Canadian Energy Centre
‘Big vulnerability’: How Ontario and Quebec became reliant on U.S. oil and gas
From the Canadian Energy Centre
ARC Energy Institute leaders highlight the need for a new approach in a new reality
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).
Originating in Edmonton, Alberta, the Enbridge Mainline moves crude oil, refined products, and natural gas liquids through a connected pipeline system. At Superior, Wisconsin, the system splits into Line 5, going north of Lake Michigan, and Lines 6, 14, and 61, going around the southern tip of the lake. The two routes then coalesce and terminate in Sarnia, Ontario, where it is interconnected with Line 9, which is terminated in Montreal, Quebec. Source: Canadian Association of Petroleum Producers
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.
The TC Canadian Mainline (red dashed line) transports natural gas produced in Western Canada to markets in Eastern Canada. Red lines show pipelines regulated by the Canada Energy Regulator, while black lines show pipelines regulated by the United States. Source: Canadian Association of Petroleum Producers
“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.”
Canadian Energy Centre
Cross-Canada economic benefits of the proposed Northern Gateway Pipeline project
From the Canadian Energy Centre
Billions in government revenue and thousands of jobs across provinces
Announced in 2006, the Northern Gateway project would have built twin pipelines between Bruderheim, Alta. and a marine terminal at Kitimat, B.C.
One pipeline would export 525,000 barrels per day of heavy oil from Alberta to tidewater markets. The other would import 193,000 barrels per day of condensate to Alberta to dilute heavy oil for pipeline transportation.
The project would have generated significant economic benefits across Canada.
The following projections are drawn from the report Public Interest Benefits of the Northern Gateway Project (Wright Mansell Research Ltd., July 2012), which was submitted as reply evidence during the regulatory process.
Financial figures have been adjusted to 2025 dollars using the Bank of Canada’s Inflation Calculator, with $1.00 in 2012 equivalent to $1.34 in 2025.
Total Government Revenue by Region
Between 2019 and 2048, a period encompassing both construction and operations, the Northern Gateway project was projected to generate the following total government revenues by region (direct, indirect and induced):
British Columbia
- Provincial government revenue: $11.5 billion
- Federal government revenue: $8.9 billion
- Total: $20.4 billion
Alberta
- Provincial government revenue: $49.4 billion
- Federal government revenue: $41.5 billion
- Total: $90.9 billion
Ontario
- Provincial government revenue: $1.7 billion
- Federal government revenue: $2.7 billion
- Total: $4.4 billion
Quebec
- Provincial government revenue: $746 million
- Federal government revenue: $541 million
- Total: $1.29 billion
Saskatchewan
- Provincial government revenue: $6.9 billion
- Federal government revenue: $4.4 billion
- Total: $11.3 billion
Other
- Provincial government revenue: $1.9 billion
- Federal government revenue: $1.4 billion
- Total: $3.3 billion
Canada
- Provincial government revenue: $72.1 billion
- Federal government revenue: $59.4 billion
- Total: $131.7 billion
Annual Government Revenue by Region
Over the period 2019 and 2048, the Northern Gateway project was projected to generate the following annual government revenues by region (direct, indirect and induced):
British Columbia
- Provincial government revenue: $340 million
- Federal government revenue: $261 million
- Total: $601 million per year
Alberta
- Provincial government revenue: $1.5 billion
- Federal government revenue: $1.2 billion
- Total: $2.7 billion per year
Ontario
- Provincial government revenue: $51 million
- Federal government revenue: $79 million
- Total: $130 million per year
Quebec
- Provincial government revenue: $21 million
- Federal government revenue: $16 million
- Total: $37 million per year
Saskatchewan
- Provincial government revenue: $204 million
- Federal government revenue: $129 million
- Total: $333 million per year
Other
- Provincial government revenue: $58 million
- Federal government revenue: $40 million
- Total: $98 million per year
Canada
- Provincial government revenue: $2.1 billion
- Federal government revenue: $1.7 billion
- Total: $3.8 billion per year
Employment by Region
Over the period 2019 to 2048, the Northern Gateway Pipeline was projected to generate the following direct, indirect and induced full-time equivalent (FTE) jobs by region:
British Columbia
- Annual average: 7,736
- Total over the period: 224,344
Alberta
- Annual average: 11,798
- Total over the period: 342,142
Ontario
- Annual average: 3,061
- Total over the period: 88,769
Quebec
- Annual average: 1,003
- Total over the period: 29,087
Saskatchewan
- Annual average: 2,127
- Total over the period: 61,683
Other
- Annual average: 953
- Total over the period: 27,637
Canada
- Annual average: 26,678
- Total over the period: 773,662
Chief David Jimmie is president of Stonlasec8 and Chief of Squiala First Nation in B.C. He also chairs the Western Indigenous Pipeline Group. Photo courtesy Western Indigenous Pipeline Group
From the Canadian Energy Centre
Stonlasec8 agreement is Canada’s first federal Indigenous loan guarantee
The first federally backed Indigenous loan guarantee paves the way for increased prosperity for 36 First Nations communities in British Columbia.
