The demise of the $11.6-billion Voyageur upgrader project won't change the Redford government's hands-off approach around oilsands processing, provincial Energy Minister Ken Hughes said Thursday.
Hughes also suggested the Progressive Conservative government won't alter its policies to meet the goal set by former premier Ed Stelmach of processing two-thirds of Alberta's bitumen into light oil by 2020.
"It's an interesting goal," Hughes said in an interview.
"If that was physically possible with private sector initiatives, then that would be something we could accomplish. But I would argue that if the only way to accomplish that goal is by doing things that are financially and economically unnatural, then I would say that would not be wise for Alberta."
In 2011, 56 per cent of bitumen was upgraded in the province, according to the Energy Resources Conservation Board (ERCB). With an expected major increase in oilsands production, that figure is expected to drop to 44 per cent by 2021.
That figure could drop further with Suncor's Wednesday cancellation of Voyageur, which was intended to convert 200,000 barrels of bitumen per day from the Fort Hills oilsands mine into refinery-ready synthetic crude oil starting in 2017.
A glut of light oil in the North American market helped make the economics of the project unfeasible.
The Tory government has made gaining access to new markets through pipelines to the U.S. Gulf Coast, B.C. and Eastern Canada a priority.
While the price differential between conventional oil and bitumen has narrowed considerably in recent weeks - shrinking to $14.35 a barrel on Thursday - the government says the discount for oilsands has led to a massive revenue shortfall this year.
Hughes said the province shouldn't be concerned only with increasing upgrading within its own boundaries.
"Adding value to Alberta products anywhere in Canada is really good for Alberta as well. It doesn't overheat our economy ... and it does get our product to the market in a way that creates goodwill in other parts of Canada," he said. "It creates jobs in other parts of Canada, it creates economic stability in other parts of Canada."
But the Tories have faced considerable criticism, from the NDP and elsewhere, for focusing their attention on promoting pipelines to ship bitumen out of province, rather than providing incentives for upgrading.
Alberta Federation of Labour president Gil McGowan said the Voyageur situation shows that oilsands processing can't be left solely in the hands of the private sector.
Upgrading within the province will create products that fetch a better price than raw bitumen and create thousands of new jobs, he argued.
"Alberta will never move up the value ladder unless the government gets involved more aggressively in decisions over how our resources are developed," McGowan said, adding he wants actions such as conditions included on oilsands leases, not "subsidies or handouts."
Hughes said it was "naive" to think the province has the capacity to process all the bitumen produced.
But he noted the government does provide incentives through its Bitumen Royalty in Kind (BRIK) program, in which the province receives oil for its share of royalties from producers. The program is being used with the $5.7-billion North West Upgrading project near Edmonton, which will see bitumen refined into diesel.
In February, Premier Alison Redford and Saskatchewan Premier Brad Wall held preliminary discussions on a strategy to work with Ottawa and industry to boost Western Canada's refining and upgrading capacity.
Hughes said the governments are interested in talking to companies about whether a new model akin to the BRIK program could be developed to provide further incentives to industry.
But direct investment is not on the table and private companies must be in the lead, he said.
The Calgary Herald, Monday, Apr. 01, 2013
Byline: James Wood
Report says Alberta will be upgrading 26 per cent of bitumen by 2025
EDMONTON - A labour group on Tuesday urged a government committee to support construction of new upgraders to stop oil conglomerates who want to "rip and ship" Alberta's resources.
The Standing Committee on Alberta's Economic Future also heard from an industry group that said market forces alone should decide whether a new upgrader is necessary, and from a project proponent who would benefit from provincial support.
The committee is trying to decide whether the province should renew its commitment to the Bitumen Royalty in Kind Program, or BRIK, in which the province forgoes royalties in favour of bitumen and then uses that bitumen to feed upgraders.
Alberta Federation of Labour president Gil McGowan told the committee that upgrading bitumen in Alberta should be a condition of resource development, not an option, because it creates jobs and adds value in Alberta.
