Building a Refinery In Canada - Why Not?

keystone pipeline

Editor's Note

Advertisers are not responsible for the contents of this site including any editorials or reviews that may appear on this site. For complete and current information on any advertiser product, please visit their Web site.

We’re going to take a break from our regularly scheduled personal finance programming today to ask a question that would indirectly affect the PF situation of all Canadians.  With all the news about the Keystone XL and Northern Gateway pipelines over the last year or so, I have a serious question for anyone out there with the expertise to answer it: Why doesn’t Canada have its own refining capabilities?

I Didn’t Even Stay at a Holiday Inn Express Last Night…

Now I should admit right up front that I am no expert on this stuff.  I have an oddly high number of friends who are geologists though, and none of them could answer this question for me either.  Just form a basic logistics standpoint, shipping our raw bitumen and natural gas to China or the Gulf Coast makes little sense to me.  Again, no expert, but those are massive distances to cover considering there is nothing geographically special about New Orleans that allows ONLY that area to refine petroleum products to my knowledge.

Drill Baby Drill Is Fine and Good BUT…

There are a staggering number of benefits that Canada could reap from building its own refining capacity somewhere in the West.  I would think some area (after a couple millennia worth of environmental studies are done) in the Swift Current/Medicine Hat vicinity would make a lot of sense.  Those cities have some decent infrastructure available to build off of, and are along Canada’s main shipping route.  This would appear to be a central location between the Bakken formation, and the oil sands up north and would be fairly easily to build pipelines to.  We could stop fighting with Native bands and billionaire-funded American environmentalists, and benefit from all of the levels of production ourselves.  I believe that one of the main expenses where raw bitumen is considered is that pipelines have to be built much stronger than when the oil is refined due to the fact it is so much heavier.  Building a refinery in the proposed area would mean that transportation by truck, rail, or pipeline would be fairly straightforward (unless I’m missing something).  An immediate consideration would be could we actually get the USA part of the Bakken down in North Dakota and Montana to consider sending their raw petroleum up to us to refine?  Wouldn’t that be a huge coup for us?


Perhaps the biggest benefit would be the massive long-term impact of jobs to the Canadian economy.  This would really be a “game changer” and would really “move the needle” (sorry, been watching too many political shows).  Think about how valuable thousands of jobs would be.  Many of the jobs would require post-secondary training, but many would be basic blue-collar labour jobs and would be able to soften the impact of deflating manufacturing and construction sectors all over our country.  Whether we want to admit it or not, outsourcing of production and good middle-class-supporting jobs is a major issue in our current economy (leading to the “donut economy” theory where our middle class is being hollowed out).  These jobs would be impossible to outsource due to their geographic dependence.  I can’t even imagine the corporate tax and personal income tax revenues that would be generated long term from this sort of project.

Cons and Costs

Now I’m not a total know-it-all here.  I realize that if this project had no drawbacks someone a lot smarter than me would have realized it and been profiting from it already.  So I’m asking if anyone knows what these drawbacks are?  If the issue is purely the massive amount of capital needed (in the hundreds of billions of dollars) wouldn’t this still be worth it?  There must be some sort of private-public partnership that could work in this regard.  I’m not much of a government-ownership type of guy, but wouldn’t this be something that governments at all levels could really sink their teeth into?  I know that Saskatchewan’s government has made a real commitment to the potash industry close to my area, and they are reaping the rewards big time right now.  Isn’t this just applying those concepts on a larger scale?  There must be a way we could sell specialized bonds, or appeal to Canadians to put the one-time costs on our collective line of credit (re: national debt) as long as we were able to prove the project would generate X revenue and fully pay for itself in X years right?

If it is an environmental issue then I’m really stumped.  Could we not build refineries just as good as China and New Orleans have?  I’m not much of an environmentalist, but I know that the area I propose to build a refinery on is one of the most geographically stable place on the planet.  These means very few earthquakes or hurricanes.  That has to count for something in this “once-in-hundred-years-storm-every-year” world right?  I often wonder if this is a case of Canada having laws that prevent a new refinery from being built because we want to be seen as environmentally friendly.  While I have no idea what the environmental impact would be (and I’m sure it wouldn’t be positive) I have to believe that it would be no worse than the impact our bitumen is making when it is refined elsewhere in the world.  If we’re sacrificing a ton of wealth in order to keep our hands clean (as opposed to actually making a difference in this environmental debate) isn’t that crazy?  Furthermore, I have to think eliminating thousands of kilometers of pipelines is pretty good for the environment right?

I Can’t Be the Only One Who Has Thought of This?

If we ever want to be more than hewers of water of timber don’t we have to look a little more long-term?  It looks like these petroleum resources are going to be around for a while, and I’m not saying we can’t continue to look into efficient renewable resources as well as looking into our petroleum refining capacity.  It just seems to me that paying other countries massive amounts of money to take our raw resources and then sell it back to us after we have essentially paid for their citizens to make a finished products seems a little insane.  This is especially true when you consider the labour market demographics right now and all of the manufacturing workers who are out of jobs or underemployed.

So if anyone can explain why shipping our raw resources thousands of kilometers makes any sense I’d honestly like to learn about it!

Recommended Stories