In May, Canada Development Investment Corporation (CDEV) announced a $400 million backstop for the consortium to jointly purchase 12.5 per cent ownership of Enbridge’s Westcoast natural gas pipeline system for $712 million.
In the works for two years, the deal redefines long-standing relationships around a pipeline that has been in operation for generations.
“For 65 years, there’s never been an opportunity or a conversation about participating in an asset that’s come through the territory,” said Chief David Jimmie of the Squiala First Nation near Vancouver, B.C.
“We now have an opportunity to have our Nation’s voices heard directly when we have concerns and our partners are willing to listen.”
Jimmie chairs the Stonlasec8 Indigenous Alliance, which represents the communities buying into the Enbridge system.
The name Stonlasec8 reflects the different regions represented in the agreement, he said.
The Westcoast pipeline stretches more than 2,900 kilometres from northeast B.C. near the Alberta border to the Canada-U.S. border near Bellingham, Wash., running through the middle of the province.
It delivers up to 3.6 billion cubic feet per day of natural gas throughout B.C. and the Lower Mainland, Alberta and the U.S. Pacific Northwest.
“While we see the benefits back to communities, we are still reminded of our responsibility to the land, air and water so it is important to think of reinvestment opportunities in alternative energy sources and how we can offset the carbon footprint,” Jimmie said.
He also chairs the Western Indigenous Pipeline Group (WIPG), a coalition of First Nations communities working in partnership with Pembina Pipeline to secure an ownership stake in the newly expanded Trans Mountain pipeline system.
There is overlap between the communities in the two groups, he said.
CDEV vice-president Sébastien Labelle said provincial models such as the Alberta Indigenous Opportunities Corporation (AIOC) and Ontario’s Indigenous Opportunities Financing Program helped bring the federal government’s version of the loan guarantee to life.
“It’s not a new idea. Alberta started it before us, and Ontario,” Labelle said.
“We hired some of the same advisors AIOC hired because we want to make sure we are aligned with the market. We didn’t want to start something completely new.”
Broadly, Jimmie said the Stonlasec8 agreement will provide sustained funding for investments like housing, infrastructure, environmental stewardship and cultural preservation. But it’s up to the individual communities how to spend the ongoing proceeds.
The long-term cash injections from owning equity stakes of major projects can provide benefits that traditional funding agreements with the federal government do not, he said.
Labelle said the goal is to ensure Indigenous communities benefit from projects on their traditional territories.
“There’s a lot of intangible, indirect things that I think are hugely important from an economic perspective,” he said.
“You are improving the relationship with pipeline companies, you are improving social license to do projects like this.”
Jimmie stressed the impact the collaborative atmosphere of the negotiations had on the success of the Stonlasec8 agreement.
“It takes true collaboration to reach a successful partnership, which doesn’t always happen. And from the Nation representation, the sophistication of the group was one of the best I’ve ever worked with.”
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