ENERGY & EQUITY: How we turned a blessing into a curse, and ways to atone. Part one.
This is a condensed reprint of a series of articles by Andrew Nikiforuk, 14 Oct 2011, TheTyee.ca
Canada has joined the ranks of exporting oil nations and now supplies more petroleum to the United States than Mexico or Saudi Arabia. The unconventional character of mined bitumen as well as the startling revenue it generates for government coffers has irrevocably changed the country. Five per cent of the nation’s GDP comes from oil while bitumen makes up 25 per cent of the nation’s exports.
No oil exporting nation, whether Christian or Muslim, is immune from the corrosive influence of oil money and its dirty politics. Yet Canada has anointed bitumen as the nation’s new “economic engine” without setting clear public policy goals or assessing the economic risks. The exploitation of bitumen has also proceeded without a national vision or even an energy strategy.
In 2011, the Office of the Auditor General declared the obvious: “incomplete environmental baselines and environmental data monitoring systems needed to understand changing environmental conditions in northern Alberta have hindered the ability of Fisheries and Oceans Canada and Environment Canada to consider in a thorough and systematic manner the cumulative environmental effects of oil sands projects in that region.”
Although North America’s greens have focused on carbon pollution and landscape degradation, the project poses other ethical challenges for the nation. These moral issues include the scale and pace of the project as well as the nature of the Dutch Disease, the absence of a savings plan, severe technology gaps, diminishing energy returns, the Chinese gamble, and the dysfunctional persona of petro states.
In simple terms too much has been developed too quickly without the proper fiscal, political and environmental safeguards. What should have been a slow-moving blessing has turned into a rapidly developing curse. Moreover, Canada’s reputation as a fair and democratic nation has now been blackened. It cannot redeem itself without democratically addressing the following ethical issues:
Ethical Challenge One: Bigness (Scale)
…the world’s longest and therefore least secure pipelines are all connected to the project. Everything about the project gives a new meaning to the word big.
the project’s Hulk-like scale invites vulnerabilities that should alarm politicians and citizens alike. The development’s brittleness can be found in the project’s basic economics, engineering complexity and long supply and delivery chains.
As the world’s most expensive hydrocarbon ($60 to $80 a barrel) the oil sands are highly vulnerable to oil price shocks. During the 2008 recession companies cancelled or shelved $150-billion worth of investments that became uneconomic at $40 a barrel. Just one improperly installed piece of pipe at an oil sands plant can create a half-billion dollar fire. Just one Enbridge pipeline leak can raise the price of oil by ten dollars and nearly shut down half a dozen U.S. refineries. And the failure of just one large dam of toxic mining waste can pollute a watershed all the way to Beaufort Sea.
Unless slowed or scaled down, the oil sands could become a Titanic for the Canadian economy.
Ethical Challenge Two: Pace
In 2011 the government of Alberta released a startling infrastructure plan for the world’s largest energy project. It forecasts that oil sands production will grow from 1.6 million barrels a day to 6 million by 2035.
this rapid expansion poses more risks than benefits for Canada. …renewable energy reforms combined with slowing growth in its industrial megacities could also lesson demand for imported oil. Moreover oil remains the world’s most volatile commodity. The Deutsche Bank has predicted that oil price volatility alone could diminish demand for petroleum as a transportation fuel and cripple high cost projects such as the oil sands.
Ethical Challenge Three: The Dutch Disease
Every oil exporting country invariably suffers a bad case of the Dutch Disease or the “petrolization” of its economy. Even David Emerson, Canada’s former industry minister, now defines the Dutch Disease as a major national concern in which “opportunities from natural resources create destructive pressures on other businesses and industries.”
Canada has often been referred to in jest as the 51st state, due to its historical reliance on the U.S. as a key export market. However, it is becoming more accurate to regard Canada as another Province of China.”
Without the creation of a national stabilization fund, Canada’s petro dollar could fracture the country and tie the nation’s economic fate to catastrophic oil price volatility.
