the stated interests of the feds for Canada to become an “energy superpower” may coincide with a possible solution to the “fair share” problem. Since 1972, there has been a federal moratorium on offshore oil and gas activity in B.C. The moratorium is not legislated but rather informal in that the federal government simply refuses to issue permits for offshore activity. The moratorium is so strict that it prevents basic scientific testing such as seismic surveys.
The potential size of offshore oil and gas in B.C. is substantial. A probabilistic assessment of B.C.’s offshore resource potential by the Geological Survey of Canada roughly suggests 9.8 billion barrels of oil and 43.4 trillion cubic feet of natural gas. In regards to oil, this endowment is similar to estimates for the coastal plain of the Arctic National Wildlife Refuge (ANWR) in Alaska.
However, a 2004 report by the Royal Society of Canada indicates that many of the environmental questions that need to be answered prior to offshore drilling cannot be answered without lifting the moratorium. In other words, even the most basic steps necessary to assess the actual size and viability of the offshore resources are prevented by the moratorium.
Herein lies the opportunity. In exchange for the B.C. government’s support of the Northern Gateway pipeline (and perhaps others), the federal government could lift this informal moratorium so that further information about the extent of B.C.’s offshore resources can be determined. Developing these resources will likely produce substantial economic benefits to B.C.
For the rest of this column, please go to the National Post website: http://opinion.financialpost.com/2012/09/27/open-b-c-s-offshore/