When it comes to energy, the U.S. has Ontario over a barrel

Donald Trump has rattled all Canadians with his threat of large tariffs on Canadian exports to the U.S. So much so, that on Dec. 16, Finance Minister Chrystia Freeland resigned in part out of concern around the Trudeau government’s response to that threat. On that same day of the Freeland news tsunami, Canada’s premiers met to discuss the looming tariff threat. Coming out of that meeting Doug Ford promised the premiers will provide “steady and stable leadership” and advocated for a larger role for premiers in the tariff discussions. 

Unfortunately, Ford had already jumped into the fray with both feet firmly in his mouth. 

Ontario’s premier got Trump’s attention with a threat to cut electricity exports from Ontario to New York, Michigan and Wisconsin. A Ford spokesperson emphasized this could affect up to 1.5 million households.  

While that sounds significant, let's put Ontario’s exports in context: the gargantuan eastern U.S. grid has 700 GW of generating capacity, while Ontario’s exports to that grid represent less than 0.3 per cent of that total. If Ontario stopped exports, the province would lose up to $700 million annually in revenue and further idle its generating capacity, or worse, waste off-peak electricity it can’t do anything with, while the U.S. has large resources to rebalance.

Ford’s tit-for-tat threat opened a door we don’t want opened. The idea of using energy as a cudgel is unbelievably terrible for Ontario when we look at how energy is supplied to the province. Ontario has far more to lose if the U.S. slashes energy supplies to Canada than the other way around.

Gone are the days when Ontario’s gas all came from Alberta. My calculations show that fully 70 per cent of Ontario’s natural gas in 2023 was supplied from the U.S. Alberta now consumes much of its own natural gas to produce electricity and bitumen while Ontario lives mostly off fracked gas from Pennsylvania and Ohio. That natural gas is used to heat Ontario homes, meet peak electricity demand and fuel major industries like steel and cement. The big chemical plants in Sarnia also now depend on ethane from those same U.S. fracking fields. The US has many options to export both ethane and natural gas. However, Ontario needs a U.S. supply of those products to stay in business: it isn’t just a nice-to-have.

And if we widen our view of energy to include transportation fuels, Ontario’s dependence on the U.S. becomes even bigger. Much of Ontario uses 10 per cent ethanol as a critical part of the gasoline supply. Statscan data shows 50 per cent of Ontario ethanol supply is imported from the U.S.

All that is bad enough. But if the U.S. actually set about trying to disrupt Ontario energy supply, it would be much worse. Almost all of the province’s gasoline, diesel and jet fuel supply is at risk. The giant Enbridge Line 5 pipeline brings much of the crude that Ontario needs, passing through Wisconsin and Michigan on the way. Michigan wants to shut the line down because of serious environmental concerns, insisting Enbridge hasn’t addressed them in a timely fashion. Native American tribes in Wisconsin also want the line removed from their land. These have been long term simmering disputes playing out in ongoing court cases.

Prime Minister Justin Trudeau raised Line 5 concerns during his recent meeting with Trump in Mar-A-Lago. Trudeau highlighted how important it is to Canada. Canada argues the untested 1977 Canada-United States Transit Pipelines Treaty means neither country can interfere with the movement of oil and natural gas by pipeline between the two countries. But parties in the U.S. argue that Indigenous rights and the ability to regulate pipelines are overriding considerations. If you were Michigan you might ask, how is suddenly cutting off this crude supply to Ontario any different than Doug Ford suddenly cutting off electricity to your home state? 

Ontario’s four refineries run about 400,000 barrels per day of crude. While some comes in through Enbridge’s Line 6, the sweeter, lighter crude those refineries need comes through Line 5. Losing Line 5 would shutter all of Ontario’s refineries. And in the winter, with the St. Lawrence Seaway shut down, there are no means to import ships of gasoline, diesel and jet fuel from offshore. The only feasible means of major supply is by truck or rail from the U.S. The immediate loss of that crude supply would be impossible to manage and Ontario would quickly run out of petroleum products. 

For Ford to even suggest that Canada might disrupt cross-border energy supplies was foolhardy. But it says something about how some of us may have a totally unrealistic view of how much leverage we have in this situation. Yes, Canada is energy rich. But Ontario has become very dependent on U.S. supply, even using U.S. territory to access Canadian supplies. How we allowed ourselves to become so dependent on a foreign country is a whole other topic. 

So yes to “steady and stable leadership.” But that means Ford and other politicians need professionals to take the lead. All of Canada should be begging Ford to go back to thinking up ideas like digging a tunnel under the 401 or handing out $200 cheques to every Ontarian instead of taking a bigger role in these discussions. Please, no more escalations Premier Ford: you ought to know, you can’t bully a bigger bully. It never ends well.