Ethical Challenge Four: The Money
According to Bruce March, CEO of Imperial Oil, both federal and provincial governments stand to make more than $500-billion in income from the oil sands over the next 25 years. Yet unlike most oil exporting nations, neither Alberta nor the government of Canada have exercised any fiscal accountability over this sweat-free income. (Ottawa makes more money from the oil sands in form of corporate taxes than Alberta does due to the province’s “give-it-away” bitumen royalties.) To date neither jurisdiction has saved this one-time inheritance for future generations.
One 2007 study bluntly warned that Alberta could look like a ghost town by the end of the century if it didn’t save $100 billion by 2030. Only ordinary citizens can force their governments to bank resource revenues. Government that run on taxes, represent their citizens; government that run on effortless oil revenue, ultimately represent the dark interests of petroleum.
Ethical Challenge Five: Energy Security
As Canada floods U.S. markets with more bitumen than Americans can burn, both Quebec and Atlantic Canada have become increasingly reliant on foreign oil from the North Sea, Venezuela, Iraq and Algeria. In fact eastern Canada is more dependent on imported oil than the United States (70 per cent). This growing dependence mocks arguments that bitumen is somehow “ethical.”
It also highlights the priorities of the North American Free Trade Agreement, which prevents oil from being shipped east. In addition eastern Canada’s perilous oil dependence reflects the absence of any national energy plan. While bitumen fuels the western half of the nation, eastern Canada now relies on petro states such as Iraq and Saudi Arabia for its energy security.
ENERGY & EQUITY: Listing the limitations to bitumen boosting. Part two.
Ethical Challenge Six: Diminishing Energy Returns
Since the turn of the century, light oil, the highest quality hydrocarbon, has given civilization extraordinary energy gains and fueled all the trappings of modern life. But the rapid development of bitumen, one of the world’s most expensive and heaviest hydrocarbons, has clearly signaled the end of cheap oil. Like most unconventional fuels, bitumen takes more energy to make than conventional oil. In fact, bitumen production requires so much natural gas for processing and enrichment that it now accounts for one-fifth of Canada’s natural gas demand. The extravagant use of natural gas to produce a lower grade fossil fuel is unprecedented.
Fuels that require lots of energy to make energy ultimately provide fewer returns to society. When a nation gets less energy out of system than it puts into it, “the process is ultimately unsustainable,” explains Tertzakian in The End of Energy Obesity. Given that natural gas has an EROI almost as high as conventional oil, many energy experts regard the use of natural gas for bitumen production as folly.
“There are limits to which any nation can continue exporting such large amounts of wealth, but there is little progress in modifying the social and economic structure to reduce oil consumption.”
In other words, high cost hydrocarbons that provide low EROI such as bitumen (and many renewables share this same trait) could cannibalize economies long before this abundant junk crude runs out. The 2010 RSK report asks a significant question: “Which runs out first, the oil or the money?”
In other words, the rapid development of bitumen threatens to sink the North American economy instead of energizing it.
Ethical Challenge Seven: “The Innovation Crisis”
Just about every oil sands developer claims that they can clean up messy bitumen production and its large carbon and water footprint with better technology. “Technology is the key to further progress,” says the American Petroleum Institute in its oil sands propaganda.
But this technology doesn’t exist yet. Although the energy industry may be dependent on technology for making fossil fuels, it doesn’t invest much in innovation.
ENERGY & EQUITY: Last in a list of ways Canada is turning a blessing into a curse.
Ethical Challenge Eight: The Enbridge/Chinese Gamble
the pipeline and supertanker project clearly puts at risk the culture and livelihood of several important coastal First Nations including the Haisla; the Git’gat; the Haida and the Heiltsuk. Just one oil supertanker accident would all but destroy these ancient marine cultures still energized by salmon. An oil spill would also irrevocably damage one of the world’s most beautiful and biologically diverse coast lines.
the pipeline project and associated tanker traffic (more than 300 ships a year) places at risk some of Canada’s most charismatic wildlife. Any nation that would even think about sacrificing white spirit bears, wolves, humpback whales and five glorious salmon species (and other wonders) for a few Chinese yuan has clearly lost its moral authority. Nicholas Nassim Taleb, the famous business critic, put it best: “We become civilized only by knowing what to refrain from doing.”
the character and scale of the China’s investments in Canada’s oil patch and the pipeline proposal undermines the nation’s sovereignty. China, a bizarrely authoritarian shopping mart, has an atrocious environmental and human rights record. Few places have destroyed as much wildlife, groundwater and soil fertility as resolutely as China’s industrial revolution. Even the government’s own environmental report card characterizes the destruction of biological life support systems as “very grave.”
