“Canada needs new markets in Asia!”
The Enbridge case for the Northern Gateway pipeline rests on fetching a higher price for bitumen from Asian customers. The argument from Enbridge and their friends in the Harper and Redford governments is that Alberta’s oil is “trapped” in North America, and we can get a higher price from customers in Asia.
Indeed, without the increase in the price of oil, Enbridge’s economic case for the Northern Gateway pipeline evaporates.
Four reasons why the “New Markets” argument from Enbridge and the governments who support them are questionable at best
But will the Northern Gateway pipeline actually deliver what they say?
1. The oil is going to China. Enbridge’s own filings of evidence show the only refineries capable of refining the products Enbridge expects to ship on the Northern Gateway Pipeline are in China. Eventually, Enbridge says some products will go to Taiwan and Korea, but those exports are further into the theoretical future.
2. Bitumen needs to be diluted with something in order to ship it. Bitumen a thick, sticky, tar-like substance that needs lighter fluids added to it in order to make it flow down a pipeline. Enbridge has only today disclosed their forecasts for the cost of condensate and/or diluent – on the first day of the hearing and with little time for the public to examine it. The cost of diluent has a massive effect on the price of oil in North America. Because we don’t know the future market, supply, and cost of condensate and/or diluent, we can’t know whether Enbridge’s claims of a “price uplift” for bitumen are grounded in reality or not.
3. Will the government of China and their state-owned oil companies pay market prices for bitumen? Northern Gateway doesn’t opens up Canadian oil to a “free market” in Asia – it’s a market dominated by China, Russia, and Saudi Arabia – none of whom are free market, open economies like Canada. Making predictions – as Enbridge has done – about what kinds of prices our oil will fetch, and assuming normal “free market” principles, is questionable at best.
4. The question before us is not whether Canada sells petroleum products on the world market. We already do this. The question is what we are selling. Are we selling the product that fetches the lowest price and creates the fewest, most temporary jobs? Or are we refining our oil sands wealth in Canada, and using the resource to build a more sustainable economy?
About the AFL Northern Gateway Reality Check Series
The Alberta Federation of Labour is a full intervener in the Northern Gateway pipeline.
The debate around the Northern Gateway pipeline is heated, and we hear governments and industry saying all kinds of things to justify locking Canada in to being a raw resource producer, but never move up the value chain with our natural resource wealth.
“The Northern Gateway pipeline hollows out our value-added industries, imposes higher oil prices on consumers, and rewrites the rules of Canada’s oil industry by reducing the amount of oil refined in Canada and shipping those jobs to China.”
- Gil McGowan, President, Alberta Federation of Labour.
Enbridge and their supporters in the Harper and Redford governments like to claim the Northern Gateway pipeline will create thousands of jobs for Canadians.
Those claims don’t stand up to the facts.
The real story on Northern Gateway jobs – 228 permanent jobs
The Northern Gateway pipeline will create only 228 permanent jobs. For all the millions of dollars worth of oil sands resources flowing out of Canada, we will see just 228 jobs created, most of them in B.C.
Four reasons why Enbridge’s jobs claims don’t hold water (or oil)
1. Enbridge’s own assessment of construction work is an average of 1,850 jobs per year for three years. Enbridge likes to claim there are 5,536 “person-years” of construction employment on the line with Northern Gateway. That sounds like a lot. But when translated into numbers ordinary people can understand, it’s an average of 1,850 actual jobs per year for just three years. Those jobs are short-lived. They’re only around for three years, and then those workers will be laid off.
2. The steel pipe needed for the Northern Gateway pipeline won’t likely be made in Canada. Sinopec – China’s state oil company – has already said they would be happy to build the pipeline, and the pipe for Keystone XL was not built in North America. Enbridge’s claims that we’d gain thousands of jobs in steel manufacturing are shaky, at best.
