Could Enbridge Line 5 trouble restart Energy East?

The Canadian Association of Oilwell Drilling Contractors (CAODC) held a virtual town hall Feb. 9 with Saskatchewan Minister of Energy and Resources Bronwyn Eyre, speaking about items like how Enbridge’s Line 5 trouble with Michigan could restart discussion on an Energy East-type project, and recent energy developments in Saskatchewan.

CAODC CEO Mark Scholz spoke from Calgary with Eyre, who was in Saskatoon, in an online format.

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Eyre said, “We all know we need pipelines and last year, the lack of Western Canadian pipeline access to tidewater cost Saskatchewan oil producers around $900 million; cost the government of Saskatchewan about $50 million in lost royalty tax revenue, and of course that's hospitals and highways and social services and schools.”

She said the province has to continue to oppose federal policies that impose significant additional costs on the oil and gas sector, with marginal environmental benefits in many cases. An example she gave was the Clean Fuel Standard, which she said will have a major impact on the energy, agriculture and manufacturing sectors. It will also impact regular Canadians, heating their homes and filling their cars.

“The Clean Fuel regulations will result in an estimated increase in gasoline costs of up to 11 cents per litre, and diesel costs of up to 13 cents per litre by 2030. That clearly hits where it hurts on transportation, certainly. In Saskatchewan, based on current consumption volumes, that impact equates to roughly $710 million on Saskatchewan residents by 2030, and they’re huge numbers: $400 million from diesel consumption, $310 million from gas consumption.”

Eyre said Saskatchewan is concerned about the “flawed data the federal government is relying on, and the utter lack of consultation taking place between provinces leading up to the gazetting before Christmas. “

On the court battle with the federal government regarding the carbon tax, Eyre said, “The federal carbon tax is another obvious, well-documented challenge facing our oil and gas sector and as you know, our government is committed to fighting it. We're anxiously awaiting the decision from the Supreme Court.”

Eyre spoke of how Saskatchewan is working its way through the periodic table. North American Helium is expected to complete its helium processing plant near Battle Creek, in the extreme southwest corner of the province. Prairie Lithium Corp. and LiEP Energy Ltd. are working together to produce lithium hydroxide from Saskatchewan oilfield brines. They have a two-stage pilot project underway, using produced water from a waterflood project.

Work continues on the Deep Earth Energy Production Corp. geothermal project near Torquay, using oil and gas workers and services.

Eyre provided an update on the Accelerated Site Closure Program, applying $400 million of federal funding toward the abandonment and reclamation of up to 8,000 inactive oil and gas wells and facilities.

“The program has engaged 98 licensees, 307 Saskatchewan-based service companies to date, and as of last month, the program had completed 724 well abandonments, 175 flowline abandonments, 39 facility decommissions and 1,434 site remediation and reclamation activities. So, that work goes on and certainly we're urging companies to work with us, work with the Saskatchewan Research Council to finalize invoicing, so that we can get that money out the door and continue to flow the program.”

Scholz touched on the cold snap gripping the prairies, saying, “If we don’t have energy to heat our homes, we’re in a lot of trouble.”

Eyre responded, “As I say, fossil fuels have to be our friends for a lot longer than maybe people realize. And on days such as this, when you actually have that sense of survival mode, you know, as the old weather advisory frostbite will occur within seconds. But really, you could freeze. It is true. It really brings home, what we can't be glib about, and can't take for granted. We understand that, you know, we're in climates where it gets really cold.”

She touched on Michigan’s plan to shut down Enbridge’s Line 5, which takes Western Canadian oil and natural gas liquids through Michigan to supply Michigan, Ohio, southern Ontario and Quebec. Eyre said, “Look at the Enbridge Line 5 discussion, and what theoretically is at risk there, and in terms of energy flow. But what that means is that we're actually cut off. I don't know if that's really settled in people, or if they've completely realized.

“You know, it's the old turn off the taps thing, right? I mean, when you really think about what that would mean. And here we are seeing literal threats about that.”

Scholz said, “It would be an absolute crisis.”

He added, “If we don't get this, right, if we don't start thinking a little bit more critically and focused on Canada, and how we ensure we have energy, secure supply, things could get carried away.”

Scholz wondered if the Line 5 issue could re-open the concept of an Energy East pipeline. Eyre said, “I think we were all very attuned to that all of a sudden. Whether Quebec is or not, I don't know. I mean, they're clearly alarmed. I would think about the risks to them. And there are certain ironies, I guess, to them, aren't there? I mean, in light of what they said about Western Canadian energy, not very long ago, and their position on Energy East, that they’re so dependent on the infrastructure they have, where that goes, in terms of restarting that discussion.”

She said there’s certainly will within Saskatchewan and Alberta to get that discussion going.

The recent brouhaha over Regina city council considering blocking fossil fuel companies from advertising on city properties was brought up as an example by Scholz, who wondered if the industry is doing something wrong with its communication strategy.

Eyre responded, “There's a terrible danger of being glib about the impact on people. When one tosses out ideas about transition, without thinking really through some of the actual layers to that the cost to that, but also the cost to families, to communities and so on.”

She said there’s been a lot of upheaval in the last few years in oil and gas, as well as the transition out of coal, plus the cancellation of Keystone XL affecting thousands of workers. “I think people have to think twice when they make statements about transition. And they have to think twice about what that's actually impacting,” Eyre said.

She added, “I sense that the federal government has kind of reconciled themselves to this Keystone decision,” adding it may be “overly passive.”

Eyre said 300 companies and 30,000 people are employed directly and indirectly by the sector. Oil and gas accounts for about 15 per cent of Saskatchewan’s gross domestic product.

“We want to get people back to work. We want to recover from the pandemic and in return to growth,” Eyre said.

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