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U.S. oil comprised 77 per cent of Canada's foreign oil imports last year: regulator

Storage tanks are shown at the Marathon Petroleum Corp. refinery in Detroit, Tuesday, April 21, 2020. The world is awash in oil, there's little demand for it and we're running out of places to put it. That in a nutshell explains this week's strange and unprecedented action in the market for crude oil futures contracts, where traders essentially offered to pay someone else to deal with the oil they were due to have delivered next month.(AP Photo/Paul Sancya)

WASHINGTON — Canada is growing ever more reliant on imported American oil, a new report from the country’s energy regulator suggests, putting a counter-intuitive spin on the fierce debate about cross-border pipelines and energy independence.

The United States provided nearly four out of every five barrels of imported crude in 2020, a year when global demand for fossil fuels was badly dented by the COVID-19 pandemic, the latest data from the Canada Energy Regulator shows.

Some 77 per cent of Canadian imports came from the U.S., up from 72 per cent in 2019 and a paltry six per cent in 2010, before a dramatic spike in domestic American oil and gas production over the last decade.

“We do often think of the pipeline relationship between the two countries as being one of, ‘Canada produces and exports to the U.S.,'” said Darren Christie, the regulator’s chief economist.

“This is specifically showing that there is another side to that coin, which is that we also import production from the U.S.”

Close observers of Canada-U.S. trade flows, particularly those in the energy sector, might not be overly surprised by how much American crude oil has been travelling north in recent years.

The U.S. absorbed a whopping 96 per cent of Canadian oil exports last year, the bulk of it heavy crude, more than half of it to the U.S. Midwest, which has been ground zero for pipeline disputes for much of the last 15 years.

But a massive surge in U.S. oil and gas production, fuelled in part by new extraction technology like fracking and horizontal drilling, has made it a convenient source of feedstock for refineries in both countries, Christie said.

“Their crude oil production has more than doubled in the last 10 years, which is quite a remarkable increase,” he said.

“That creates a massive supply push out of the U.S. And if we are just north and had previously been importing some crudes from around the world, it’s a natural market for a lot of that increased production out of the U.S.”

While foreign oil has long been a part of the Canadian energy mix, the latest numbers — along with the proportion of imports from the U.S. — casts the ongoing controversy over pipeline links between the two countries in a surprising new light.

On his first day in the Oval Office, President Joe Biden cancelled the Keystone XL pipeline expansion, which would have ferried an additional 800,000 barrels a day of Alberta oilsands bitumen to refineries on the U.S. Gulf Coast.

Michigan is currently in court with Enbridge Inc. over Gov. Gretchen Whitmer’s efforts to shut down Line 5, a vital cross-border energy link that crosses the Great Lakes beneath the ecologically sensitive Straits of Mackinac.

The pipeline is widely billed by its defenders as a critical piece of infrastructure that feeds key refineries in Sarnia, Ont., and provides more than half of the propane needed to heat homes in Michigan alone, to say nothing of neighbouring states.

Canada has vowed to strenuously defend Line 5, with Natural Resources Minister Seamus O’Regan insisting last month that its operation is “non-negotiable.” Ottawa has yet to say if it will take part in the ongoing court case.

Protesters in Minnesota are also doing their best to disrupt Enbridge’s ongoing $10-billion upgrade of Line 3, another key link in the cross-border chain that connects to Line 5 at a facility in Superior, Wisc.

The dependence on U.S. oil is especially high in Atlantic Canada, a region of the country where pipelines are often not an option. Imports to refineries there have increased tenfold over the last decade.

While Canada’s energy exports to the U.S. are more than six times what moves in the other direction, the interdependence between the two countries is dramatic, both from the standpoint of energy supply and economic impact, the American Petroleum Institute said in a report last week.

Over the past 10 years, the value of petroleum liquids traded between the two has measured as high as 20 per cent of all Canada-U.S. trade. Up to 90 per cent of oil refined in Eastern Canada travelled either through or from the U.S., the API said.

“Trade volumes in both directions are dominated by crude oil,” it said.

“Crude oil trade growth has been primarily driven by heavy crude oil shipped from Western Canada to the U.S. Midwest and Gulf Coast by pipeline and rail, and light crude oil from North Dakota and Texas shipped to Eastern Canada by pipeline and marine vessel.”

This report by The Canadian Press was first published April 14, 2021.

James McCarten, The Canadian Press