New report suggests oil-sands jobs won’t return even if Alberta economy improves

U.S. pipeline and refinery expansions mean that Alberta's dream of "moving up the value ladder" is on its deathbed

EDMONTON – Without aggressive government intervention, Alberta will almost certainly miss out on the opportunity to create thousands of high-quality jobs in oil sands upgrading and petroleum refining.

At the same time, an historic opportunity to diversify the Alberta economy and build a more robust value-added petroleum industry will be lost – probably forever.

Those are the main conclusions of a report released today by the Alberta Federation of Labour.

The report, entitled "Lost Down the Pipeline," reveals important new information about the state of oil-sands employment and the future oil-sands development in Alberta, including the following:

  • Despite the global recession, energy companies are proceeding with aggressive plans to dramatically expand both U.S.-based bitumen-refining capacity and American-bound bitumen pipeline capacity.
  • Energy companies are in the process of spending about $31 billion (US) to build, re-tool or expand at least 10 refineries in the U.S. for the specific purpose of upgrading and refining raw bitumen from the Alberta oil sands. These refineries will have the combined capacity to upgrade and refine about 2.8 million barrels per day (bpd) of raw bitumen from Alberta.
  • At the same time, two major bitumen pipelines – the Keystone and Alberta Clipper – are nearing completion. Together, they will have capacity to move about 1.4 million bpd of raw bitumen from Alberta to refineries in the U.S. Mid-West. In addition, six other pipelines are being planned that will have the capacity to move 2.3 million bpd of Alberta bitumen to refineries on the U.S. Gulf Coast.
  • To put these numbers in context, output from the Alberta oil sands today totals about 1.3 million bpd. By 2020, Alberta's bitumen output is expected to rise by 2 million bpd to bring total production to 3.3 million bpd.

"Government and business leaders have left the impression that once the global recession ends, it will mean a return to business as usual in the oil sands," says AFL president Gil McGowan.

"But nothing could be further from the truth. What our research shows is that American refineries will have the capacity to process ALL of the expected increase in oil-sands output from Alberta. As a result, unless the Stelmach government steps in much more aggressively than it has, the raft of upgrader postponements we've seen here in Alberta will almost certainly turn into permanent cancellations. We'll be losing literally thousands of jobs down the pipeline."

The AFL report considers the two solutions put forward by the Stelmach government – new pipeline tolls and a scheme to collect bitumen in lieu of royalties – but concludes both are ineffective and doomed to failure. To make matters worse, the report shows the Stelmach government has actually been undermining the real competitive advantage that would make bitumen upgrading and refining profitable in Alberta.

"The government's own consultants have been saying for years that Alberta's real competitive advantage when it comes to refining is easy access to cheap feedstock in the form of cheap bitumen," says McGowan.

"But by actually promoting the construction of bitumen pipelines to the U.S., the government has been helping to build a bigger market for bitumen in the States which, in turn, has had the effect of reducing the price differential between bitumen and conventional crude oil. So, in an effort to get a few extra dollars per barrel for bitumen, they're giving away the advantage upon which we could build an entire new value-added industry."

The AFL report concludes that the real solutions lie in re-learning the lessons of the Lougheed government which used a mix of regulation and government ownership to create a multi-billion-dollar, value-added petrochemical industry based on natural gas.

In particular, the report recommends that the Alberta government follow Lougheed's example by using regulations to prohibit the export of raw bitumen and by using government resources to create a publicly owned energy company with a mandate to advance the interests of Albertans. The report also recommends that the government take the lead in building an upgrading and refining "super complex" based on a government-commissioned (but ignored) blueprint developed by the respected energy consultant, David Netzer.

"The real question we're left with after reading this report is this," says McGowan. "Will we re-learn the lessons of Lougheed and embrace a more aggressive role for government in the oil sands, or will we stand idly by while the 'market' decides to send our jobs and our economic opportunities down the pipeline?"


