COMMENTARY · 27th November 2011
Recently the North American media and business world has been encountering movie stars and more acting as protestors drawing attention to the tar sands and the pipelines been planned to ship the raw bitumen oil from Northern Alberta.
One pipeline, the Keystone XL, has been proposed to carry the product to the southern USA for refining. The second pipeline proposed is to carry the product to Kitimat for shipping by Ocean tankers to China and other destinations.
The protests are two pronged. First the complaint is about potential pipeline ruptures and or tanker mishaps spoiling the environment. The second is about the Alberta Tarsands/Oilsands themselves; calling this open pit mining operation the worst on the planet. All of this is a seriously bad distraction from the core issue.
When looked at as an overall production it appears the protest groups and the media are being set up to look at these specific secondary concerns while the real game is being played unnoticed in the background. Looking at the primary issue is what I will address.
Pipelines are transportation systems only. The pipeline companies are not selling oil. The producers in northern Alberta, the open pit miners extracting the bitumen, are the sellers. In some cases the sellers also own refineries and they need a method of delivering this product to those refineries. Getting a company to construct and maintain a delivery system such as a pipeline is just one option.
Almost every oil company in the world is invested in the Northern Alberta Oil Sands project; whether they be independent owners or part of a consortium. And this is why the pipeline discussions are a clear diversion from what Canadians and Albertans should be considering; the production facilities.
A pipeline company will build their transportation system when asked by one or more companies to provide the service. In the case of the proposed Enbridge Northern Gateway pipeline to Kitimat BC, the pipeline is now called ‘fully subscribed’. This means a group of companies have agreed to take specific percentages of the total volume the pipeline will carry. There is nothing left for any other buyers, it is ‘fully subscribed’ now.
This presents an entirely new problem to the potential of selling the product. The transportation system is, in essence, owned by foreign investors, not Canada; therefore these owners can restrict the sale or manipulate the price as they control the delivery system.
Currently the ownership of the Athabasca Oil sands is being consolidated into fewer and fewer owners with China making the most significant investments; taking over entire companies. If this were to continue without a proper forward looking plan, Canada might find its resources being extracted and sold at significant mark-ups without achieving any benefit for Canada. As an example, if China was to own the entire subscription of the Enbridge Northern Gateway Pipeline and end up owning a significant interest in the Athabasca Oil Sands they would not only control the production but also who the product was sold to, and at what price.
Canada’s National Energy Board (NEB) has engaged in a review process of the Enbridge Northern Gateway proposal with a three person panel called the Joint Review Panel (JRP). This panel also represents the Canadian Environmental Assessment Agency (CEAA). The JRP has been instructed to look at various aspects of the proposal including the environment, the feasibility and the national Canadian interests. It is the environment most groups are focused on. The Canadian government however has expressed a greater concern on the financial benefits placing the environment as a secondary concern. This becomes apparent as the tankers, which will become necessary to carry the product away from Kitimat to foreign Pacific Rim ports, are not part of the JRP investigative mandate.
If the JRP were to truly consider the best financial benefit for Canada they would easily determine the fixed monopoly control position of the Enbridge Northern Gateway pipeline would benefit Canada in the least possible manner. The national Canadian interests can not be met with the sales from a pipeline controlled by a foreign government.
Even before this an overall look at the entire oil sands project needs to be taken.
Canada has not been taking a leadership role in managing its resources; letting industry take the lead. When the entire production, transportation and refining is segmented into numerous aspects the full picture gets confusing. Therefore it is necessary for Canada to take a step backwards and assess the future and the whole picture.
The initial assessment needs to be at the production itself;
1- Currently water is used in excessive quantities to extract the bitumen from the sand. This has raised numerous concerns regarding the Athabasca River in Northern Alberta and around the world.
2- The bitumen is not refined to fully extract the sand and silica leaving the product an estimated 16 times more corrosive to the pipelines.