3. Enbridge likes to claim there will be 63,000 person-years of employment from the Northern Gateway project. If that sounds too good to be true, it likely is. These aren’t real, guaranteed jobs. They’re a guess based on what economists call “induced” effects estimated by trying to count spinoffs. Enbridge came up with these astounding figures, but didn’t release their math to the public.
The real story on jobs – layoffs and closures at Canadian refineries a virtual certainty
The only way the Northern Gateway pipeline makes economic sense for its foreign-owned backers is if the price of bitumen goes up by quite a bit. And this would make refining oil in Canada much more expensive. In fact, Enbridge predicts we will refine less oil in 2018 than we do now. Most of that reduction will be in Western Canada. Refineries will close, and people will lose good-paying, long-term jobs.
A single refinery can employs 2,000 people for a period of 30-40 years. In other words, we could have more employment, for much longer, with real economic benefits, if we refine our oil sands resources in Canada.
An independent assessment of the number of jobs Canada could have – if we upgraded and refined all the bitumen products going down the Northern Gateway pipeline – puts the total amount of employment at 26,000 good jobs going to China.
Enbridge wants Canadians to trade 26,000 good, long-term jobs, along with all the taxes and other spinoffs that come with upgraders and refineries, for 228 permanent pipeline jobs. It’s not a fair trade.
About the AFL Northern Gateway reality check series
The Alberta Federation of Labour is a full intervener in the Northern Gateway Pipeline hearings.
The debate around the Northern Gateway pipeline is heated, and we hear governments and industry saying all kinds of things to justify locking Canada in to being a raw resource producer, but never move up the value chain with our natural resource wealth.
“The Northern Gateway pipeline hollows out our value-added industries, imposes higher oil prices on consumers, and rewrites the rules of Canada’s oil industry. Gateway will reduce the amount of oil refined in Canada and ship thousands of jobs to China.”
- Gil McGowan, President, Alberta Federation of Labour.
After a bumpy ride this summer, Enbridge will face a tough grilling this week on its $6 billion Northern Gateway project as public hearings enter their final phase in which interveners can challenge the company's evidence.
Enbridge will square off with unions and First Nations while big oilsands players, including MEG Energy, Cenovus, Suncor, Nexen and Total appear in a joint witness panel. The Alberta government is also prepared to appear for the "questioning" phase of the federal Joint Review Panel hearings to examine the economic benefits of the proposed $6-billion pipeline project to carry Alberta bitumen to Kitimat on the coast of British Columbia for export to China.
Critics like the Alberta Federation of Labour will argue Canada's refining industry will shrink — with a loss of 8,000 jobs expected — if the pipeline project goes ahead and diverts bitumen feedstock to China. Opponents will also argue there is plenty of room in existing pipelines to handle growing bitumen exports.
Enbridge, however, is " very confident" going into the hearings as it will finally have a chance to respond to critics, says spokesperson Ivan Giesbrecht, noting the company will speak Tuesday.
"This is our first chance to speak; it's going to be a rigorous questioning and we welcome that," Giesbrecht said. "We really feel the project will benefit both provinces and Canada. It's an opportunity for Canadians to listen in on a very democratic process."
Enbridge is also required, by noon Tuesday, to submit a highly critical U.S. report on the 2010 Michigan pipeline spill that saw 12,000 barrels of heavy oil spill into Kalamazoo River from its pipeline. Initially, the federal review panel said it would not take the report, but reversed its decision mid-August.
Enbridge's project — twin pipelines, with one to carry 585,000 barrels of diluted bitumen west and another to carry the diluent — faced growing resistance, starting in late July when B.C. Premier Christy Clark raised the stakes. Her province will not approve the pipeline unless B.C. gets a share of the increased revenues Alberta will gain from shipping more bitumen, she said.
With the project stuck in political hot water, B.C. newspaper tycoon David Black stepped in with a proposal for a $13-billion refinery in Kitimat as a way to bring economic benefit to the province. The oilpatch was not keen on the idea.