Moreover Chinese Communists have no more regard for First Nations than they do for dissident artists, Buddhist Tibetans or Moslem Uighers.
……Chinese support for Enbridge’s pipeline, not only clearly threaten the B.C. coast and First Nations territory; they also represent a real danger to national sovereignty. “The wrinkle is that the more Canadian resources are controlled by China, the less say Canadians will have over how they are developed, where they are sold and for how much, putting China in the driver’s seat,” accurately observed pro-business columnist Claudia Catteno in the National Post. Sinopec, now a minority holder of Syncrude, Canada’s largest bitumen producer, can already veto whether that the company adds value to the product at home or ships more raw bitumen abroad.
Just like Big Oil the ethical record of both Sinopec and CNPC are appalling by any Canadian business standard. The former chairman of Sinopec (now Enbridge’s big partner) was convicted in 2009 of taking $28-million worth of bribes in order to help “illegal interests.”
REPRISK, a Swiss firm that provides data on corporate performance, rates CNPC as one of the world’s 10 worst companies because of its African human rights abuses and environmental pollution. (CNPC is almost as accident prone as BP.) Not surprisingly, four other oil sands investors keep CNPC company on the REPRISK’s worst performing list: Shell, Total, ExxonMobil and Chevron.
In sum the Enbridge/Chinese gamble poses but one basic question for the country: should Canada risk destroying the coastal Great Bear Rainforest as well as First Nations dependent on the energy of salmon in order to fuel an abusive Communist regime hell bent on putting more cars on the road in Shanghai?
Ethical Challenge Nine: The Carbon Bomb
Although Alberta’s politicians like to call bitumen “the jewel of hydrocarbons,” the unconventional resource remains a junk asphalt-like crude. Rich in impurities and poor in hydrogen, coal-like bitumen requires energy intensive upgrading as well as complex refining. Just cleaning up the heavy hydrocarbon produces mountains of petroleum coke (more than 5 million tonnes) a year in northern Alberta. As a consequence Environment Canada estimates that the project now accounts for six percent of Canada’s total GHG emissions.
Environment Canada estimates that total carbon emissions from the oil sands will likely grow from 49 million tonnes today to 92 million tonnes by 2020. At that point the dirty industry will surpass the emissions of Canada’s buildings, agriculture or entire passenger car fleet. It will also exceed the carbon emission of more than half of 50 U.S. states south of the border.
Ethical Challenge 10: The Dysfunctional Petro State
Countries that rely on black gold for revenue generally come to represent the interests of petroleum production and then lie like hell. And Canada is no exception. In fact its foreign diplomats now spend more time pimping for Big Oil than they do representing the interests of ordinary Canadians.
While former premiers (Gordon Campbell and Gary Doer) actively promote bitumen production as “clean energy,” Natural Resource Minister Joe Oliver openly lies about the project’s social and health impacts on the Cree, Dene and Metis. Incredibly, Oliver told one European crowd that bitumen mining takes place in a land “uninhabitable… uh… by human beings. So, you know, no community is being disrupted.”
Stanford political scientist Terry Lynn Karl has documented how state reliance on revenue from a single staple such as bitumen or natural gas, can weaken institutions, dumb down policy, concentrate power, cripple the economy and hinder democracy.
The almost total capitulation of federal political interests to bitumen exports and the defense of Big Oil has grossly undermined Canada’s character and reputation. “Oil revenues are the catalyst for a chronic tendency of the state to become overextended, over-centralized, and captured by special interests,” warns Karl. In Canada this dangerous transformation has become a moral hazard of the highest order.
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