"It is our resource and it is we, the citizens of Alberta, who should be seizing the value opportunity, not some foreign-based energy giant," McGowan said. "It may make all sorts of sense ... for Exxon and Sinopec to rip and ship our raw resources, but just because it makes sense for them, it doesn't mean it makes sense for Albertans."
McGowan said Alberta has traditionally upgraded roughly two-thirds of its bitumen, a figure that will drop to 47 per cent by 2017, according to the Energy Resources Conservation Board. He said an independent consultant's report prepared for the province estimated that by 2025, Alberta would be upgrading just 26 per cent of its own bitumen.
Government reports obtained through freedom of information requests show exporting raw bitumen captures 35 per cent of the value, McGowan said, while upgrading to synthetic crude captures 70 per cent of the value and refining to diesel and jet fuel nets 100 per cent of the value.
"At the same time, there is compelling evidence that moving up the value ladder will also generate more revenue for government to help pay for things that Albertans need, like health care or education," McGowan said.
The BRIK program was developed in 2007, one year after former Premier Ed Stelmach famously said "shipping raw bitumen is like scraping off the topsoil, selling it and then passing the farm on to the next generation."
Stelmach pledged Alberta would upgrade 72 per cent of its bitumen by 2016. In May 2010, the province announced the first BRIK-backed upgrader would be built by North West Upgrading northeast of Edmonton.
The province initially backed a $6.6-billion refinery proposed by Alberta First Nations Energy Centre, but pulled support in February 2012. Teedrum president Ken Horn said the BRIK program could help make the First Nations refinery a reality.
"What is being considered in this room today is whether to introduce a second round of brick barrels under a request for proposals," Horn said, highlighting the economic benefits of the projects. "(The province is) facing a lot of challenges. ... These particular projects could yield a tremendous amount of money for the Alberta government."
Neil Shelly, executive director of Alberta's Industrial Heartland, said "overall, we think (BRIK) is a great long-term strategy for Alberta.
"It helps diversify our markets, it provides long-term stability in the future and it's definitely the role of government. When industry acts, they're acting on behalf of an individual company," Shelly said. "What may not make sense to an individual company may make sense to the province as a whole."
Emilson Silva of the University of Alberta School of Business said he believes the North West Upgrader should go ahead but doesn't think the market will support a second BRIK-backed upgrader.
Martyn Griggs of the Canadian Association of Oilsands Producers said the organization thinks BRIK is a good program but won't comment on whether implementing it is the right political choice for Alberta.
Patricia Nelson, vice-chair of the In Situ Oilsands Alliance, said if building an upgrader makes economic sense, the industry will do it.
"If it doesn't make sense, they will not. And I think you need to have some faith. We've had some pretty good ... trends with industry players here in Alberta making this a world-class place for energy development," Nelson said.
"So keep the faith."
The committee is expected to table its findings on April 30.
The Edmonton Journal, Tuesday, Feb. 26, 2013
Byline: Karen Kleiss
AFL to highlight advantage of in-province upgrading in presentation to Redford Government
Edmonton – Alberta Federation of Labour president Gil McGowan will promote the benefits of the bitumen bubble on Tuesday.
McGowan, who will be presenting to the Standing Committee on Alberta's Economic Future about the Bitumen Royalty In-Kind (BRIK) program, says that the bitumen bubble is an opportunity to create more in-province upgrading projects.
The BRIK program, which incentivizes in-province upgrading, is under the government's microscope this week as they consider how they intend to continue or expand it. McGowan, who will be speaking to the committee from 1:00 p.m. to 1:45 p.m. on Tuesday, will be available to media immediately after his presentation.
“This is the time to be investing in the long-term prosperity of this province,” Alberta Federation of Labour president Gil McGowan said, noting that the program has helped create capacity to upgrade up to 75,000 more barrels per day in Alberta. “75,000 barrels per day may sound like a lot, but it’s really little more than a drop in the bucket. Building Alberta's economic future requires more than just one BRIK.”