Meanwhile, Enbridge came under fire for a smaller spill in late July in Wisconsin. It also hit rough water when it posted a map of the Douglas Channel route into the Kitimat port that left out many islands, rocks and narrow channels that make the route particularly difficult to navigate. Around the same time, the company also announced $500 million in improvements to pipeline safety for the Northern Gateway pipelines which start in Bruderheim northeast of Edmonton. Those include increasing the thickness of the line by 20 per cent, adding 50 per cent more shut-off valves and increasing inspections by 50 per cent.
Company officials said such improvements are meant to respond to concerns raised by First Nations and other members of the public during a federal review that started six months ago.
The federal review panel is jointly operated by the National Energy Board and the Canadian Environmental Assessment Agency.
The Alberta government remains firmly committed to the project to diversify markets for bitumen, said Tim Markle, spokesman for Alberta Energy. Oilsands producers will only get higher world prices when they have access to Asian markets, said Markle, noting the price differential is up to $20 a barrel.
The province will be represented at the hearings by Christopher Holly from Alberta Energy and Skip York of Wood Mackenzie Consulting, the consulting company which predicted the province will lose $72 billion over nine years if the pipeline is not built.
Gil McGowan, leader of the Alberta Federation of Labour, disputes the province's figures.
"We think this project will kill more jobs than it will create," said McGowan, noting that Enbridge's own figures estimate a four-per-cent reduction in refining capacity by 2018 in Canada as a result of the pipeline.
"This isn't just about losing value-added jobs in the future, it's now becoming clear that existing jobs in the refining sector are also threatened," McGowan said.
He said "we will be raising questions" that there is no agreement in the evidence of the proposed pipeline's impact on refining jobs in Alberta.
Oilsands producers will get higher prices for their product in Asia, but that will only be temporary, McGowan said, noting that China's industry is state-run so there is no real market pricing.
In a report for Forest Ethics Advocacy, David Hughes, a former geologist with the federal government, says the price differential will be eliminated when the glut at Cushing, Oklahoma in the U.S. Midwest is relieved.
"Once it gets to the Gulf coast, the oil can go around the world and they will be forced to pay world price and that's important," said Hughes, adding that could eliminate the need for the Northern Gateway.
Meanwhile, Canadians should talk about whether "we should liquidate our energy resources to sovereign countries like China" or look at longer-term strategies for national energy security, he added.
The hearings begin Tuesday at 2 p.m. at the Holiday Inn at 4485 Gateway Blvd. They run until Saturday Sept. 9, then resume again Sept. 17 at 9:30 a.m. for ten days at the Westwood Inn at 18035 Stony Plain Road.
In November, hearings continue in Prince George to deal with pipeline safety and later in Prince Rupert to deal with marine issues.
Last week, just days before the hearing, Enbridge received approval from the Energy Resources Conservation Board Alberta for a new 400,000-barrel-a-day pipeline to bring bitumen from Fort McMurray to its Edmonton hub. The company says the new Woodland pipeline project is not connected to the Northern Gateway.
Global News, Monday September 3 2012
NDP calls for a deeper look at fracking in Alberta
The Alberta NDP has renewed its call for a scientific review of hydraulic fracturing (fracking) technology. NDP environment critic Rachel Notley says an independent, science-based review is necessary because uncertainty about the risks associated with fracking are exaggerated in Alberta due to the number of abandoned well sites across the province.
"We just think it's irresponsible to do [fracking] without first having a better sense of what the consequences are," says Notley. She says that without a comprehensive review, which would ideally result in legislation specifically geared toward fracking, the provincial government does "not have the capacity to tell us if there's a problem or not, because they're not looking for it, first of all. Secondly, the nature of fracking has changed dramatically... we're engaging in a much more risky form of fracking."
Notley is particularly concerned with the possible effects horizontal fracking techniques could have on groundwater.
The NDP is not the only organization pressuring the Alberta government to initiate a study of fracking. The Council of Canadians is also campaigning for a review.
Notley says she is skeptical of the government's claims that fracking is safe and closely monitored, especially after documents obtained by the Alberta Federation of Labour revealed in November 2011 that the government entered into discussions with the Canadian Association of Petroleum Producers to create a joint communications campaign to convince the public fracking is safe. That collaboration never materialized.
