‘Protection for Canada’: Ontario, Quebec rely on U.S. gas. Could they get it from Alberta?

Skip to Content News Archives Economy Energy Oil & Gas Renewables Electric Vehicles Mining Commodities Agriculture Real Estate Mortgages Mortgage Rates Finance Banking Insurance Fintech Cryptocurrency Work Wealth Smart Money Wealth Management Investor Personal Finance Family Finance Retirement Taxes High Net Worth FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials More Innovation Information Technology FP500 Podcasts Small Business Lives Told Tails Told Shopping Financial Post Store Obituaries Place a Notice Advertising Advertising With Us Advertising Solutions Postmedia Ad Manager Sponsorship Requests Classifieds Place a Classifieds ad Working Profile Settings My Subscriptions My Offers Newsletters Customer Service FAQ News Economy Energy Mining Real Estate Finance Work Wealth Investor FP Comment Executive Women Puzzmo Newsletters Financial Times Business Essentials This advertisement has not loaded yet, but your article continues below.HomeEnergyOil & Gas'Protection for Canada': Ontario, Quebec rely on U.S. gas. Could they get it from Alberta?Trade tensions exposed what analysts consider a vulnerability in domestic energy security: Eastern Canada’s reliance on U.S. natural gasLast updated 11 minutes ago A worker at a natural gas facility located atop the Marcellus shale rock formation in Washington Township, Pennsylvania. Natural gas exports from the U.S. account for “about two thirds of the natural gas Ontario and Quebec currently uses,” a Calgary-based expert says. Photo by Ty Wright/Bloomberg/FileEscalating trade tensions between Ottawa and Washington have exposed what analysts consider a vulnerability in domestic energy security: Eastern Canada’s heavy reliance on American natural gas.THIS CONTENT IS RESERVED FOR SUBSCRIBERS ONLYSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman, and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.SUBSCRIBE TO UNLOCK MORE ARTICLESSubscribe now to read the latest news in your city and across Canada.Exclusive articles from Barbara Shecter, Joe O'Connor, Gabriel Friedman and others.Daily content from Financial Times, the world's leading global business publication.Unlimited online access to read articles from Financial Post, National Post and 15 news sites across Canada with one account.National Post ePaper, an electronic replica of the print edition to view on any device, share and comment on.Daily puzzles, including the New York Times Crossword.REGISTER / SIGN IN TO UNLOCK MORE ARTICLESCreate an account or sign in to continue with your reading experience.Access articles from across Canada with one account.Share your thoughts and join the conversation in the comments.Enjoy additional articles per month.Get email updates from your favourite authors.THIS ARTICLE IS FREE TO READ REGISTER TO UNLOCK.Create an account or sign in to continue with your reading experience.Access articles from across Canada with one accountShare your thoughts and join the conversation in the commentsEnjoy additional articles per monthGet email updates from your favourite authorsSign In or Create an AccountWhile Western Canada holds claim to an abundance of natural gas, millions of homes and industrial plants in Ontario and Quebec depend on short-haul imports from Pennsylvania and Ohio. It’s a trade dynamic that analysts warn leaves the country’s most populous region directly in the crosshairs of cross-border tariff disputes.According to the Canada Energy Regulator, U.S. natural gas exports into Canada average close to three billion cubic feet per day. Ninety percent of it enters Ontario and Quebec.Get the latest headlines, breaking news and columns.By signing up you consent to receive the above newsletter from Postmedia Network Inc.A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try again“That represents about two thirds of the natural gas Ontario and Quebec currently uses,” said Dulles Wang, a Calgary-based director on global consultancy Wood Mackenzie’s natural gas and LNG research team.“And it didn’t use to be this way.”The change has turned what was once a routine, cost-saving trade partnership into what some view as a burgeoning energy security issue.“With President Trump waging an economic war against Canada, the status quo is no longer acceptable,” said Stephen Lecce, Ontario’s Minister of Energy and Mines, in a statement to the Financial Post.Alberta Premier Danielle Smith agrees. “[Alberta] used to sell almost one hundred per cent of the natural gas Eastern Canada used back in the early 2000s,” she said in a news conference last week.“And if they were able to get one hundred per cent of their gas from us before, they can do it again. Maybe it’s time for us to talk about how we might restore some of that production from Western Canada to get it out East.”Ideas on how Canada can achieve energy security abound. But first, policy makers have to define what they need by the term, Wang said.“Are we talking about energy flows coming through the U.S, and back into Canada?” Wang said. “Or are we talking about transporting the molecules only through Canadian territory?”Today, Canadian natural gas moving west-to-east takes a path that partly snakes its way through the states. “Therefore, we are not just talking about Alberta gas being sold into Ontario. We are also talking about what path it takes to get there,” said Wang.Beyond those questions, other, bigger ones remain: Is the current trade dispute a temporary blip on the geopolitical radar, or evidence of a more profound restructuring of trade relations between Canada and the U.S.?And if Canada decides energy security is in fact a top priority, what are the mechanics of achieving that end?The decision to boost American natural gas imports into Eastern Canada was driven almost entirely by cold, hard market economics. Natural gas from Pennsylvania, West Virginia and Ohio’s Marcellus and Utica formations — collectively part of the Appalachian sedimentary basin — travels roughly 800 kilometres north into southern Ontario via a storage hub near Sarnia.This advertisement has not loaded yet.This advertisement has not loaded yet, but your article continues below.Natural gas from Alberta, on the other hand, must travel over 3,000 kilometres to reach the same delivery point. Short-haul pipeline tolls for importing Appalachian gas across the U.S. border are a fraction of the transport cost.What’s more, over the past 15 years, as U.S. natural gas imports grew, some parts of TC Energy Corp.’s northern Mainline system — Canada’s largest pipeline — were repurposed, under-utilized or decommissioned. To completely replace Appalachian volumes, TC Energy and local utilities would need to invest large amounts of capital in upgrades.All told, undoing the trade relationship could cost billions in capital infrastructure and higher ongoing delivery tolls. “The financial burden would therefore fall on Ontario and Quebec homes, businesses and industrial energy consumers,” Wang said.Other analysts argue that these issues are bumps in the road, not dealbreakers.“More pipeline infrastructure gives additional flexibility and tactics in trade negotiations,” said Jeremy McCrea, managing director of equity research at BMO Capital Markets. “It’s a good idea to reduce the risk of energy becoming a bargaining chip. More pipelines in general would provide comfort and protection for Canada.”The current political climate may be enough to convince policy makers to restart cancelled pipeline projects.Back in 2013, TC Energy proposed converting parts of its under-used Mainline system into an oil pipeline – Energy East – which would have moved Western heavy crude to refineries in Eastern Canada.Given that the project would have reduced gas transport capacity to Eastern Canada, TC Energy had also proposed the Eastern Mainline project, a natural gas pipeline in Ontario and Quebec to ensure continued gas delivery to Eastern consumers.The company abandoned the entire project in 2017, however, due to changing market conditions, low oil prices, stiff opposition from municipal and Indigenous communities and Trudeau-era environmental regulations.Canada could also explore government subsidies to incentivize new pipelines. “It comes down to deciding what problem we want to solve,” said Gitane De Silva, a Calgary-based public policy analyst and a former chief executive of the Canada Energy Regulator.“If we want to prioritize energy security over market economic forces, we can achieve that goal. But only if there is enough political will to incentivize that change.”Notice for the Postmedia NetworkThis website uses cookies to personalize your content (including ads), and allows us to analyze our traffic. Read more about cookies here. By continuing to use our site, you agree to our Terms of Use and Privacy Policy.