Under the BRIK program, the province takes its royalty payments from producers in bitumen, the thick, heavy oil squeezed out of the oilsands, rather than in cash.
“The governments own internal documents indicate that there is $72 billion in refining value being lost as a result of the current focus on raw bitumen exports,” McGowan said. “This is money the Alberta taxpayer could recover if we had an upgrading strategy. I'm glad to have been invited to speak on this subject — it gives me hope that the government might be taking in-province upgrading strategies seriously.”
Several times over the past decade, and under the leadership of three premiers, the Government of Alberta has promised to ensure at least 2/3 of Alberta's bitumen is upgraded in the province. At present, barely half of our bitumen is upgraded in-province, and the percentage is decreasing.
“The latest government projection is that we will only be upgrading 26 per cent of our bitumen by 2020,” McGowan said. “Something needs to be done to turn this ship around.”
Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email firstname.lastname@example.org.
2013 Feb 26 Presentation to the Standing Committee on Alberta’s Economic Future on the Study of BRIK (Bitumen Royalty-in-Kind) Program
Gil McGowan, President
As elected officials from across the province, you all know that the majority of Albertans want to see more upgrading done within our borders.
You’ve seen the polls. And you’ve heard directly from your constituents.
In their hearts and in their guts, Albertans feel a strong need to move up the value ladder.
Albertans are saying “yes” to adding value and “no” to sending high-quality, high-paying jobs down the pipeline to places like the US Midwest, the US Gulf Coast and, in the future, to China.
The wishes and preferences of Albertans on this issue are clear.
But, we all know that public opinion isn’t enough. In order to become a reality, upgrading also has to pass the economic test.
On that score, the power players in the oil industry are on entirely different page than ordinary Albertans.
They say the numbers don’t add up for Alberta-based upgrading.
They put on their longest faces and sadly report that we have no choice but to get comfortable on the lowest rung of the value ladder.
They say that the case is closed.
But we at the AFL aren’t buying it.
I’m here today to challenge the industry’s conventional wisdom.
I’m here to say that the industry power players are wrong…and that the majority of supposedly ill-informed ordinary Albertans are right.
I’m also here to thank Premier Redford…but also to take her to task.
Albertans should thank her for drawing wide public attention to the whole concept of the differential between the price that’s paid for conventional oil and the price we get for bitumen.
The premier is right when she says that the differential is incredibly important to the future of the Alberta economy.
But she’s dead wrong when she says that a widening differential is a disaster for our province. The truth is that a wider differential dramatically improves the economics of upgrading and presents us with an opportunity to do exactly what they majority of Albertans want us to do – and that is, move up the value ladder.
To put it another way, the so-called bitumen bubble that has been inflated by the widening differential has a very significant silver lining. And if the goal of this committee and this government is to develop effective public policy, it’s a silver lining that cannot be over-looked or ignored.
For those of us in Alberta’s labour movement, the need for our policy makers to see and seize the opportunity presented by the widening differential is great. The need for policy leadership is great because, as a province, we are in the process of tumbling down the value ladder, rather than climbing up it.
This slide shows the reality we’re facing today. Throughout the 80s, 90s and well into this decade, we normally upgraded about two-thirds of our raw bitumen to synthetic crude. Former Premier Stelmach promised that his government would ensure that 70 per cent would be upgraded within the province. That’s why he established the BRIK program. But we’re moving in the wrong direction. Today, we upgrade only 58 per cent and the ERCB projects that by 2017, that figure will drop to 47 per cent.
Even worse, a report prepared last for the government by the consulting firm Wood MacKenzie projects that by 2025 Alberta will be upgrading only 26 per cent of our bitumen.
To be clear, no one is talking about shutting down existing upgrading or refining facilities. They’re all very, very profitable. In fact, there isn’t an upgrader or refinery in the country that isn’t making money hand over fist. Instead, the problem is that – with the notable exemption of the Northwest Upgrader and refinery – no new upgrading capacity is being added in our province. Virtually all of our province’s new oil sands production is going to be shipped out of the province in raw form.