The quasi-independent Energy Resources Conservation Board, which reports directly to cabinet, is charged with regulating fracking activities in Alberta. It is currently reviewing its fracking rules, though the government has not expressed any intention to open a fully independent review.
Notley says she doesn't believe the government understands the need for investigations apart from ERCB work.
"There's a broad range of ways in which the government can act to protect the public and balance the need for sustainable and healthy economic development," she says. "It's a 40-year-old government that's completely captured by the oil and gas industry, the end."
FFWD News, Thursday 30 Aug 2012Byline: Suzy Thompson
As is well known, the "Ethical Oil Institute," the Edmonton-based organization founded by Sun News Network commentator Ezra Levant to support petroleum extraction companies in Alberta, has complained to the Canada Revenue Agency demanding the charitable status of Tides Canada "be reviewed for violating Canada's charities law."
Last week, Ethical Oil accused the Vancouver-based environmental and social issues charity of "'laundering' money from contributors to groups engaged in 'non-charitable' political activities," as the complaint was summarized by the Edmonton Journal.
Ethical Oil also set up an automated online form to enable those who share Levant's and his organization's views to send emails to National Revenue Minister Gail Shea "to report any radical or environmental lobby group you've seen masquerading as a charity so that their taxpayers (sic) subsidy comes to an end!"
Now an Edmonton researcher has filed a complaint with Service Alberta Minister Manmeet Bhullar arguing that by taking this action Ethical Oil is violating its Memorandum of Association with the with the Alberta government.
"Corporate entities such as Ethical Oil are bound by the Companies Act to follow the objects set in their Memorandum of Association," researcher Tony Clark wrote Bhullar last week. "Ethical Oil has mounted a protracted campaign against what it views as violations of the Canada Revenue Agency's rules by certain environmentally oriented charities. I believe this campaign is against the letter, if not the spirit, of the corporation's Memorandum of Association which regulates its external activities."
Citing statements made by Ethical Oil on its website, before a House of Commons committee, in the mainstream media, in a 143-page letter of complaint to the CRA and on a Sun News Network television program hosted by Levant, Clark argues there is nothing in Ethical Oil's Memorandum of Association "that allows this corporation to be a referee on charities' activities."
On his Sun News Network program, Levant -- who is president, treasurer and a director of Ethical Oil and holds 50 per cent of the corporate entity's shares -- interviewed Ethical Oil Executive Director Jamie Ellerton about the campaign against Tides Canada's charitable status. On this episode of The Source with Ezra Levant, Levant set aside his trademark aggressive interview style and was positively warm.
Regardless, Clark's complaint goes on, "The objects of the corporation include, among other things, 'issues and considerations of environmental responsibility, peace, treatment of workers, democratic rights, and human rights.' There is no mention whatsoever in Ethical Oil's foundational documents of this corporation being used as an overseer of the Canada Revenue Agency's rules on charities.
"I do note, however, that Ethic Oil's Memorandum of Association, article 5, specifically states (emphasis added), '[t]he income and property of the Company, however derived and received, shall be applied solely towards the promotion of the objects of the Company...'," Clark writes.
"The key word in the sentence above, Hon. Minister, is 'solely.' Given the scale and scope of Ethical Oil's campaign against a few environmentalist charities, I think it is undeniable that Ethical Oil is using its resources in contravention of its objects as set out in its Memorandum of Association," he argues.
"I urge you to use your powers as the minister responsible for the Companies Act to investigate Ethical Oil's activities and penalize the corporation to the fullest extent of the law if you find it has violated the Act," Clark concludes.
Meanwhile, it is hard to predict the outcome of Ethical Oil's complaints against Tides Canada and other environmental charities.
On one hand, Prime Minister Stephen Harper would clearly like to suppress the activities of charitable organizations that do not march in lockstep with his Conservative Party's environmental policies. On the other, many other charitable organizations with which Harper is both broadly in agreement and whose work he values are clearly in violation of the CRA's regulations about political activities.
