A day in the life of Danny D'Amours

Will Eastern Canada freeze in the dark?

Vulnerability of the East Coast

In one of my earlier posts, I pointed out the often overlooked fact that although Canada is a huge exporter of oil, it also imports a very large amount of crude from overseas as well. In fact all of Eastern Canada relies in imported crude oil for heating oil, diesel, gasoline and other petroleum products.

Earlier this month, Gordon Laxer from the University of Alberta wrote an article entitled Freezing in the dark – Canada needs Strategic Petroleum Reserves (SPR) which examines the vulnerability of Eastern Canada to oil supply shocks due to the lack of east-west pipelines. He points out that since Atlantic Canada and parts of Quebec are almost completely reliant on oil countries, geopolitical events which could disrupt supply could cause hardships for nearly half the country.

Are reserves the solution?

The piece continues on to propose as a solution a Canadian Strategic Petroleum Reserves as a buffer against possible future supply disruptions. The proposal of having a 90 day supply of imported oil (approx 76 million barrels) would reduce the impacts of the interruption of oil imports. Creating a Strategic Petroleum Reserves of this size would be quite costly. The crude oil alone would cost over $7 billion. In addition the added cost of maintaining and managing the reserves would quickly make this a costly endeavour.

Is better distribution of crude oil is the answer?

Another proposal put forward by Laxter is to reverse the flow of the current pipeline between Sarnia and Montreal (which currently flows westward and moves foreign oil into southern Ontario) in order to allow Western Canadian oil to flow to refineries in Montreal lessening the dependence on foreign oil and hence the impact of foreign disruptions. On the surface this sounds like a good idea but I imagine that reversing a large pipeline would cause capacity bottleneck and problems in other parts of the distribution network and so it might no be as simple as it sounds. A nice map of existing pipelines shows the existing structure of the distribution network.

I would suggest taking Laxter’s pipeline reversal idea a step furthur and propose an east-west pipeline connecting to refineries in Montreal, expanding to refineries in Quebec City and Saint John, NB and eventually expand the pipeline to the refinery in Dartmouth, NS. This course of action would allow refineries in Eastern Canada to have the option to use Western Canadian oil or to continue to import foreign oil. By having a pipeline in place however Canada would be more resistant to supply shocks as we could supply our own oil and thus be self-sufficient.

Is it feasible?

I will be the first to admit that the cost for such a pipeline would be huge with little immediate benefit but we can place a dollar figure on the risk reduction achieved. The 1000 kms for a pipeline from Montreal to Saint John would cost ~$2 billion but if we compare that cost to the Petroleum Reserves discussed above, this is not an overwhelming amount. Besides if we do experience a disruption in oil and Eastern Canada freezes in the dark, the cost will be much more than $2 billion.

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February 20th, 2008 Posted by Danny D'Amours | Atlantic Canada, Economics | 3 comments

3 Comments »


  1. Interesting article.

    Establishing emergency reserves probably makes more sense than trying to divert Alberta oil to New Brunswick and Nova Scotia. In the event of an international crisis, Alberta oil would be in great demand in the United States and fetching top dollar. Canadian trade agreements and long term contractual obligations might not even allow diversion of oil to eastern customers rather than to customers in the central United States.

    Thus, even if the pipeline capacity existed, it might not be possible to acquire oil to send eastward. Unless someone is proposing the return of the National Energy Policy, Alberta oil wouldn’t be any cheaper than whatever oil was available on the world market from Venezuela, Mexico, the middle east, etc.

    In an emergency, the focus would be on making sure people don’t freeze to death. If gasoline is in short supply, people may need to carpool or use public transit, where available. As long as prices are free to rise, the price mechanism will ration gasoline. I don’t think it is the government’s responsibility to ensure gasoline supplies.

    Although it would increase the risk of local fuel leaks, it might be best to simply encourage home owners heating with oil to install a second or third heating oil tank, and to stockpile firewood. That would see most people through a winter.

    Rather than extending oil pipelines to New Brunswick and Nova Scotia, money might be better spent on improving the distribution of natural gas in the maritime provinces and strengthening the electrical distribution system. In the event of a severe and protracted oil shortage in winter, many people would attempt to heat their homes with electric heaters, which would strain generating capacity and transmission and distribution systems in some areas.

    In Quebec, many people already heat with electricity, so Quebec would not be as seriously affected by an oil disruption in winter.

    I’m not sure how competitive the oil refinery in Dartmouth, Nova Scotia is. For all we know, it might be closed in five or ten years, in which case refined products, not crude, would be needed in N.S.

    Have you considered the option of keeping a fleet of rail tank cars under contract? Rail might be a satisfactory option for transporting oil or refined products in a short term emergency.

    Comment by sph | February 22, 2011


  2. I see someone in the industry shares my outlook for the Dartmouth refinery:

    Dartmouth Refinery Future Looks Bleak
    June 8, 2010

    http://www.en-pro.com/newsroom/pdfs/Dartmouth%20Refinery%20Future%20Looks%20Bleak-All%20of%20Nova%20Scotia-July-26-2010.pdf

    Comment by sph | February 23, 2011


  3. I agree with you, making an east-west pipeline seems like a great option. First it is good as a just in case so Eastern Canada can keep their heaters running. Second, I think it is a good idea to be as self sufficient as possible. It is better to prepare now than to wish you had later. Thanks for your post.

    Comment by Jordan Jorgenson | October 9, 2015

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