And Then We Wonder Why.....

Ever wonder about free trade?

Ever wonder why, with all the oil produced in Canada, gas prices continue to climb and climb?

Hey, have you ever wondered (you'd probably have to live in NL to do so but...) why we can never advance as a province on a fiscal front?

Hell, you know something, in reality the following, from the Toronto Star, does'nt just tell the story of a messed up reality, it tells the story of a Canadian government bought off by corporate interests and more than willing to sacrafice the people of the nation.

Synopsis: NL is not allowed to sell oil to the rest of Canada and, when it comes to a dependable oil supply, Atlantic Canada is on its own.

Read on:

From The Toronto Star:...

Yes, we know Newfoundland has oil. But...it doesn’t have as much as we tend to think.

And what it does have is running out pretty fast. There are hopes in Newfoundland that some recent deepwater discoveries will soon bring new sources of oil online, but that oil is very, very deep in treacherous waters and it still has to be determined if enough can be reached and retrieved to make the investment worthwhile.

That explains, in large part, why Newfoundland and Nova Scotia last year made the historic decision to build an undersea power line from the vast hydro-electric resources of Labrador to the vast, power-hungry markets of the U.S. East Coast. Newfoundland’s offshore oil may run out in a few decades, but hopefully the raging rivers of Labrador will keep pumping water through hydro dams far into the future.

Just under half of Newfoundland’s (roughly) 300,000-barrel-a-day offshore oil production is processed at Newfoundland’s sole refinery at Come By Chance. The rest is shipped directly by tanker to refineries in the U.S.

The Come By Chance refinery was built in the early 1970s by American entrepreneur John Shaheen, who finagled a huge amount of financial backing from Joey Smallwood’s provincial government. The refinery processed crude shipped in from the Middle East at the time.

By 1976 — overwhelmed by the OPEC Arab oil boycott and astronomical price increases for crude — Shaheen’s company was bankrupt and the refinery was shut down at great loss to Newfoundland taxpayers.

In 1980, the $120-million refinery was bought for $10 million by the Canadian government through Petro-Canada, just to get it out of limbo.

The refinery was not reopened until 1986 when Petro-Canada sold it to Bermuda-based Newfoundland Processing (later Energy) Ltd. for the princely sum of $1 (that’s one dollar).

But here’s the really incredible part: A condition of sale was that Newfoundland Processing and any subsequent owners were forbidden FOREVER from selling oil products from the Come By Chance refinery to ANY Canadian market apart from Newfoundland & Labrador.

As a result, to this day, about 10% of the oil refined at Come By Chance supplies the Newfoundland & Labrador domestic market, while the other 90% is shipped directly to the U.S. Not a drop goes to Nova Scotia, New Brunswick, P.E.I., Quebec or Ontario.

Incredible, eh?

I don’t know for sure why that strange codicil was added to the sales agreement, but I am fairly confident in deducing that it was as a result of pressure from the private owners of refineries in Halifax, Saint John and Montreal who didn’t want a taxpayer-dollar-leveraged Newfoundland refinery cutting into their markets in the Maritimes and Quebec.

Perhaps it made sense at the time (I think not) but what it did do was cut off Eastern Canada from oil produced in Eastern Canada.

And where, exactly, does the oil come from that feeds those refineries in Halifax (Dartmouth, actually), Saint John and Montreal?

Why, it comes from all those dangerous places in the Middle East, Africa and South America that the U.S. is trying so desperately to steer clear of by glutting itself on Canadian oil.

The Eastern Canadian refineries used to get most of their oil from British and Norwegian sources in the North Sea and from the Persian Gulf states, but as those sources dry up or become more troubled, the refineries in Dartmouth, Saint John and Montreal have turned more and more to places like Libya (shiver), Nigeria, Angola, Venezula and Mexico.

Getting back to the Come By Chance refinery for a moment, it was sold in 1994 to the Vitol Refining Group, after which its name was changed to North Atlantic Refining Ltd.

In 2006, the refinery was sold to Alberta-based Harvest Energy and, in 2009, Harvest in turn sold North Atlantic Refining to the Korean National Oil Corporation, owned by the South Korean government.

So you’ve got the only oil refinery processing Newfoundland crude owned by the South Korean government, while the other oil refineries in Eastern Canada process oil pumped from wells located halfway around the world.

It’s enough to make you shake your head, as dear old Lloyd Robertson would say.

Skipping over to the other Atlantic Canada refineries, the one in Dartmouth, N.S., is owned and operated by Imperial Oil while the one in Saint John, N.B., was built in 1960 by the Irving family empire, the dominant economic force in New Brunswick in the 20th Century.