For more information call:
Gil McGowan, AFL President @ (780) 483-3021 (office) or (780) 218-9888 (cell)

For copies of Lost Down the Pipeline, visit the AFL website @


Lost Down the Pipeline

I. U.S. refinery expansions, conversions and new refinery construction to process bitumen from Alberta oil sands

Refinery: Detroit Heavy Oil Expansion
Company: Marathon
Location: Detroit, Michigan
Investment: $1.9 billion (US)
Bitumen Capacity: 115,000 bpd

Refinery: Garyville Refinery Expansion
Company: Marathon
Location: Garyville, Louisiana
Investment: $3.2 billion (US)
Bitumen Capacity: 180,000 bpd

Refinery: Hyperion Refinery
Company: Hyperion
Location: Union County, South Dakota
Investment: $4 billion (US)
Bitumen Capacity: 400,000 bpd

Refinery: Port Arthur Refinery Expansion
Company: Motiva (Shell and Saudi Aramco)
Location: Port Arthur, Texas
Investment: $7 billion (US)
Bitumen Capacity: 600,000 bpd

Refinery: Port Arthur Refinery Expansion
Company: Valero
Location: Port Arthur, Texas
Investment: $2.4 billion (US)
Bitumen Capacity: 415,000 bpd

Refinery: Tulsa Refinery Expansion
Company: Sinclair Oil
Location: Tulsa, Oklahoma
Investment: $1 billion (US)
Bitumen Capacity: 115,000 bpd

Refinery: Whiting Refinery Conversion
Company: BP
Location: Whiting, Indiana
Investment: $3.8 billion (US)
Bitumen Capacity: 205,000 bpd

Refinery: Wood River Refinery Conversion and Expansion
Company: WRB Refining (ConocoPhillips and Encana)
Location: Roxana, Illinois (with refinery in Borger, Texas)
Investment: $4 billion (US)
Bitumen Capacity: 495,000 bpd

Refinery: Toledo Refinery Conversion
Company: BP/Husky
Location: Toledo, Ohio
Investment: $2.5 billion (US)
Bitumen Capacity: 131,000 bpd

Refinery: Lima Refinery Conversion
Company: Husky
Location: Lima, Ohio
Investment: $1.9 billion (US)
Bitumen Capacity: 146,000 bpd

Number of U.S. oil sands related refinery projects identified by AFL: 10
Total bitumen processing capacity: 2.8 million bpd
Estimated investment: $31.7 billion (US)

Sources: Environmental Integrity Project, corporate annual reports, corporate websites, media reports

II. Bitumen Pipelines to the U.S. Mid-West

Pipeline: Alberta Clipper
Company: Enbridge
Capacity: 450,000 bpd (to be expanded to 800,000 bpd in 2010)
Status: under construction

Pipeline: Keystone
Company: TransCanada Pipelines
Capacity: 435,000 bpd (to be expanded to 590,000 bpd in 2010)
Status: under construction

Total Combined Capacity: 885,000 bpd in 2009; 1.4 million bpd by 2010

Source: National Energy Board (NEB)

III. Planned Bitumen Pipelines to U.S. Gulf Coast

Pipeline: ExxonMobil/Enbridge Texas Access
Capacity: 445,000 bpd
Status: Proposed

Pipeline: Sunoco Gulf Coast
Capacity: 300,000 bpd
Status: Proposed

Pipeline: TEPPCO/Kinder Morgan Chinook-Maple Leaf
Capacity: 440,000 bpd
Status: Proposed

Pipeline: TransCanada Keystone XL Gulf Coast
Capacity: 700,000 bpd
Status: Proposed

Pipeline: Altex Energy Gulf Coast
Capacity: 425,000 bpd
Status: Proposed

Pipeline: ExxonMobil Pegasus
Capacity: 30,000 bpd
Status: Proposed

Total Combined Capacity: 2.34 million bpd
Source: CAPP

IV. Survey: Albertans support a bigger role for government in oil sands

Results of Alberta Federation of Labour survey of 500 Albertans. Conducted by Environics Research, January 21-25, 2009

Q1. How important do you think it is that oil-sands processing and refining jobs be kept in Alberta?

Very important 77%
Somewhat important 19%
Not very important 3%
Not at all important 1%

Q2. Which one of the following policies do you think the Alberta government should pursue with regard to keeping more oil-processing and refining jobs in the province? Should they...

Make it legally mandatory that energy companies do more of their processing and refining in Alberta. 42%
Set voluntary targets for more processing and refining in Alberta that the energy industry would be encouraged to meet. 43%
Let the energy companies decide for themselves where upgrading and refining should be done. 12%

Q3. Which one of the following statements best summarizes your view on how the Alberta oil sands should be developed?

Energy companies are the ones who know the industry best. Decisions about when and how to develop the oil sands should be left with them. 22%

The oil sands are a publicly owned resource. The Alberta government should strictly regulate the pace of oil sand development, environmental standards and job creation. 72%

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