Canada needs a true national energy strategy: Slowing tar sands development smarter than unlimited extraction, shipment

When energy ministers from around the country gathered in Kananaskis recently, Alberta Energy Minister Ron Liepert billed the meeting as a potentially historic gathering at which politicians will begin long-overdue discussions towards the creation of a truly pan-Canadian energy strategy.

Now, some might think this meant that the energy ministers would work to develop a sustainable, secure energy strategy that works for Canadians in all regions of the country. But the event proved to be an elaborate attempt on the part of the Alberta government and its patrons in the oil patch to win support from other provinces and the federal government for their controversial plans to build bitumen export pipelines to the US Gulf Coast and the port of Kitamat in BC (the "gateway" to China).

Royalties are not taxes. They are the price that forestry, mining and energy companies pay to develop resource assets owned by Canadian citizens.

Clearly. some groups who were involved in the process are sincerely committed to a wide-ranging discussion about what's really best for Canadians when it comes to energy policy (the respected and even-handed Canada West Foundation is particularly notable in this regard). But it's also clear that a number of extremely influential individuals and groups had already made up their minds: they want bitumen pipelines, no matter how many good jobs in upgrading, refining and petrochemical production those pipelines might end up exporting to the US and China.

Unfortunately, Minister Liepert appears to fall into the category of pipeline salesmen rather than the category of big-picture policy thinkers.

The same can be said for the Canadian Council of Chief Executive Officers and EPIC, a new think tank created by a coalition of major oil companies, which have both recently released reports calling for ­ you guessed it ­ more bitumen export pipelines and quicker approvals for oil and gas projects in general.

Instead of slapping together a plan for a couple of questionable pipelines and calling it an energy policy, Canada's energy ministers should set their sights much higher. Here are a few issues that cannot be ignored if federal and provincial politicians are serious about doing more than putting a bow on the status quo and declaring their work done.

Energy Security: Like it or not, we live in a world that runs on oil. For the time being at least, individuals and businesses simply can't make do without the stuff. Yet Canada is the only major oil producing jurisdiction in the world that doesn't have a coherent national strategy that puts their interest of its citizens first.

The results are perverse. Despite our status as a net energy exporter, Ontario, Quebec and the Maritime provinces import roughly 700,000 barrels of crude oil a day from places like Saudi Arabia, Algeria, Nigeria and Venezuela. In fact, Quebec and the Maritime provinces import more than 80 percent of the oil they use from outside Canada.

Why? Because almost all of our pipelines run north-south. Shockingly, we don't have the infrastructure to send western oil to our fellow citizens in the eastern half of the country.

Minister Liepert and others are right when they say we should be looking for new markets for our oil. After all, demand from our biggest costumer, the US, is stagnating and quirks of the US distribution system mean we're not getting world price for what we sell.

But if new markets are what we're looking for, doesn't it make more sense to build pipelines connecting west and east within our own country before building pipelines to supply refineries in Texas and China? Building pipelines to supply the Canadian east as opposed to the Far East also has the benefit of keeping the jobs, profits and tax revenue associated with upgrading and refining within Canada.

Economic Impact of Oil: Driven by massive investment in the oil sands, Alberta's energy sector has become the driving force behind the Canadian economy. This has been great news for Albertans and the hundreds of thousands of other Canadians who have flocked to our province to participate in the boom.

However, from a national perspective, by relying too heavily on the energy sector, we run the risk of developing what economists call Dutch Disease. This is an economic condition in which a booming energy sector drives up the currency and oil-related investment but, in the process, drives down investment, profits and jobs in other sectors, particularly manufacturing.

Any national energy strategy worth its salt would recognize this threat and take steps to deal with it. One possible solution is the one offered by former Alberta premier Peter Lougheed: set a slower pace for development in the oil sands. By proceeding with five or ten projects at a time (instead of the sixty-plus that are currently on the books) we would reduce the likelihood of developing a full-blown case of Dutch Disease.

As added benefits, a more reasonable pace for development would also make it easier to address cumulative environmental impacts and also would reduce (perhaps eliminate) the need to bring thousands of temporary foreign workers into the country to supplement the domestic construction labour force. In other words, a slower pace for development would ensure that it would be Canadian workers who would benefit most from the construction of major Canadian resource projects.

Royalties: Royalties are not taxes. They are the price that forestry, mining and energy companies pay to develop resource assets owned by Canadian citizens.

The good news is that royalties generate billions of dollars each year, especially in resource-rich provinces like Alberta, Saskatchewan and Newfoundland. This is money that we use to build needed infrastructure and fund vital public services like education and health care. The bad news is that we don't always (or even often) get the best possible price for the sale of our assets.

In Alberta, for example, under the Stelmach government we're actually collecting fewer royalties as a share of our overall energy oil and gas sector's revenue than the Social Credit government did in the late sixties (and less than a third of the proportion that was collected under Lougheed).

To rectify this problem, and ensure Canadians get the best possible price for the sale of their assets, a national energy strategy could introduce a truly national process for setting and bargaining royalty rates, so that energy companies could no longer play one jurisdiction against the other.

The bottom line is this: in an environment characterized by historically high oil prices and rapidly declining options for oil companies in other parts of the world, provinces like and Alberta, Saskatchewan and Newfoundland hold all the cards. By cooperating, we can play those cards more aggressively and successfully. Energy companies won't fold or leave the table, because they have nowhere else to go.

Transition: A post-carbon economy is years away, but make no mistake, it's coming. It's coming because the science around global warming is real and frightening; because a global political consensus has emerged in support of a greener economy; and because, more practically, the world is running out of oil (at least cheap oil).

This doesn't mean that we should stop developing our oil resources. The oil sands are one of our country' most valuable assets at the moment and it would be foolish not to exploit them. However, what the coming of a post-carbon economy does mean is that we're going to have to start looking at the oil sands in a different way. In particular, we should very consciously start thinking of the oil sands as a transitional resource: a resource that will help provide us with the revenue necessary to build the next, greener economy in Canada.

If Alberta find a way to join other provinces in crafting and supporting a national energy strategy that uses the oil sands as a bridge to a better future for the entire country, then not only will our country's economic prospects be brighter, we may also be able to manage the "politics of envy" that inevitably come from one province having so much more wealth than others.

In the end, Minister Liepert is right about one thing: the meeting in Kananaskis had the potential to be historic. How unfortunate that he and other provincial energy ministers failed to think and dream big. A true national energy strategy has to be much more than a plan to build a couple of pipelines that export jobs along with our oil.

We can do so much better. In fact, for sake for future generations of Canadian, we need to do much better.

Gil McGowan is president of the Alberta Federation of Labour. The AFL represents 145,000 unionized Albertans, including about 25,000 who work in the energy sector or energy-related construction.

Straight Goods, Mon Aug 8 2011
Byline: Gil McGowan

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