The Irving Oil refinery is the largest in Canada, daily processing more than 250,000 barrels of crude from the Persian Gulf, the North Sea and Venezula. The Irvings have their own fleet of tankers to bring the oil to Saint John, where the refinery dominates the city.

And now the multi-billion-dollar question: Why is Canada importing a million barrels of oil a day from other countries when it’s got its own oil supply?

Mainly because the same pipeline builders who decided to run “our” national pipeline through the United States also decided it was not economically viable to extend the InterProvincial pipeline to the Maritimes when its second leg — from Sarnia, Ont., to Montreal — was built in the mid-1970s. Which is really weird, seeing as how the pipeline extension was ordered by the Canadian government on national security grounds after the scare of the OPEC Arab oil boycott.

I think the decision may also have been affected by the Irving family’s determination that the Irving empire would retain greater control over oil flowing into the Maritimes if the oil kept coming by ship instead of pipeline. And I think the Irvings also determined they could get crude oil cheaper elsewhere in the world than from Western Canada. I guess nobody wants to be a hostage to a single provider. I always hated being a hostage of the monolithic Irvings when I lived in New Brunswick.

I’ll get back to oil pipelines and where Quebec and Ontario stand, oil-wise, in a minute, but I want to round off the Atlantic Canada discussion first.

There is one other major oil facility in Atlantic Canada, the super port at Port Hawkesbury, N.S., created accidentally as a year-round ice-free deep-water port by the construction of the Canso Causeway connecting Cape Breton with mainland Nova Scotia.

The Canso super port, however, has virtually nothing to do with Canada. It is almost exclusively a transshipment point to move oil delivered from the Middle East and Africa by massive supertankers to smaller vessels that then deliver the oil to U.S. East Coast refinery ports that can’t accommodate the ultra-large crude oil tankers.

Now let’s move on to Quebec

As I said a little while ago, the Interprovincial pipeline was pushed through from Sarnia to Montreal in 1975-76 at the behest of the federal government.

At the time, the Montreal area had four oil refineries. That number dropped to three, then two and finally one when Shell ceased processing operations at its refinery at the end of 2010.

Now Montreal’s only refinery is the Suncor facility (Petro-Canada before it was absorbed by Suncor in 2009).

And where does the Montreal Suncor refinery oil come from?

It comes by pipeline, but not from Western Canada.

Because the flow of more expensive oil from Alberta to Montreal had slowed to a trickle by the early 1990s. The eastbound pipeline was finally shut down in the mid-’90s and in 1999, the flow was reversed to carry overseas oil westward from Montreal as far as Sarnia.

Crude oil for the Montreal refinery and the westbound flow to Sarnia is from all the usual Mideast, African and South American suspect countries. The oil is delivered by tanker to the deepwater port of Portland, Maine, then pumped north through the Portland-Montreal Pipe Line.

The original Portland-Montreal lines were built during World War II when German U-boat activity in the Gulf of St. Lawrence was strangling the supply of overseas oil to Canada. Since Alberta’s major oil deposits weren’t discovered until after the war, the safe overland pipeline route from then-neutral U.S.A. was the best way to feed the war industries of Quebec and Ontario.

But times change.

As Alberta oil has become more competitive economically — and definitely more secure — new pipeline reversals are the order of the day.

Enbridge (successor operator of the Interprovincial network)Â is right now applying to the National Energy Board to change back the westward flow of oil from Montreal to Sarnia.

For starters, Enbridge wants to re-engineer its Line 9 pipeline from Sarnia to Westover, southwest of Toronto, to feed Alberta crude to Imperial Oil’s Nanticoke refinery on Lake Erie via Line 11 and to connect with U.S. markets through New York state via Line 10.

Take a look at this Enbridge map to see what I’m talking about.

Enbridge figures if it gets prompt approval, it can start work on the changeover this summer and have oil flowing east again by spring 2012.

Enbridge hasn’t applied for Phase 2 of its conversion yet, but that will follow as night follows day.

Phase 2 would see the oil again flow eastward on Enbridge Line 9 from Westover to Montreal. That will happen eventually and Quebec, at least, will no longer be totally dependent on foreign oil. But, like Ontario, it will suddenly become dependent on one or two pipelines feeding through the United States.

The biggest motivator for that change is that the Portland-Montreal Pipe Line oil flow can also be reversed. Thus safe and secure (if “dirty”) Alberta oil can then be pumped down to Portland, where tankers will carry it to U.S. East Coast refineries.

Who knows, maybe someday the Maritimes will finally get their own pipeline extension and finally get refined Canadian oil and gas from Alberta.

Better yet, why not let the rest of Atlantic Canada buy Canadian oil and gas refined in Newfoundland? What a concept...