The Alberta government has finally added flesh to the bones of its long-promised Bitumen Royalty In-Kind (BRIK) program - but one of the province's strongest proponents of an Alberta-first oil-sands policy says the program doesn't go nearly far enough to keep value-added energy jobs in the province.
"Since becoming premier, Ed Stelmach has promised new policies that would stop valuable jobs in oil-sands upgrading and refining from being shipped down the pipeline to places like the U.S. Midwest and Gulf Coast," says Gil McGowan, president of the Alberta Federation of Labour.
"Now, after two long years of waiting, we're finally seeing the plan: but frankly, it's deeply disappointing. The government's rhetoric on this issue has been big, but the program they've delivered is shockingly small."
McGowan points out that the 75,000 barrels per day of raw bitumen that will be made available for Alberta-based upgrading under the program is little more than a drop in the bucket compared to total oil-sands production.
"It represents only 6.25 per cent of the 1.2 million barrels per day produced from the Alberta oil sands each year," says McGowan.
"If this is all the Stelmach government has to offer when it comes to policies to promote value-added development in the oils sands, then Albertans should get used to losing refining jobs to the U.S. - because this program is not going to turn the tide. The government is letting Albertans down by setting their sights far to low. Their lack of ambition is truly frustrating and disappointing."
McGowan says the 75,000 barrels per day of bitumen collected under the BRIK program will, at most, provide feedstock for one new upgrader - and a small one at that. Comparisons with the capacity of existing upgrading facilities put the government's promised bitumen reserve in perspective: Syncrude currently processes 300,000 barrels of bitumen per day; Suncor processes 275,000 barrels and Albian Sands-Shell Scotford processes 155,000 barrels.
"The small scale of the BRIK program underlines the weakness of using the royalty system as the government's only tool to address the problem," says McGowan. He says what's really needed are more aggressive policies: like export restrictions, conditional lease agreements for companies working in the oil sands and even the creation of a crown energy corporation to spearhead the construction and operation of Alberta-based upgraders and refineries.
McGowan says these kind of policies are needed to deal with the "new generation" of oil-sands developers (companies like Encana, Conoco-Phillips, Husky and Exxon) who are planning to export most of their raw bitumen to the U.S. for processing, as opposed to the "older generation" of developers (companies like Suncor, Syncrude and Shell) who traditionally have done their upgrading in Alberta.
McGowan says more aggressive policies like the ones he favours are actually nothing new for Alberta. They were used successfully by the Lougheed government in the 70s and 80s to create a value-added petrochemical industry - one that had not existed before and which continues to contribute billions of dollars to the provincial economy every year.
"We were hoping the Stelmach government would learn lessons from the Lougheed era," say McGowan. "But, if this is all that they have up their sleeves, it's clear that this latest version of the Conservative government is a pale imitation of the original."
McGowan concluded by saying that even if the BRIK program is successful in kick-starting one small upgrader, it won't do anything to move the province toward the more ambitious goal of refining a greater proportion of our oil into more valuable products like gasoline, diesel and jet fuel.
"The program sets its sights too low both in terms of volume and in terms of how high the government wants to climb the value ladder," says McGowan. "If this is all the government has to offer, then basically what they're saying is that they're content for Alberta to remain stuck on the bottom few rungs of the value ladder. I think most Albertans aspire for something bigger and better."
For more information call:
Gil McGowan, AFL president @ (780) 218-9888 (cell)