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Stop that (oil sands) thief! Think tanks call for 5-year freeze to develop national policy; see U.S. military-industrial complex as drain on Canadian security Gary Park For Petroleum News
Oil sands royalties will pour about C$1.2 billion into Alberta government coffers in fiscal 2005-06, up 65 percent from the previous year, the Canadian Association of Petroleum Producers forecast.
And that figure is scheduled to make a quantum leap as more projects cover their construction costs and move from paying royalties of 1 percent of gross revenues to 25 percent of net revenues.
Meanwhile, a trio of think tanks has called for a moratorium on all new oil sands development for five years until all Canadians can debate how the resource should be exploited.
They also want the moratorium extended to the Mackenzie Gas Project, arguing the gas will fuel oil sands operations.
The policy groups, in a report entitled “Fuelling Fortress America: A Report on the Athabasca Tar Sands and U.S. Demands for Canada’s Energy,” argued that Canada’s energy policy provides complicit support for U.S. foreign policy in general and the U.S. military-industrial complex in particular.
The royalty prediction was issued on March 8, one day after the report by the Parkland Institute (which operates under the umbrella of the University of Alberta), Canadian Center for Policy Alternatives and Polaris Institute — all seen as organizations that tilt to the left.
Those two events neatly captured a national dilemma.
The oil sands are Canada’s ace in the hole in terms of oil self-security. Without them Canada would rapidly become a net importer. Report calls for public inquiry But the think tanks have moved beyond the concerns of environmentalists who view the oil sands as the destruction of northern Alberta’s landscape and wildlife. They want an all-encompassing public inquiry that would focus heavily on Canada’s energy security.
Hugh McCullum, the report’s author, while doubting that a moratorium would be imposed, said the findings were designed as a wake-up call and hopefully the beginning of a national debate.
He said the residents of Canada have never been involved in decision-making on the oil sands.
The report says it may be possible to develop the oil sands in a way that could enhance Canada’s long-term energy needs, but “shockingly, there is no coherent national or provincial energy policy to address this need.”
In the absence of a provincial or national plan, the “rapid pace of extraction has also led to inequities between the provinces, with Alberta in an embarrassment of riches, part of which is being thrown at local infrastructure spending, escalating the boom,” the report said.
Instead of pacing development to maximize job creation and the returns to Alberta there is “instead a bonanza, using foreign workers and union-busters in the short-term, while offering royalty holidays.”
Although the suggested policy actions “may sound like bold measures to some, the fact remains that much of what is needed now was commonplace in this country a quarter-century ago,” the report said.
“The steady deregulation of the oil patch in the years since then has now brought us to the brink. Either Ottawa takes action now, in collaboration with Alberta and other oil and gas producing regions, or Canada’s energy security will be put seriously at risk.”
If, as forecast by some, oil sands output grows by six-fold over the next 25 years to 6 million barrels per day, it is not possible to avoid “screwing up the environment” by consuming vast amounts of natural gas in the extraction and processing phases, using valuable water and pumping more greenhouse gases into the atmosphere, McCullum suggested. Canadian energy security a concern The report extended its concerns to Canada’s energy security, noting that costly oil sands and unconventional gas sources (including Arctic gas) will be needed to offset shrinking reserves of conventional oil and gas.
In 2004, conventional crude (including offshore Newfoundland) yielded 1.4 million bpd (with heavier oil contributing 1.1 million bpd). Of that total, 1.6 million bpd were exported, while close to 1 million bpd were imported to the Atlantic Canada region, Quebec and Ontario.
The researchers estimate that since the North American Free Trade Agreement was signed in 1994, oil shipments to the U.S. have risen from 44 percent to 63 percent of Canadian output, while gas exports have climbed from 41 percent to 56 percent.
“Canada has become the leading energy satellite of the U.S. at a time when America has reasserted itself globally with imperial ambitions,” they said.
The study said the potential shortage of natural gas is an even greater concern than the outlook for oil, quoting a federal government report that calculated Canada’s reserves of 56.5 trillion cubic feet represent only 8.7 years of supply (compared with 10 years for conventional oil) at current rates of consumption, urging the government to restore its former policy of maintaining a 25-year supply to meet domestic needs before allowing any exports. Klein rejects claims Alberta Premier Ralph Klein, never a friend of the Parkland Institute, rejected claims that Canada is running out of oil.
If ever Canada’s supply were threatened “we will do whatever is necessary to ensure that Canada receives its supplies first,” he said, adding that the oil sands have 300 years of supply listed as proven reserves.
Alberta Energy Minister Greg Melchin said Albertans and Canadians have no cause to worry the U.S. is draining Canadian supplies. Neither did he agree that a new national policy is needed when Alberta has the “ownership and stewardship and constitutional authority to develop its resources.
“Our policies are built on a lot of trade, the United States being our most valuable customer,” he said.
But he did endorse keeping a close eye on long-term needs for Alberta and Canada. “Those are first and paramount,” Melchin said.
Greg Stringham, a vice president at the Canadian Association of Petroleum producers, rejected arguments that energy exports are tantamount to backing U.S. military intervention overseas.
He said that line of reasoning could be extended to cover almost any exports to the U.S.
David MacInnis, president of the Canadian Energy Pipeline Association, said Canada confines oil and gas exports to supplies that are not used domestically.
He said the Parkland Institute’s options “will only result in higher prices for Canadian consumers as they will result in a curtailment of exploration, development and infrastructure investment.”
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