So on the theory the rule of law still prevails in Canada, it is hard to see how what is good for the charitable goose mustn't also be good for the charitable gander, an outcome with which the prime minister may be uncomfortable.
One of the most glaring examples, as is well known, is the Vancouver-based market-fundamentalist propaganda organization known as the Fraser Institute, which continues to be permitted to operate as a charity despite blatantly and consistently ignoring the CRA's limits on political activities.
In January 2012, Clark wrote Shea arguing that the Fraser Institute engages in excessive political activities and requesting that the CRA investigate its activities and revoke its charitable status.
Shea responded with a letter that ran to two pages, but contained remarkably little information. She did note that "the confidentiality provisions of the Income Tax Act prevent me from discussing the tax affairs of any particular organization without written consent from an authorized representative of that organization."
Shea did observe in her letter to Clark that "a charity's political activities must be reported on its annual form T3010-1, Registered Charity Information Return."
As Clark noted in an Alberta Federation of Labour submission to the House of Commons Standing Committee on Finance and Tax Incentives for Charitable Organizations on Jan. 17, 2012, each year between 2000 and 2010 the Fraser Institute responded "no" to the CRA's question "Did the charity carry on any political activities during the fiscal period?"
As the AFL submission observed: "Any rookie observer of Canadian politics knows this is nonsense: the Fraser Institute is actively involved in the Canadian political landscape. Any reporting or suggestion otherwise is a sham."
Shea also told Clark that "a charity whose object includes the advancement of education must take care not to disregard the boundary between education and propaganda. To be considered charitable, an educational activity must be reasonably objective and based on a well-reasoned position, that is, a position based on factual information analyzed methodically, objectively, fully, and fairly. In addition, a well-reasoned position should present serious arguments and relevant facts to the contrary."
The flawed approach to "research" taken by the Fraser Institute is well known and aptly deconstructed by Saskatoon health policy consultant Stephen Lewis, who wrote in 2011 that the organization's research in his field was "fatally flawed," based on a methodology that is "essentially absurd," uses respondents' hunches and opinions rather than real data, relies on unrepresentative samples of self-interested respondents and produces only "sortafacts" that support its market-fundamentalist ideological position.
Or, as Nova Scotia Finance Minister Graham Steele put it more bluntly: "The Fraser Institute produces junk. It is not a serious institution. It is a political organization."
Since Canada remains a country of laws, surely we can assume that Levant's Ethical Oil Institute will receive a similar response from Shea.
Rabble.ca, Tues Aug 14 2012
Byline: David Climenhaga
A joint study from the Alberta Federation of Labour and the Parkland Institute of Alberta have released a study arguing the province could lose billions in royalty revenue if the proposed Northern Gateway pipeline is built.
The report's authors defend their claim by examining projected royalty payments between 2011 and 2045, using data collected from the Canadian Energy Research Institute. The report's authors compared those numbers to the royalty system that existed under former premier Peter Lougheed, who held office between 1971 and 1985.
Under Lougheed, 35% of Alberta's oil revenue was captured by royalties during the 1980s. The study argues if that system was still in place, the Alberta Heritage Fund could be as large as $1 trillion by 2045, not including any income earned through investments.
Under the current royalty model, secretary-treasurer of the Alberta Federation of Labour Nancy Furlong says Alberta will collect an average of 18% from oilsands revenue between 2012 and 2045.
"That's an extra billion missing," she said. "Under the old system, that means total royalty would be worth $2.2 trillion during that period, based on CERI's numbers."
Furlong acknowledges that lower royalty payouts mean the province would still be missing out on royalties that existed in the 1980s, even if Gateway is not approved. However, she argues the province's economy will still suffer if Enbridge's proposed pipeline is built.
