Bitumen Bubble Bust: Why Alberta’s oil sands are sinking Canada

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Not since Confederation has a nation-building project determined so much of Canada’s future, divided Canadians and equaled the endeavor of CP Rail, than Alberta pipelines. Several projects have been proposed but nothing perhaps more politically contentious than the Keystone XL, which would run pipelines from Alberta to parts of central United States. While Northern Gateway would transport bitumen from Bruderheim, Alberta to Kitimat, British Columbia and then ship it to Asian markets.

Canadians must decide whether it would be better off becoming gas station of the world or global leaders combating climate change. Petroleum is a dangerous market and there are potential socio-economic and environmental risks facing Canadians. Outside factors are influencing whether Canada takes on those risks.

Despite some financialists, think-tanks and environmental expert warnings, PM Stephen Harper has vowed continuing support for Canada’s future in crude oil. Consequently, Conservatives have enforced gag orders on climate change scientists from speaking to the media and further removed environmental protections through Bill C-45, opposed by Idle No More.

Harper would ensure risks of environmental catastrophes from pipeline projects including clear-cut forests, depleted wildlife and risks of oil spillage into nearby bodies of water, poisoning communities. Even the most optimistic pipeline job projections, according to Cornell University, appear to be pipedreams. 85 to 90% of the people hired to do the work would be non-local and predominately temporary workers.

Oil venture in Canada is also up against time and technology. There is the impending deadline of Congress facing President Barrack Obama on whether to approve Keystone. If Obama rejects the deal, Canada would scrap Endbridge. There is also the rapid pace of American petroleum technology innovations.

Obama will likely announce a national synthetic oil technology policy. Synthetic oil is a greener, cheaper technology which could be harnessed in the United States. Its production utilizes a combination of non-food crops, natural gas and coal. The result of which is a much more sleeker and finer product.

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Princeton University concluded it could reduce greenhouse gas emissions by 50% if non-food crops are used to produce that fuel. A national program would require further assessments and thereby extend Keystone’s deadline further down the road, effectively putting Alberta’s already uncertain future in the cruder, harsher tar sand oil in the stone ages with the dinosaurs.

This is the likely reason why Obama neglected to mention Keystone in his State of the Union address. Instead, the president emphasized cutting climate change, harkening back to his 2008 campaign promise to achieve American energy independence within ten years. All signs appear to point in this direction with John Kerry’s appointment to Secretary of State, Kerry being the most outspoken Democrat on tackling climate change.

Should American backing fall through, Alberta should not rely on its Chinese state-owned oil partner, China National Offshore Oil Corporation (CNOOC), to be its safety net. A Chinese ambassador to Canada has revealed that Beijing would not wait on Canada if Alberta-BC issues are not resolved in a timely manner.

Alberta oil is only lucrative to Chinese investors so long as it will have pipeline clients. Alberta currently trades at a $40 discount per barrel of oil to the US. Since there are no pipelines to cancel out high transport costs to distant clients this is done to maintain interest. This means negative dividend returns for Alberta.

Currently, Premier Alison Redford’s government is bleeding $6 billion. China is only willing to cover the cost of cargo shipments to keep Alberta oil afloat until Canada could find other larger markets to invest in pipelines. BC’s blockade of Alberta’s Gateway deal would deny access to Asian markets. A ThreeHundredEight poll suggests a BC NDP victory this May with leader Adrian Dix promising to kill Northern Gateway. Northern Gateway is expected to be complete by 2017 or 2019.

Although Canada may be a politically stable source of oil, China could secure its oil supply by other means. China could diversify its clients while further weaning itself off of dirty oil towards sustainable energies. Unlike Washington, Beijing is not beholden to whomever it does business with. This ensures China’s access to petroleum could come from multiple markets.

Bottom line, Canadians could see themselves sitting on surplus black gold sold at red dot prices. In the end, Canada could be left holding the bag. Not quite the Dutch Disease prophesy, but still a crude awakening for Canadians.

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