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Wed, 06 Mar 2013 15:15:00 GMT | By Deirdre McMurdy, MSN Money

The real debate behind the XL pipeline

The XL pipeline has nothing to do with the environment — it’s all politics.

Deirdre McMurdy

Canada is in quite a pickle. Even worse, it’s a political pickle that’s dressed up as an environmental one. Don’t let all the clatter about the State Department environmental plan fool you for a second.

To recap: For all our fancy talk about innovation and competitive advantage and adding value, the truth is that our national economy is still fundamentally about extracting and shipping our abundant natural resources to the rest of the world.

We may do that faster, cleaner and cheaper by applying sophisticated technology, but that still leaves us profoundly dependent on demand from the rest of the world — especially from the U.S.

Oil now represents a quarter of this country’s total merchandise exports and 99 per cent of those oil exports — more than half of what Canada produces — go to the United States. We’re talking $92 billion a year here.

Our ability to reach those markets, however, is limited by current pipeline capacity between northern Alberta and the U.S Gulf Coast. As well, the U.S. is producing so much more of its own oil and gas that the International Energy Agency expects it could be energy self-sufficient by 2035.

As delivery of the Alberta and federal budgets this month will demonstrate, the cost of this new reality is steep. Alberta alone expects to collect $6 billion less in revenue this year — the entire amount it spends annually on education. And that has a direct bearing on how much Ottawa collects as well.

Given how reliant the rest of Canada has become on Alberta to offset Ontario’s devastated manufacturing-based economy among other weak spots, things are looking a bit grim.

But here comes the tricky part.

With everything that’s at stake — federal spending, provincial welfare, transfer payments to other provinces, infrastructure, corporations, jobs — it comes straight down to politics.

Don’t believe for a minute that any of the debate about the merits or de-merits of the XL Keystone pipeline are about anything other than politics. This is not really about the environment — no matter how many celebrities chain themselves to fences.

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