"Gateway will ship thousands of upgrading and refining jobs to the Chinese, taking jobs away from Canadians. It will only leave 104 permanent jobs for Canadians, most of them in B.C. Other jobs surrounding construction of the pipeline will be mostly part-time or temporary labour," she said. "We're not opposed to a pipeline, but any discussion surrounding one has to include getting our fair share."
SunMedia.ca, Thurs Aug 9 2012
Byline: Vincent McDermott
Study Says Albertans won't get their fair share of Royalties
The Alberta Federation of Labour and the Parkland Institute have released a study that says Albertans could lose billions of dollars in royalties if the Northern Gateway pipeline goes ahead.
The study bases that claim by adding up what the province would collect under the current royalty regime by 2045 as compared to the royalty regime under former premier Peter Lougheed.
Alberta collected 35 per cent of oil revenue as royalties during the 1980s.
According to the study, if that percentage was still in place, the Alberta Heritage Fund would be worth $1 trillion dollars by 2045.
The study quotes figures from the Canadian Energy Research Institute which show Alberta will collect an average of 18 per cent of oilsands revenue under the current royalty regime.
The Parkland Institute is a left-leaning think-tank based in Edmonton.
'Fair share' for Albertans
Nancy Furlong is the Secretary-Treasurer of the Alberta Federation of Labour.
"This study shows Albertans are being fleeced on our fair share of royalties," said Furlong on Thursday.
She says in the Lougheed era, the Heritage Fund was used for loans to other provinces.
"There is no reason why, if we collected anything approaching appropriate royalty rates, Alberta could not lead the country toward a greener economy."
Stelmach royalty review
The province last reviewed the royalty regime in 2007 when it released the report titled Our Fair Share.
Ed Stelmach, who was premier at the time, then announced the government would increase royalties to collect an extra $1.4 billion a year.
The announcement created a backlash in the energy industry and was blamed for a downturn in natural gas production in Alberta.
The province eventually backed away from any major royalty changes.
CBC News, August 9, 2012
Industry data shows Alberta should have $1 trillion in Heritage Fund by 2045
Edmonton – The Alberta Federation of Labour (AFL) and Parkland Institute released a joint study today, showing Albertans will let billions slip through their fingers if the Northern Gateway Pipeline is approved and constructed.
The study showed that if Alberta met the royalty targets in place when Peter Lougheed was Premier, the province would have $1 trillion in the Heritage Fund by 2039.
According to oil industry data generated by the Canadian Energy Research Institute (CERI), Alberta will collect an average of only 18 per cent of the revenue generated in the oil sands as royalties.
The data covers the 2012-2045 forecast period and assumes the Northern Gateway pipeline will be constructed and operational.
In the 1980s, Alberta collected 35 per cent of oil industry revenue as royalties. The target was lowered to about 25 per cent during the Klein era.
AFL Secretary-Treasurer Nancy Furlong says any discussion of the Northern Gateway pipeline should involve Albertans getting their fair share first.
“Albertans only get value out of the oil sands in two basic ways – royalties and jobs.” “This study shows Albertans are being fleeced on our fair share of royalties.”
“The Northern Gateway pipeline will also ship thousands of upgrading and refining jobs down the pipeline to Asia, leaving Canadians with only 104 permanent jobs, most of them in B.C. Albertans are not getting their fair share from this pipeline,” adds Furlong. The Alberta Federation of Labour represents 150,000 Albertans, including 25,000 working in the oil sands and energy-related construction.
Furlong adds that Alberta’s oil sands wealth could – and should – be used to build the economy in the rest of the country.
“In the Lougheed era, when the Heritage Fund was growing, it was used for loans to other provinces and for infrastructure projects. There is no reason why – if we collected anything approaching appropriate royalty rates – Alberta could not lead the country toward a greener economy.
“There are certainly ways Alberta could lead a real conversation about a national energy strategy, which would insulate us from demands from other provinces. But instead we’re following oil industry orders for more pipelines, fewer royalties and taxes, and zero plan for how we might transition our economy and protect jobs while we address climate change.”
“What we have now is not an energy strategy. It’s surrender,” concludes Furlong.