Why is this a problem? It’s a problem because by shipping our bitumen raw, we’re letting literally thousands and thousands of good jobs slip through our fingers.
A single upgrader employs up to 2,000 people in direct operations positions. It also provides millions of man-hours of employment each year for construction workers doing regular maintenance and turnarounds.
In addition, as the Conference Board of Canada has pointed out, upgraders and refineries have incredibly long supply chains – so the spin-off affects to suppliers and local businesses are huge.
And these are temporary, transitory jobs in construction. These are long-term, stable, family-sustaining, community-building jobs. If you don’t build the upgraders and refineries, you don’t get these jobs – it’s as simple as that.
Our federation, working with the Communications, Energy and Paperworkers Union, has estimated that if the volume of diluted bitumen slated to go down the Keystone XL pipeline were instead upgraded in Alberta before being exported as synthetic crude, it would create as many as 18,000 permanent, direct and indirect jobs.
If the bitumen slated for the Northern Gateway pipeline was upgraded here and shipped as synthetic crude, it would create 26,000 jobs.
Those are numbers provided by economists working for the labour movement. But for our purposes today, I want to draw your attention to work done by other economists…in particular, work done by economists and energy experts working for the Alberta government itself.
We at the AFL do a lot of FOIP searches…and we recently did a search on reports conducted or commissioned by the government on the subject of upgrading.
The search netted about 8,000 pages of documents. But there were two that really stood out, both of which we have included in your kits.
The first is entitled “Alberta’s Value Added Oil Sands Opportunities and Bitumen Royalty in Kind.”
It includes this slide, which shows that when you export bitumen in raw or diluted form, you capture about 35 per cent of the value chain. But if you upgrade that same bitumen to synthetic crude and export that product, you capture 70 per cent of the value chain. And if you move even higher up the chain, to products like gasoline, diesel, jet fuel and petrochemicals, you can essentially capture 100 per cent of the value chain.
At the same time there is compelling evidence that moving up the value ladder will also generate more revenue for government to help pay for things that Albertans need like health care or education or which can be saved for future generations.
For example, just a few months ago, Ian McGregor from Northwest Upgrading told this committee that if his very small refinery had been in operation last year, it would have generated approximately $500 million more in revenue for the government than they got by allowing the bitumen to be exported raw. And that’s on a volume of 37,500 barrels per day…which is tiny compared to overall production from the oil sands.
So that’s what we stand to lose if we don’t find a way to arrest our province’s headlong tumble down the value ladder. Thousands of jobs. Millions, perhaps billions, in public revenue. And the difference between 35 per cent of the value chain and 70 per cent.
Of course, the skeptics will say – and have said – that the numbers just don’t add up.
And for a few years – just a few (between 2009 and 2011) – they didn’t. But they do now.
To illustrate my point, I’d like to draw your attention to the second very important document that we received as a result of our FOIP search.
This one is entitled “Oil Sands Fiscal Regime Competitiveness Review.” It comes to a number of very interesting conclusions about royalties (it shows we are not getting a fair share for the sale of our collectively owned resources) and carbon taxes (it shows that there is little to be feared from a carbon tax and actually something to be gained).
But for our purposes, I want to focus on the report’s findings on upgrading.
Basically, it says that there were two factors undermining the economics of Alberta-based upgrading between 2009-2011. The first was the spike in the cost of the oil sands related construction and the second was the narrowing of the differential between world oil prices and the price for bitumen.
Like many, many other studies I’ve seen this one concluded that the high cost of construction was a direct result of the pace of development. Too many projects, approved and under construction at the same time were undermining productivity and driving up costs.
On the differential side, the study points out that, contrary to the arguments presented and repeated recently by the premier, that a relatively wide differential is nothing new and nothing to be afraid of. In fact, the study shows that the differential has hovered in the 25-30 per cent range for most of the past two decades.
The study also shows that wider spread between conventional and oil prices and bitumen prices is not only good for Alberta-based upgrading, it’s our biggest competitive advantage.
