Vancouver Sun

Keep the oilsands’ wealth at home

Foreign countries are gearing up to reap the benefits of importing Canadian bitumen

- ROBYN ALLAN Robyn Allan is a consulting economist and former CEO of the Insurance Corp. of British Columbia.

Earlier this year, federal Natural Resources Minister Joe Oliver branded Northern Gateway pipeline opponents “foreign- funded radicals.” According to Environmen­t Minister Peter Kent, they’re also “money launderers.”

Recently Ontario Premier Dalton Mcguinty raised a yellow flag on Canada’s appreciati­ng dollar. He was quickly admonished by Alberta Premier Alison Redford as being “simplistic.”

Last Saturday, B. C. Premier Christy Clark called federal NDP leader Thomas Mulcair’s caution against unbridled exploitati­on and export of oil resources “goofy.”

Name- calling has replaced meaningful debate about legitimate concerns and clouds important issues.

Resource developmen­t is necessary for economic growth — Mulcair said he supports it. But what hasn’t adequately been addressed is how the benefits and risks are to be managed and shared.

This dialogue is an important one for Canadians. Over the past few years, multinatio­nal oil companies and companies owned by countries — such as China — have introduced a new natural resource strategy for Canada.

Their strategy could turn B. C. into an oil tanker terminal for Alberta and crowd out viable activity in tourism and commercial fishing. It puts pressure on the Canadian dollar, underminin­g the viability of those industries and others.

Canada may be an oil exporter, but it’s also an oil importer. Almost 50 per cent is imported from volatile and uncertain markets, including many of the same markets the U. S. and China are trying to protect themselves from by sourcing our crude.

Putting the energy security needs of other countries ahead of Canada’s threatens our standard of living. To understand how requires a little history. To make sure it doesn’t happen — while developing our resources — requires resolve.

In 2008, Alberta’s oil producers announced a wide range of upgrading and refining conversion projects to process crude oil at home. These projects would have taken the province’s already strong downstream activity up a notch and securely establishe­d a domestic value- added supply chain.

Upgrading oil before refining is necessary to enhance the quality of oilsands crude, called bitumen. Upgrading and refining are where the jobs and economic wealth come from — not ripping it and shipping it to foreign countries so they reap the gain from turning Canada’s raw resources into end- user products.

Planned projects would have seen upgrading capacity in Alberta grow from 1 million barrels per day to 3.5 million barrels per day by 2015. Then came the financial crisis and the projects were scraped — in Canada.

South of the border — facilitate­d in part by favourable investment terms offered to taxpayers through the Energy Policy Act of 2005 — U. S. oil producers continued to expand plant and equipment, enabling increased throughput of Canada’s bitumen.

New oilsands production — whether destined for the U. S. or Asia — will be shipped as bitumen along with the jobs, labour income and government revenues that go with it. Alberta’s new energy strategy is actually hollowing the downstream capabiliti­es of the oil industry.

It’s not that value- added is not done in Alberta. Alberta has five upgraders and in 2010 about 58 per cent of oilsands production was processed into synthetic crude. The province has three refineries capable of processing more than 430,000 barrels a day. But while current crude oil production volumes exceed pre- recession levels, investment in downstream activity has not recovered. Alberta’s upgrading capacity will be 1.4 million barrels a day by 2015 — 60 per cent less than the pre- crisis plan.

Chopping local downstream expansion projects breaks the value- added chain. Canada’s oil resources increasing­ly become a pool of raw crude waiting to be siphoned off along pipelines serving economic developmen­t and energy security needs of other nations. These nations are smart. They know controllin­g the supply chain mitigates the pain of rising oil prices.

The oil sector is mum. Companies that own Canadian exploratio­n and production rights own refineries in the U. S. and China. They don’t like our higher labour and environmen­tal standards.

Value- added capital hasn’t just gone on strike in Canada — it has moved elsewhere.

If more bitumen upgrading was undertaken where it comes out of the ground we wouldn’t need as many new pipelines — about 30 per cent less capacity is required to move upgraded bitumen. Fewer pipelines, fewer tankers, and less environmen­tal spill risk. The industry still grows and still earns healthy profits, more of which stay in Canada.

If Canadian energy security was a higher priority than meeting the energy security needs of other nations, western crude would flow to Eastern Canada — along with the benefits energy independen­ce affords.

Paying Canadian- based producers for oil, instead of foreign producers, keeps the money, jobs, value- added production and wealth at home. Every other major country seems to understand this radically simplistic, goofy idea — it’s time Canada did too.

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