MEDIA CONTACT: Nancy Furlong, AFL Secretary-Treasurer, 780-720-8945
Federal government to review deal
The proposed takeover of Calgary petroleum producer Nexen Inc. by a Chinese state-owned oil company sparked a fiery debate Monday, with the Alberta government welcoming foreign investment as opposition parties, unions and some business leaders urged caution.
Federal Industry Minister Christian Paradis announced Monday that Ottawa will review the China National Offshore Oil Corp.'s (CNOOC) $15-billion bid for Nexen under the Investment Canada Act.
The federal minister will have the final say on whether the takeover goes through, based on if it's deemed a net benefit to Canada.
Although the provincial government has no formal say in the matter, Energy Minister Ken Hughes said the news is further evidence of the importance of Alberta's oilsands in meeting global energy demand.
"Foreign investment benefits Albertans, and Canadians, putting Canadian firms in a better position to compete globally," Hughes said.
"The investment required to develop oilsands resources is significant . . . The result is jobs for Canadians here and abroad, and competitive products on an international market."
The Nexen takeover is not the first Chinese state-owned enterprise foray into Canada, but it's by far the biggest. The $15.1-billion agreement is equal to the amount Chinese firms have invested in Canada's oil and gas industry over the last three years.
The sheer size of the takeover will put Prime Minister Stephen Harper and the premiers to the test, forcing them to decide how to handle the future of the oilpatch, said University of Calgary economist Jack Mintz.
"It's going to be fascinating," Mintz said in an interview.
Debate over the Nexen deal began immediately after the news was announced Monday. Federal NDP energy critic Peter Julian said the Harper government needs to better define the criteria for a foreign sale, and the Nexen takeover should be subject to a transparent review - not decided behind closed doors.
Liberal industry critic Geoff Regan said in assessing the "blockbuster" deal, the Harper government needs to determine whether Canadian companies will be given reciprocal leeway to make major investments in China - and whether the state-owned company will act according to free market principles.
In Alberta, Liberal MLA Kent Hehr said the proposed sale should provoke questions about whether Albertans are losing control of their own resources.
And Alberta Federation of Labour president Gil McGowan said Canadians shouldn't let a company like Calgary-based Nexen, with a major stake in the oilsands, fall into the control of a foreign government without serious reflection.
"They'll keep the best jobs for themselves. They'll do the minimum to protect the environment and ignore Canada's long-term energy needs in favour of their own nation's needs," McGowan said.
But Gordon Houlden, director of the University of Alberta's China Institute, said given the size of the Chinese economy, it would be strange if the Asian powerhouse wasn't investing in Canadian energy companies.
He noted China is still a smaller player than Europe and the U.S. in Canada's oilpatch, but the U.S. will quickly realize it has a robust competitor north of the border.
The Nexen deal is likely to draw comparisons with CNOOC's $18.5-billion bid for U.S. energy giant Unocal in 2005, a tender ultimately beaten down by political opposition on Capitol Hill.
In Canada, the Harper government blocked Australian miner BHP Billiton Ltd.'s hostile bid in 2010 for Potash Corp. of Saskatchewan after political and business leaders lobbied against it.
Dick Haskayne, one of those business leaders, said the onus is on Nexen and CNOOC to prove this latest deal is a net benefit to Canada.
Haskayne, one of Calgary's most prominent energy executives, said Ottawa's decision needs to be shaped by the fact a number of energy companies hammered by the global economic slowdown and low natural gas prices are also ripe for a takeover.
"It's going to be a critical decision," Haskayne said. "It's not just Nexen. If Nexen is approved, you know the other ones that are in the same league."
Haskayne said he doesn't know all the pros and cons of the deal, but one of his key concerns is whether a pledge to keep a head office in Calgary is met.
But businessman Jim Gray, who also opposed the Potash Corp. sale, said it's a good thing Canada is building a closer relationship with the country poised to become the world's largest economy.
