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Opinion: Now do you see the value of pipelines?

Financial Post logo Financial Post 2021-05-14 Special to Financial Post
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There’s nothing like real life as a corrective to Disney-like musings, where fantasies are concocted absent any connection to reality.

The latest example comes from the ransomware attack against Atlanta-based Colonial Pipelines, which ships 100 million gallons of refined fuel daily. Colonial was hacked and extorted by an entity known as DarkSide. It locked the company out of its own network, which affected its ability to move fuel through its 5,500-mile pipeline network, which stretches from Houston to Linden, New Jersey. As of this writing, Colonial’s four main pipelines were just slowly coming back on line.

To give you some sense of the magnitude of the problem, 100 million gallons of fuel daily is nearly one-third of the 337 million  gallons of fuel used daily by American consumers, businesses and governments, and it’s 45 per cent of the fuel consumed on the East Coast.

Refined fuel — gasoline, diesel, propane — is used for every conceivable purpose. It powers automobiles so parents can commute to work and drop kids off at school. It enables trucks to deliver food, water, and medicines to 328 million Americans daily, via their stops at farms, factories, pharmaceutical plants, distribution warehouses, and ultimately grocery stores, pharmacies, and hospitals, among many other places. The 100 million gallons of fuel now interrupted are also critical to ships and airplanes, both commercial and for America’s military.

The U.S. Department of Transportation has issued a temporary waiver to allow fuel trucks to work much longer hours than normally allowed, so as to reduce disruption to the fuel supply chain. The exemption applies to many southern and northeast states, including Alabama and Arkansas and up to New York and Pennsylvania.

a screenshot of a computer:  Drivers wait in line to refuel vehicles at a Costco Wholesale Corp. gas station in Dunwoody, Georgia on Wednesday amid gas shortages after the pipeline cyberattack. © Elijah Nouvelage/Bloomberg Drivers wait in line to refuel vehicles at a Costco Wholesale Corp. gas station in Dunwoody, Georgia on Wednesday amid gas shortages after the pipeline cyberattack.

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The reality check in all this should be obvious: Pipelines are vital to the modern American economy. Reflexive opposition to them is nonsensical: demand for oil and gas is real, and the advantages of hydrocarbons mean other energy cannot replace them any time soon.

As energy transition expert Vaclav Smil has pointed out repeatedly, attempts to design “hypothetical road maps outlining complete elimination of fossil carbon from the global energy supply” are “nothing but an exercise in wishful thinking that ignores fundamental physical realities.”

The problem for Americans and Canadians alike is that such wish-upon-a-star thinking has become routine at the highest levels. In Canada, opposition to pipelines or pipeline routes has come from premiers in Quebec and British Columbia, as well as from the federal government, which has enacted onerous legislation (Bills C-48 and C-69) that act as a regulatory thicket to energy development and has also banned large tankers on the north coast of B.C.

In the United States, former president Barack Obama was the first to try to spike the cross-border Keystone XL pipeline, a move imitated by Joe Biden on his first day in office. In addition, Michigan’s governor has demanded a shutdown of Enbridge’s Line 5, which carries light oil and natural gas liquids between Superior, Wisconsin, and Sarnia, Ontario. That’s because it runs under the Straits of Mackinac — even though the existing pipeline has never leaked, and the replacement pipeline is to be buried even deeper under the lake and encased in cement.

There will be consequences if the governor’s directive to shut down Line 5 is successful, including not hiring up to 325 Michigan construction workers and others such as engineers for the replacement line (at salaries of between $60,000 to $200,000). Nor is there any way to replace the 540,000 barrels per day of light crude oil, light synthetic crude, and natural gas liquids that travel through Line 5, much of which is later refined into propane. Shutting off Line 5 would also reduce most capacity in refineries in Michigan, Ohio, Pennsylvania, Ontario, and Quebec. Those refineries, all served by Line 5, would receive 45 per cent less from Enbridge than their current supply of gas, diesel, and jet fuel.

Michigan alone would face a propane shortage of 756,000 US gallons per day, or 55 per cent of current supply, since there are no short-term alternatives for transporting natural gas liquids to market. Detroit International Airport would have to replace the half of its aviation fuel that currently comes from Line 5 via a Toledo refinery.

The ransomware attack against Colonial Pipelines has shown how critical pipelines are to American daily life and the U.S. economy. And yet too many politicians in both Canada and the U.S. continue to pursue the fantasy that their citizens do not need pipelines. The end result of their Disney-thinking — cancelled projects and shutdowns — will produce exactly the same outcomes as a ransomware attack.

Mark Milke and Lennie Kaplan are with the Canadian Energy Centre, an Alberta government corporation funded in part by carbon taxes. They are authors of the report, $5.8 Billion: A Michigan-Canada Energy Snapshot.


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