Take a look at this slide. What it shows are the break even points for SAGD, mining and integrated projects at different differential and price levels. Look closely. What it shows is that projects with upgraders are very economic unless the differential gets narrower than 15 per cent. On the other hand, the viability of SAGD operations without upgraders plummets as the differential gets wider.
The picture is similar in the next slide, also from the same report. What this one shows is that upgraders are entirely viable in the current price and differential climate.
Here’s the report’s conclusion:
“Despite the fact that adding upgrading capacity makes less economic sense in today’s market (2011, when the differential was 15 percent), our sensitivity analysis suggests an integrated upgrader serves as a hedge against volatility of the light-heavy differential.”
Did you hear that? Upgraders profitable when the differential is above 25 per cent AND they are a responsible hedge against volatility in the light-heavy differential. They’re profitable over a greater range of market scenarios than extraction-only projects.
All this talk about differentials and sensitivity analysis sound confusing. But it’s actually really simple. Low bitumen prices are actually good for us because they allow our upgrader to buy their feedstock low and sell their refined products high. In fact SCO often trades at a premium to WTI priced conventional oil.
So that’s our question for the government as the steward of our collectively-owned resources: why shouldn’t we buy low and sell high? Why sell the world products that fetch a higher price and keep the jobs for ourselves?
That leads me to our recommendations:
First, we need to see the widening differential not as a threat, but as an opportunity.
Second, we need to stop chasing the mirage of price parity between bitumen and conventional oil. The differential is not the result of lack of market access. It the natural result of bitumen’s lower quality.
Do you remember the old Russian Ladas? The fact that they couldn’t get the same price for one of those hunks of junk as GM could get for a Cadillac was because they lacked market access. It was because their product was junk. We face a similar problem with bitumen. It may not be junk, but it’s not conventional oil. So instead of chasing the impossible dream of getting world price for our sub-par product, let’s upgrade and sell that higher-value product. The only way to get Cadillac prices is to sell a Cadillac product.
Third, we need to set a more reasonable pace for development in the oil sands. Unrestrained pace is driving up costs and higher costs are one of the factors leading companies to opt for the cheaper, extraction-only projects. But failing to set a more reasonable pace of development, as Peter Lougheed suggested, we’re pricing ourselves out of the market for the kind of value-added projects that Albertans want and which would be better for our economy over the long term.
Fourth, we need to make upgrading a condition of development, not an option. By leaving these important decisions entirely in the hands of largely foreign-based multi-national energy corporations, we’re ignoring Lougheed’s advice to act like owners. Even now that the numbers do add up for Alberta-based upgrading, these companies are not investing in value-added projects because have their own, existing refining plants in the US or in China. They see the money that can be made by buying our bitumen low and shelling the refined product high. But it’s our resource and it is we, the citizens of Alberta, who should be seizing the value opportunity, not some foreign based energy giant. It may make all sorts of sense from a private-profit point-of-view for Exxon and Sinopec to rip and ship our raw resources. But just because it makes sense for them, doesn’t mean it makes sense for Albertans, who own the resource.
Fifth, we need to expand the Bitumen Royalty In Kind program. It’s a good program, but we can’t build our provinces energy program with just one BRIK.
Finally, we need to be bold and build on Peter Lougheed’s legacy. Energy companies like Exxon and Sinopec cannot be counted on to make development decisions that are in the best interests of Albertans who own our resources. The approach that Lougheed took to build our petrochemical industry is actually the one we should take today with bitumen. He set a clear goal of building a value-added industry. He understood that the government, as the steward of the resources, had to be a participant in the market, not just a spectator. He introduced regulations about what could be exported and couldn’t be. He used public money to build critical infrastructure like straddle plans to support a value-added industry. And he created a public energy corporation to enter into joint-venture projects with reluctant private-sector investors. And it worked.
In the end, all we’re asking the government to do is to see and seize the opportunity that’s in front of us.
And we’re not asking you to do anything that previous Progressive Conservative governments haven’t already done. We are asking you to lead like Lougheed.