3- Condensate, a petroleum thinning agent, needs to be imported and added to the raw bitumen so it will flow in the pipelines.
4- The waste/tailings ponds present an environmental hazard attracting international condemnation.
If we were to only consider these four initial concerns one might easily determine all the interests; Canada’s financial, the environmentalists, the Athabasca River and the world communities, could be satisfactorily addressed, at least moderately.
First and foremost, there is more than one way to extract the oil from the sand. Water is currently being used as it is readily available and it was the first method tried. It is heated to steam the oil out and separate it from the sand. Condensate can also be used. Condensate however is currently being imported from foreign refineries to add to the bitumen to export it to these foreign refineries. Using condensate to extract the oil would therefore present a further importation expense.
If Canada’s government were to take the position of insisting a primary refinery be constructed by the oil company consortiums, such that it could produce all the condensate required for shipping and extraction processes, we could address all four of these concerns.
There are already start up companies which have perfected the method of extracting the oil from the sands using condensate. Condensate, being a petroleum product already, could easily be recovered during the process unlike the water being used today. Today we use water as it was the first method tried and proven between 1913 and 1930 by Sidney Ells, RC Fitzsimmons and Dr. Karl Clark. Eighty years later we have better methods, we only lack leadership.
If the refinery was substantial enough Canada could become a net exporter of condensate as well as many other refined products. The tailings ponds of mixed water and oil residue would become a thing of the past, or at least greatly reduced. The product being exported would be less corrosive in any potential pipeline and a potential environmental spill would have less impact as refined petroleum products float and will dissipate much quicker than the raw bitumen which sinks and remains for many decades where it is spilled.
The last issue the JRP should be looking at is the shipping of the product. And the full subscription of the proposed pipeline must be considered in a serious manner. If Canada owned the pipeline and managed the sales at the Port in Kitimat Canadians would find a much greater economic benefit and control of their own resource. If Canada wished to become a real world leader and reverse the growing international perception of being a gross polluter, another shipping arrangement could be considered.
Just as above ground fuel storage facilities today are legislated to be double skinned with a monitored internal vacuum, the refined oil product could be shipped by rail in the same manner. All of these sealed , double skinned vacuum protected, rail containers could be loaded onto container vessels for international destinations in the same fashion other products are shipped by container. Canada could set a new standard for shipping, reducing the threat of environmental harm on land and water, at the source right through to the destination.
The bonus for Canada from this method of "containerized' shipping is no one entity would control the market. A purchaser could buy the quantity as they require it. Both small and large buyers/refineries would be able to take advantage of Canada's resources. This would make the market unlimited rather then the exclusive limited market being proposed by pipeline proponents today. What is in Canada's best economic interests?
This would take real leadership; a leader much like Prime Minister Stephen Harper wants to portray himself as. The new Premier of Alberta has already lampooned the concept of constructing a refinery in Alberta stating they already have enough jobs. This statement alone seems somewhat ludicrous as the claim for the construction of the pipeline is about the great influx of new jobs. A refinery would be permanent jobs, 10’s of thousands. But even more so, a refinery would open up the possibility of extracting the oil from the sand in a much more environmentally acceptable manner and substantially reduce the opposition to all of the activity in the Northern Alberta region.
The only question now is does Canada possess real leaders? If Canada looked forward to the future and offered a real tangible alternative, Bono and Robert Redford might arrive to shake the Prime Ministers hand. Today Canada looks foolish on the world stage. Travellers are even removing the Maple Leaf from their apparel.
When a solution to all the issues is simple yet comprehensive it is a wonder why the resistance is so pervasive.
Comment by Martin on 29th November 2011
Watched an interview with Harper on BCTV last night and he stated that building the pipeline was in Canada's best interest.
Now what would be in Canada's best interest?
A pipeline that ships a raw material with a few hundred to a couple thousand temporary jobs and gives a few dollars royalty per barrel and a few dozen to about 100 permanent jobs.
