WHAT NEXT? SUPER DUPER CLUSTERS?

According to innovation policy expert Professor Dan Breznitz, the technology that is now responsible for the majority of oilsands production — steam-assisted gravity drainage, or SAGD — would never have been developed without government. Without the Alberta Oil Sands Technology and Research Authority, AOSTRA, he recently told the National Post’s “Innovation Nation” series, “there wouldn’t have been an oilsands industry in Alberta.” Ergo, more such targeted support for innovation is both necessary and viable. It’s time for “us” to start “picking winners” again.

Given the role of government policies in currently crippling the oilsands industry, this would seem a rather ironic justification for more government. Indeed, this week Alberta Premier Rachel Notley specifically cited the potential threat to SAGD and other forms of “in situ” production from uncertainties in the Trudeau government’s investment-killing Bill C-69.

Still, policy entrepreneurs must always be on the lookout for any and every case that might justify more — and, of course, better — policy.

The Trudeau Liberals last year introduced a Supercluster Initiative whose nodes are currently being unveiled and trumpeted. Professor Breznitz, who is Munk Chair of Innovation Studies at the University of Toronto, was among those projecting success for “policies aiming to combine our worldquality innovation actors into cohesive and globally competitive eco-systems.”

But the real question — given the abject failure of past innovation policies — is not about the aim, but whether the target might be reached.

Not only is the story of AOSTRA and SAGD a little more complicated than presented, but if anybody wants to cite government success in promoting energy innovation, then a balanced perspective should also cite its myriad failures.

The concept of SAGD — which requires drilling pairs of horizontal wells, one to inject steam and one to extract the bitumen that the steam releases from the ground — was hatched by Dr. Roger Butler when he worked at Imperial Oil in the late 1970s. Imperial scientists had already invented Cyclic Steam Stimulation, CSS, which involves injecting steam into a heavy oil reservoir under high pressure, then reversing the well to take the bitumen to the surface. Local geology meant that CSS worked at the company’s Cold Lake development, but there were extensive heavy oil deposits in Alberta where CSS was not effective. Butler came up with SAGD, which Imperial patented, but the technology was uncertain, and Imperial already had plenty on its oilsands investment plate with both Cold Lake and its leadership of the Syncrude consortium. The company realized that even if SAGD worked, it wouldn’t be in a position to use the technology for many years. Also, the prospects for the oilsands moved into reverse with the national energy program and the price collapse of the early 1980s.

Butler, like all great — and not so great — innovators, was convinced of the viability of his ideas and eager to test them. If Imperial was less than enthusiastic, the perfect place to look for funding was AOSTRA, which had been created by Peter Lougheed in 1974.

Butler thus moved to AOSTRA, and constructed an Underground Test Facility where he built his pilot plant with funding from Alberta’s Heritage Fund and a number of other oil companies, who obviously believed in the potential of the technology.

So AOSTRA, thanks to Dr. Butler, did indeed play a significant role. But the key factor was the vision and drive of one man, who would not have come up with the idea unless he had worked at Imperial. This was a very rare case where a “winner” picked government.

Meanwhile the notion that AOSTRA provides a justification or blueprint for more government innovation policy is profoundly flawed. The basic problem for oilsands production research has always been simple: how to separate the oil from the sand economically. That is quite different from government boosting the vague notion of “innovation.” The insuperable problem is whose ideas to pick. For every Roger Butler there are many more Malcolm Bricklins waiting to foist their gull-winged dreams on gullible governments.

And there are myriad failures to balance against AOSTRA’S role in SAGD. The national energy program stimulated innovations in hugely expensive Arctic offshore drilling platforms that were eventually sold off for cents on the dollar. Peter Lougheed’s attempts at promoting diversification provided multiple failures. Government support for B.C.’S Ballard Power, which was supposed to lead us all to a hydrogen-fuelled future, ended up down the drain. And no innovation failure can rank with the current unravelling of governments’ support for wind and solar power, which are expensive, unreliable and disruptive.

Choices about where to put taxpayers’ money are inevitably constrained not just by not knowing where new ideas will appear, but by shifting political priorities and the burdens of bureaucratic oversight. Those problems cannot be wished, or washed, away with positive verbiage, or with recommendations for — yet more — arm’s-length agencies. Promoting clusters has been on the innovation agenda for at least a quarter-century, with remarkably little success. What next? Super duper clusters?

Governments can’t promote success, but they want to be associated with it, and even successful companies find it hard to turn down free money. After all, they can’t afford to make an enemy of government. Government can hurt them, as the oil industry knows only too well. A related problem is that every developed country on earth is concentrating on the same sectors — AI, electrified autonomous vehicles, genomics, etc., etc. — just as they once all decided to support aerospace and automobiles, with less-than-stellar results.

What innovation policy is primarily, and inevitably, about is government-assisted taxpayer drainage.