On this year’s occasion of the 50th anniversary of the last weld on the TransCanada pipeline, Canada Post chose to commemorate completion of the national natural gas highway with a new first-class stamp. It’s a major historical landmark in Ottawa as well as Alberta. As hot as the arc was in that October 1958 weld near Kapuskasing in northern Ontario, it was a mere candle compared to the heated Great Pipeline Debate in the House of Commons that set the project in motion. Distinguished Canadian journalist and writer Peter C. Newman calls the pipeline “a venture that mobilized the will of a nation, dealt a death blow to its longest-reigning political dynasty and fathered a significant new industry.”

Half a century later, with the debate largely forgotten except among historians and political partisans, a large section of that same pipe is being born again – to serve another significant new industry unheard of 50 years ago. The tube is being converted to transport bitumen from Alberta’s oil sands to U.S. Midwest and Gulf Coast refineries. TransCanada’s new project, a 50-50 joint venture with ConocoPhillips called the Keystone Pipeline System, has the monstrous price tag of $12.2 billion and is set to move 1.1 million barrels per day by 2012. Added pumping could increase the capacity by a further half a million barrels daily. As the first major export outlet aimed squarely at oil sands production, it is again a historic first.

Canadian Natural Resources Ltd. highlighted the importance of Keystone in a progress report on its multibillion-dollar Horizon oil sands project. A 110,000-barrels daily operation now going into production only starts a mega-mine development.

With about $1 billion in preliminary work underway on expansions that will more than double plant capacity, CNRL made a 20-year booking of 120,000 barrels per day in Keystone capacity and secured an option to buy an ownership share in the new oil sands highway to Texas refineries.

The CNRL actions also highlighted a theme that runs like a red thread through Alberta’s evolution into a world-class energy supplier. The growth has been driven by markets, and pipelines are a cornerstone of the industry.

A half century ago, Canada’s western natural gas producers sorely needed a marketplace to sell an initial 24 trillion cubic feet of reserves discovered in the early stages of the industry’s development. Interprovincial Pipe Line Inc. (now Enbridge) was already sending Alberta oil from Edmonton east to Sarnia; and Trans Mountain Pipe Line was flowing crude west across the Rocky Mountains to Vancouver and the northwestern United States. But natural gas producers were left out, stuck with relatively small local markets.

Today, it is oil’s turn again to drive pipeline development. This time the customers aren’t Canadian. They’re refiners in the United States, looking for alternatives to the likes of Venezuela under President Hugo Chavez, who has been threatening to send his oil elsewhere. The Americans are also seeking replacements for Mexico’s once-prolific Cantarell field, which is aging and declining in productivity.

This time around, there are no fireworks in the Commons. Today, as natural gas production from the Western Canadian Sedimentary Basin’s remaining 55-odd trillion cubic feet of conventional gas reserves tapers off and bitumen production from the oil sands cranks up towards 3.5 million barrels per day, does Keystone represent a turning point for the industry?

A year ago the project may have represented a major shift in production, away from gas and more into oil. “The traditional view of the Western Canadian Sedimentary Basin was that it would level out and decline and we would see in the future that being offset by the introduction of non-conventional supplies and northern gas,” says Russell Girling, TransCanada Corp.’s president of pipelines.

“But the surprise recently is the tight gas, the shale plays are a lot more prolific than people had anticipated – maybe they did anticipate them but not the increase in gas prices which make these plays economical. It’s a fairly large shift in people’s thinking in the last 12 months or so,” Girling says.

The emergence of new gas sources, thanks to technical drilling and production advances as well as firming prices, is certainly influencing TransCanada’s thinking, he says.

EnCana Corp. for example, which hopes to produce one billion cubic feet of gas per day from northeastern British Columbia’s Montney field by 2011, says it has been in talks with TransCanada and other transporters to ensure there is enough delivery capacity.

The Keystone conversion of TransCanada’s original line only reduces the gas capacity of its system by about five per cent, the company’s pipeline development vice-president, Steve Becker, told an investment conference held by TD Securities. Over its first half-century, the right-of-way was filled up with seven steel tubes capable of carrying 7.5 billion cubic feet of gas.

So, Girling said in an interview, “we’re still a major North American gas pipeline company with many opportunities to expand our system; we’re still very much focused on being a gas transporter.”

He doesn’t consider TransCanada’s entry into the massive bitumen pipeline south a turning point at all. It is, however, a “strategic diversification,” he allows, using the company’s existing skills and expertise. “The opportunity really gels as a result of increased production in Fort McMurray. And U.S. refiners are looking to diversify their supply. We’re one of their largest new supply sources in the world.”

But Roger Gibbins, president of Canada West Foundation, reckons Keystone represents a turning point in a wider sense for the regional and national economies. “There’s no doubt it’s a shift,” Gibbins says. “It’s part of a long evolutionary change in the Canadian economy.

The east-west economic ties have become progressively less important and the north-south more so – not only in this region, but in Ontario where 90 per cent of exports go to the U.S.”

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