At first glance, the public hearing of Canada's National Energy Board that began on May 23rd involves only a minor matter. Enbridge, an energy distributor, wants permission to reverse the flow of Line 9, a duct of 195km (121 miles) which moves imported oil westward to petrochemical plants in Sarnia, Ontario. Instead, Enbridge wants the pipeline to carry light crude oil eastward, from Alberta and North Dakota to a refinery in Nanticoke, Ontario, and then to others in Quebec. But environmentalists in both Canada and the United States have filed petitions against the switch. They worry that, if it is approved, Line 9 will soon start moving oil from the Alberta tar sands to Montreal and then, if the flow of another pipeline is reversed, to Portland, Maine for export.
Oil production from the tar sands is set to rise from 2m barrels a day (b/d) to 3.3m by 2020, or from 58% to 72% of Canada's total oil output. Getting this oil to market is a mounting worry for Canada's energy industry and for Stephen Harper's Conservative government. That is because the necessary infrastructure is opposed both by local communities and by greens, who want to halt development of the tar sands. Per barrel, the extraction of oil from bitumen emits between three and four times as much carbon and other greenhouse gases as conventional oil does, according to the Pembina Institute, an environmental think-tank in Calgary. But other estimates are much lower.
The Line 9 hearing comes as two other potential routes for tar-sands oil face problems. The Obama administration has withheld approval of the Keystone XL pipeline, which would take oil to Gulf coast refiners. (TransCanada, Keystone's promoter, still hopes for approval.) Mr Harper has courted China as an alternative market for the oil, but that depends on approval of Enbridge's Northern Gateway project, a C$5.5 billion ($5.4 billion) 1,177km twin pipeline from Edmonton to Kitimat in British Columbia. The route crosses the land of 50 or so First Nations bands (indigenous tribes). More than 4,000 people have registered to speak at the environmental hearings, which began in January.
Last month another energy firm, Kinder Morgan, said it would spend $4.1 billion to double the capacity of the Trans-Mountain to Vancouver, the only existing line to Canada's west coast. It hopes to start work in 2016. Vancouver's mayor opposes the idea, worrying that tourism will be wrecked by tanker traffic and spills.
The government is pulling out all the stops to get these projects approved. The budget bill includes sweeping changes to the cumbersome procedures that govern environmental approval of energy projects. These now involve up to 40 federal departments and agencies. Under the bill, only those directly involved would be able to intervene in hearings; fishery habitat will no longer automatically be considered; and most assessments will have to be completed within 18 months. The federal government would have the power to overrule the energy board, but also to cede the assessment process to the provinces. These changes could quicken the prospects of big hydropower schemes in Manitoba, Labrador, British Columbia and Quebec, aimed at exporting electricity to the United States.
But pipelines are the government's priority. That is because natural-gas exports, long the mainstay of the energy industry, are threatened by shale gas in the United States (they have fallen by 5% over the past year). While there are legitimate environmental worries, replacing gas exports with tar-sands oil is vital for economic growth, argues Matthew Akman, an analyst at Scotiabank. Investment is pouring into the tar sands, but potential oil exports will outstrip pipeline capacity by 2015.
Unless, that is, existing pipelines are rejigged—and not just Line 9. TransCanada's 3,000km main line has carried Alberta's gas to Ontario and Montreal for more than 50 years, but now runs at less than half of capacity. Converting the line to oil, and adding a spur to a refinery at Quebec City, would cost more than C$5 billion and take several years. But it could still beat the Northern Gateway, and be politically more attractive. Refiners in eastern Canada currently use imported crude costing $20-30 a barrel more than western Canadian oil.
The budget bill also includes money to investigate whether green charities are engaging in political activities incompatible with their status. But there are risks—not least to Canada's international image—in demonising environmentalists. The arguments for developing the tar sands are strong, but the opponents cannot be simply shrugged aside.
Copyright 2012 The Economist Newspapers Ltd. All Rights Reserved.
(Originally published in the May 26, 2012, edition of The Economist.)