Or upgading/expanding an exsisting refinery and crating a few hundred to a couple of thousand temporay jobs and getting a few more dollars on a finished product and creating a few hundred permanent jobs.
Or, heaven forbid, a new refinery, creating several thousands of temporary jobs with several hunderd permanent jobs, with a lot more taxes collected by the government.
gimme a break !!!!
Comment by Apocalypse Now on 28th November 2011
Some people drive because they have no option .But this is not just about Pipelines ,and Tankers. Its about the future and what resource depletion will do to our society. Yes Mr Ippel ,slow down and smell the coffee,lets leave something for future generations so they have a chance at a semi decent life style. We are damaging the ecosystem at alarming rates ,the earth needs time to heal.I am not a hard core environmentalist just for the record but I do make an effort to leave things better off than I found them. I take it from your rant that because you support the pipeline its ok for you to drive a gas guzzler? I am ok with another refinery , if its going to benefit canadians first. But it should be built in alberta right near where the raw materials come from.This is the lesser of 2 evils. MMMM the coffee smells great where I am sitting.
"if you are against oil, don't drive"
Comment by Karen on 28th November 2011
I really wonder about the mentality of those who utter such a stupid statement. It tends to be the kneejerk reaction of many who have given little serious thought to the real problem behind the feverous mining of the tarsands.
I am sure there are those that are adamantly opposed to 'oil anything' but they are, more than likely, already hoofing it everywhere they go. It is a closed-minding individual who will lump 'anyone' who speaks out against the tarsands in with these stalwart folk.
I am not going to go into details about why the oil industry will not be our economic saviour but our downfall instead unless some big changes are made to the way we use the product - there is enough information out there for even the mildly challenged mind to grasp if one cares to indulge in more than repetitive expletives or fed platitudes.
I disagree with you Mr. Ippel
Comment by Merv Ritchie on 27th November 2011
I believe in my neighbours. I trust they make solid and good decisions. I know they all know they use fossil fuels (even though the fuel has nothing to do with fossils).
But they want a responsible management of the entire affair. Shipping the raw unprocessed product is asinine. And this is the foundation of the protests, not the use of the refined product. You have fallen for the oldest trick in the war book, divide and conquer. You are one of us, this family in the Northwest of BC. We must stand as one, united, to be effective. Fighting with our neighbours is not an option.
Well said Merv
Comment by James Ippel on 27th November 2011
I like your article Merv, as you have come up with some alternatives to the Pipeline.
Obviously Gerry can'nt see beyond his nose with his diatride agains the PM and the individuals in the Alberta Gov't. An atitude like his induces projectile vomitting in any sane thinking Canadian.
I am all for processing our raw materials in Canada, especially our products from the Oil Sands, but just mention building a Refinery in Canada and the environmentalists will be out in full force objecting voraciously. The will complain bitterly that refineries cause polution, but will continue to drive their gas guzzling SUV's and complain about the price of fuel.
Quite frankly, you can'nt have it both ways. If you are against the pipeline and having raw materials processed overseas, quit driving, walk or ride a bike.
Wake up and smell the coffee.
Yeah, how unenlightened do we have to be?
Comment by Jim Smith on 27th November 2011
Lets see, we import an oil product to export an oil product simply because we haven't the capacity to refine our own oil product.
Damn, who writes this stuff?
And during the whole stupid exercise we endanger our entire ecosystem.
I hate being Canadian!
Harper the IDIOT!
Comment by Gerry Hummel on 27th November 2011
Great article Merv, we are just simple hard working country folk and we can see what is happening with the Tar Sands! How is that clown Harper and even the stupider clowns in the Alberta government are letting foreign governments specially China and the US take over control of a CANADIAN natural resource! I forsee even if the pipeline is stopped we as Canadians will have to buy back the resource from these foreign governments at the cost of MULTI billions of dollars compensation! Thank-you Mr Harper you IDIOT!!