The chairman of the energy group of Brookfield Asset Management said he was concerned about Potash Corp. falling into the hands of a foreign entity because the Saskatchewan company controls one-fifth of the global resource.
Control of the oilsands isn't as concentrated, Gray noted. While Nexen is a major Canadian company, much of its assets are located outside the country.
"There's no parallel between those two deals," he said.
Recent Chinese investments in Alberta
- July 23: Calgary-based Nexen Inc. agrees to a friendly $15-billion takeover bid by CNOOC, China's largest offshore oil producer. Separately, Talisman Energy agrees to sell a 49-per-cent interest in its UK division to Sinopec Corp. for $1.5 billion.
- January: Calgary-based Athabasca Oil Sands Corp. announces it is selling its remaining 40 per cent of the MacKay River project in northern Alberta to PetroChina for $680 million. PetroChina becomes the first Chinese-state-owned company to wholly own a Canadian oilsands project.
- December 2011: Sinopec Group spends $2.2 billion acquiring Calgary oil and gas explorer Daylight Energy Ltd.
- November 2011: CNOOC buys Calgary oilsands developer Opti Canada Inc. for $2.1 billion US.
- May 2010: China Investment Corp. injects $1.25 billion into Penn West Energy to develop the trust's oilsands assets in the Peace River region.
- April 2010: Sinopec purchases ConocoPhillips' nine per cent stake in Syncrude for $4.65 billion.
- August 2009: PetroChina buys a 60-per-cent share in Athabasca Oil Sands' MacKay River and Dover projects for $1.9 billion.
- April 2005: CNOOC Ltd. pays $122 million for 16.7 per cent in MEG Energy Ltd. for a northern Alberta oilsands project.
The Edmonton Journal, July 24 2012
Byline: Kelly Cryderman, Calgary Herald
With files from The Canadian Press
Alberta Federation of Labour applauds Keystone XL delay: It’s a chance to consider value-added opportunities in Alberta, says McGowan
Edmonton – The Alberta Federation of Labour applauds the Obama administration’s decision to delay the Keystone XL pipeline, saying it will give the Redford government an opportunity to pursue value-added opportunities here at home, rather than shipping unprocessed bitumen south for upgrading.
“There’s been a parade of Alberta government ministers travelling to the States to sell unprocessed bitumen. Now perhaps those same ministers can stay in Alberta and consider our needs and our future ahead of those of our neighbours south of the border,” says Gil McGowan, president of the Alberta Federation of Labour (AFL), which represents 145,000 workers.
“Upgrading more bitumen in Alberta will help our province in many ways. Increasing value-added industries will provide quality, long-term jobs for Albertans and Canadians. While good relationships with our neighbours are important, the government of Alberta must promote the long-term health of our province first. Increasing value-added energy industries in Alberta will increase revenues from royalties and taxes,” he says.
“As bitumen is upgraded and moved up the value chain, more funds will flow into the Treasury through higher royalties on finished products. This is money that can be used to pay for important public services like health care and education,” says McGowan.
McGowan took particular exception to the Wildrose Party’s reaction to the delay of the Keystone XL pipeline.
“The Wildrose Party was playing fast and loose with the facts in their media release today. They should avoid fear mongering. The truth is that this pipeline is bad news for quality jobs and bad news for royalties,” says McGowan.
“Danielle Smith is trying to convince us that we’ll lose billions in royalties if the Keystone XL pipeline isn’t approved, but the opposite is true. If we export unprocessed bitumen, we ruin a great competitive advantage,” says McGowan
“The National Energy Board notes that, ‘wide differentials provide refiners with an economic incentive to build heavy oil conversion capacity.’ If we get rid of the prices differential between our bitumen and global crude, we destroy future opportunities to boost our value-added industries,” he says.
“In this context, Albertans should see the Obama administration’s decision as an opportunity, not a disappointment. It is an opportunity for us to move up the value chain and create a more prosperous and stable economic future for Albertans.”
Gil McGowan, President, Alberta Federation of Labour @ 780-218-9888 (cell)