Thank you. When I was invited to the committee by Mr. Stewart, I was asked if there were pipeline and refinery issues in Atlantic Canada. I said there were no refinery issues per se. We have three refineries in the four Atlantic provinces, but we don't really have any pipelines to speak of, although we have some natural gas pipelines leading to the United States. The issue is, where do we get our energy from? More to the point, it's an energy security issue. That's what I'd like to talk about today with respect to potential pipelines to Atlantic Canada.
When we talk about energy security, we are talking about three things. The first thing is availability; that is, the availability of an energy source, or specifically an energy product, that is available to those services that use the product. We also talk about affordability. How affordable is this energy source? Can people actually pay for it? Can families use this energy source? We also talk about acceptability. How acceptable—environmentally, politically, and socially—is this energy source? This is based upon the International Energy Agency's definition of energy security.
If we look at Atlantic Canada's energy mix, it's very similar to Canada's. There's natural gas, there's coal, there's oil, and there's hydroelectricity. However, unlike the rest of Canada, what you find is, and as you know full well, that although we're an extremely rich country with respect to our energy resources, the resources are not evenly distributed. What you find, of course, is some provinces are extremely well endowed with hydroelectricity—Quebec, Manitoba, and British Columbia—whereas others are well endowed with hydrocarbons, such as Saskatchewan and Alberta, and to a lesser extent Manitoba, and, to a degree, offshore Newfoundland and Labrador.
Unfortunately, in the case of the three regions of eastern Canada—that's Ontario, Quebec, and Atlantic Canada—what one finds is that, surprisingly, most of the oil in this region is imported. In Atlantic Canada—and the numbers are very similar in Quebec—about 80% of the oil comes from imported sources. Now, one can argue, what's wrong with this? Globalization works. We should be happy with globalization, and it does work. There is no disputing that. Atlantic Canada has done very well out of globalization. The world price of oil is more or less the same. It's not entirely true. Of course, Brent, which Atlantic Canada pays for its oil, is at a higher price than WTI, which much of western Canada and perhaps Ontario pays for its oil.
One can then ask how Atlantic Canada is any different from the rest of Canada. Unfortunately, as you are well aware, the first issue is that many Atlantic Canadians are not as well-to-do. The second issue is how the energy is actually used. In Atlantic Canada we have very little natural gas. About 90% of the natural gas we do have, most of which is from Nova Scotia, is exported to New England, although some of it is actually used for electricity in Nova Scotia. This means that in terms of home heating specifically, Atlantic Canadians are using upwards of 50% for both home heating and commercial buildings, whereas in the rest of Canada we're probably talking the reverse of that, which is probably that about 60% of buildings are heated with natural gas. Due to the price differential between natural gas and fuel oil, many Atlantic Canadians are feeling the pinch, if you will. This raises the whole issue of energy security and affordability. What we see in Atlantic Canada is that it's not an availability issue. There is lots of crude oil and light fuel oil available for space heating. It becomes an affordability issue.
We're seeing this manifest itself in a number of ways. Perhaps the best example is the cost to the homeowner. If you take the definition of energy poverty as being 8% to 10% of the household income spent on energy, that would put the household into a state of energy poverty. Some Atlantic Canadian provinces are already at 6%. Prince Edward Island is one, for example. The rest are well over 5% and some are pushing 6%. What you are finding is that the average cost to a household in Atlantic Canada is reaching an energy poverty level, if you will. That's not all, of course, but it's the average. One is finding that.
Could we address that? Yes we could. However, there's another issue, and that is energy availability. That is something we should be greatly concerned about in Atlantic Canada and Quebec, because most of our major suppliers have either peaked—good examples include the U.K., Norway, and Nigeria—or are in politically volatile regions. We rely on Saudi Arabia, for example, and of course countries in the Middle East or North Africa are politically unstable. We've gone through the so-called Arab Spring. We don't know where this is going to lead and what types of governments will result.
If there are problems in the Strait of Hormuz between Israel, Iran, and the United States, we could very well see oil prices increasing, but more to the point, we could see oil availability declining dramatically. This would perhaps be a boon to western Canada, with more production, but it would certainly have a great impact on Atlantic Canada.
What can be done about this? I'm arguing that western Canadian crude should be made available to Atlantic Canada, and the question is how. People have justifiably said that given the size of the Atlantic Canadian market, it really doesn't make sense to build an entirely new pipeline. I agree wholeheartedly with that. But there are at least two other possible routes. One is the Montreal-Portland pipeline—reverse that to take western Canadian crude to Montreal. There's talk of reversing Enbridge's line 9, shipping it to Montreal and then to Portland, and distributing it from Portland by tanker—as it already is—to Atlantic Canada's three refineries. An alternative to this, if there are very strong objections in the United States—the second approach I discuss in my brief—is to carry the crude by tanker from Montreal to Atlantic Canada.
One can argue that this will improve availability, which will improve the energy security at that level, but it won't address affordability. It may not address affordability, but the crude oil will be available, and, equally as important, those people in need could be given some form of subsidy.
So the options really open to policy-makers are energy reduction, in which households are encouraged to reduce their energy consumption through government grants, and so forth; replacement, which I just discussed; and restriction. Restriction policies are those that encourage people to change both their source of energy and the way the energy is consumed. We do have limited resources. We have some hydroelectricity. There is also some biomass that could be used. On the reasoning behind this, we should really take into account what Dr. Fatih Birol, the chief economist of the International Energy Agency has said: we have to leave oil before oil leaves us.
If nothing else, Atlantic Canada should be doing everything it can to both get off oil and find more secure sources. Essentially a no-regrets policy would be something like a tanker route from Montreal to Atlantic Canada.
Thank you very much.