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).

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.

“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.”

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Despite the common misconception, many people in Quebec support Canada’s oil and gas industry – especially amid the growing global energy security crisis ignited by Russia’s invasion of Ukraine.

“(Russian President Vladimir) Putin has reminded us that the world must focus on peace through strength, before the naïve ‘Green’ agenda where surrender of our energy and natural resources is misguided,” says Leonard Gorski, CEO of Montreal-based fashion brand Gorski Group.

He says that oil and gas are essential to a robust Canadian economy – and Canadian independence – where ample supply and stable pricing benefits Quebec businesses.

While Quebec has virtually no oil and gas production of its own, the resources play an important role in the province’s economy. For example, Quebec is Canada’s second-largest market for refined petroleum products after Ontario, according to Canadian Energy Centre research.

Using customized data from Statistics Canada, CEC found that in 2017 the oil and gas sector supported over 20,000 jobs in Quebec and added nearly $1.8 billion to Quebec’s economy.

Calgary-based pipeline giant Enbridge, for example, reports that in 2021 it spent more than $79 million in Quebec on capital and operating costs like salaries, steel and equipment. The company had 122 permanent and temporary employees in Quebec last year.

Enbridge also paid about $2.9 million in corporate and property taxes across the province in 2021.

“This revenue can be used for schools, infrastructure (roads and bridges), health and wellness, recreation, transportation and other services that help strengthen the fabric of the community,” the company said.

MEI economist Miguel Ouellette says Quebec benefits when the West, and particularly Alberta, are doing well in the oilpatch.

“Right now in Quebec we do not produce any oil or natural gas. We import $5 billion a year worth of oil and gas, mainly from the West and from the northeast states of the United States. We’re buying everything,” he says.

He also points to Quebec’s benefits from federal equalization payments, where higher income provinces like Alberta contribute funds that are distributed to lower income provinces like Quebec.

Ouellette says there are trickle down effects into the overall Quebec economy from those equalization payments, which are about $11 billion to $12 billion per year.

“It’s big money and it’s money we use for our programs. It’s not something that we can just say ‘oh it doesn’t matter, we don’t need it,’” he says.

Ouellette says Quebec should develop its own resources – particularly natural gas – instead of banning development, as the provincial government has voted to do.

A new poll by MEI and Ipsos found that 52 per cent of Quebecers think their province should develop its own oil resources rather than importing all the oil it consumes, while just 28 per cent are opposed to this and 20 per cent are undecided.

“We are always looking for new money in Quebec. We’re saying the health care is expensive, the education system is expensive, then why don’t we exploit our own resources?” Ouellette says.

“There is money sleeping underground and I think with what we see in Ukraine, many countries will say that they don’t want Russian natural gas anymore. I think it’s an opportunity for Quebec to exploit and export our natural gas.”

For Gorski, the important work to reduce environmental impacts of Canadian oil and gas must be considered along with the benefits of the industry across the country and around the world.

“While we fashionably aspire to reduce the carbon footprint in all sectors, we must remain mindful that the hurried misguided assault on the oil and gas sector is not in Canadian or global interests,” he says.

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Customers in Quebec will soon use more natural gas from western Canada that is certified as being produced with excellence in environmental and social responsibility.

Énergir, Quebec’s main natural gas distributor, has reached a deal to purchase supply from Calgary-based Pacific Canbriam Energy. The agreement follows new certification for the producer by New York-based non-profit Equitable Origin, whose program was born out of concerns over oil development in the Amazon basin.

“It’s not an easy standard to achieve. Not everybody could achieve certification,” says Equitable Origin CEO Soledad Mills.

“I think typically a lot of stakeholders might paint the industry with one brush, whereas actually there’s quite a difference between operators. Some responsible operators are going above and beyond the minimum that they have to do for legal compliance, and really are implementing innovations and leadership in areas like greenhouse gas emissions reductions, methane monitoring, carbon capture, [and] community engagement.”

Pacific Canbriam is one of the companies showing leadership in these environmental, social and governance (ESG) measures, Equitable Origin’s assessment found.

It’s the second company that produces natural gas from the Montney region straddling Alberta and B.C. to receive the distinction, following Seven Generations Energy (now ARC Resources) in 2019.

Seven Generations also signed a deal to supply Quebeckers through Énergir, subsequently receiving a premium price from the distributor for its ESG-certified natural gas. Equitable Origin’s assessments of both operators are available online.

“I think that transparency gives our customers comfort, not only in the emissions data around our development, but also that we have a culture of trying to develop this responsibly,” says Pacific Canbriam CEO Paul Myers.

For example, Myers pointed to the company’s water recycling hub, in which it has invested about $100 million over the last 13 years. The hub enables reuse of up to 99 per cent of water produced during natural gas operations, and because of pipeline connections there is no need to truck around water and generate additional greenhouse gas emissions.

Pacific Canbriam is also replacing as much diesel as possible in its operations with lower emissions natural gas.

“The whole certification process really is just an audit of how you’re doing on the ESG front, and particularly the environmental [performance] in the field,” Myers says.

“It helped us identify areas where we can beef things up. It also demonstrated areas where we’re going above and beyond. And that’s just part of the culture we tried to instill from day one.”

Mills says that a global voluntary standard helps level the playing field for natural gas producers, helping companies that go above and beyond demonstrate their ESG credentials.

“I think companies are looking for ways they can demonstrate site level performance in a credible way that’s validated by third party, that it’s not them waving their own flag and saying, ‘look how great we are,’” she says.

Now it’s headed to Quebec, but by mid-decade Pacific Canbriam’s ESG-certified natural gas could be sold in global markets. The company is the supplier to the proposed Woodfibre LNG project near Squamish, B.C., which is expected to start operating around 2025.

Royal Dutch Shell forecasts that global demand for natural gas, traded as LNG, will double between 2020 and 2040, primarily driven by Asian economies moving off coal.

Mills says there are now 20 companies undergoing its assessment process in Canada and the United States, including EQT Energy, America’s largest natural gas producer.

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