Standing Committee on Alberta’s Economic Future
review of the BRIK (Bitumen Royalty-in-Kind) Program
Committee Room A
4th Floor – Legislature Annex Building
Tuesday, February 26, 2013
But the utive director of Alberta´s Industrial Heartland Association said Tuesday there are good reasons for the province to start up its bitumen royalty-in-kind initiative two years later than originally planned.
"Obviously we´d like to see construction sooner than later, but we also want to make sure it´s the right project, and the best project for the region," Neil Shelly said Tuesday.
Under the bitumen royalty-in-kind program, the province will take its royalty payments from producers in bitumen, the thick, heavy oil squeezed out of the oilsands, rather than in cash.
The province would then supply up to 75,000 barrels per day of that raw product to an Alberta-based project, which would process it into value-added products like gasoline or diesel.
It´s seen as a way to ensure oilsands-processing jobs and investment stay in the province, rather than flow south of the border, where many refineries have been retrofitted to handle the heavy crude from northern Alberta´s vast oilsands operations.
When the initiative was first announced in July, any upgraders taking part in the program were required to be up and running by 2016. But on Monday, the Alberta government said it had decided give participants until 2018.
It takes about two years for a new project to go through the regulatory process in Alberta. And if it´s a large development, construction could take three or four years.
"The initial time lines they initially had on this one were a little more constrictive on that, and it kind of eliminated a whole group of potential new players that couldn´t invest in the region," Shelly said.
"It would have made it more difficult if not impossible for these new entrants to apply to the program."
That´s not to say there won´t be downsides that come from the delay.
Shell Canada Ltd. is currently the only company building a major project in the region. Once the expansion to its Scotford upgrader wraps up some time next year, there may not be any reason for skilled labourers, who were so scarce during the boom, to stay in the area.
"We spent a long time building up that skills base," Shelly said.
"If there´s no projects on the go in the area after next year, we potentially could lose that skills base and it we´ll be back at square one again when the projects are ready to go in 2016 or 2018."
Potential participants in the program have until Jan. 27, 2010 to file their applications, and a decision on which projects will be approved would likely be made toward the middle of the year, Alberta Energy spokesman Jerry Bellikka said.
"If you want to get to full capacity and use 75,000 barrels per day, it´s going to take some time, longer than first estimated, in order to bring those projects in," he said.
"It´s the realities of the market place ... You can´t force companies to build things faster than they´re able to build them."
The royalty-in-kind program fell short even before the province announced the delay, said the president of the Alberta Federation of Labour.
"The fact that they´re pushing it back another two years, frankly, doesn´t surprise us," said Gil McGowan.
"And given the paltry effort that the program provides, it´s really not going to change the big picture."
TransCanada Corp. (TSX:TRP) and Enbridge Inc. (TSX:ENB) are both working on major crude pipelines that stretch from Alberta to various markets in the United States.
Together, those two projects will see more than one million barrels of oil leaving the province daily, McGowan said.
And major oilsands players like Imperial Oil Ltd. (TSX:IMO) and Suncor Energy Inc. (TSX:SU) have talked about making their new projects bitumen-only, and foregoing building multibillion-dollar upgraders in Alberta.
"For those who are not familiar with the oilsands industry, 75,000 barrels per day may sound like a lot. But it´s really little more than a in the bucket," he said.
"Based on this government´s hands-off approach to the oilsands for them to point to this BRIK program as some kind of silver bullet, it´s almost laughable."
The AFL wants the Alberta government to take bolder steps, like restricting exports of raw bitumen, granting leases to producers on the condition they process their bitumen in Alberta and creating a Crown energy corporation.
"Two years ago it was easier for the provincial government to shrug off the need to more jobs in the value-added oilsands sector because we had such a booming labour market," McGowan said.
"Now that our unemployment rate has shot up so dramatically over the last year, it´s hard to be so cavalier."
Oilweek Magazine, Tues Oct 20 2009
New BRIK program too small to turn the tide of raw bitumen being sent south of the border for refining, says AFL
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)