Canada’s oil industry
The other Keystone debate
The Economist
Oct 1st 2011
THE popular impression of the fight over the proposed Keystone XL pipeline, which would carry crude oil from Alberta’s tar sands to Texas, is that it is a clear-cut battle between greens and the energy industry. But in Canada the involvement of a third group blurs this dividing line: those who support development of the tar sands but don’t want the pipeline built. Among the 117 people arrested during a small anti-pipeline protest in front of Canada’s Parliament buildings on September 26th was David Coles, who as president of the Communications, Energy and Paperworkers Union, represents some 35,000 of the 140,000 workers in the northern Alberta oil patch. He argues that in shipping the tar sands’ crude to American refineries, where much of the value is added, Canada will be sending money and jobs down the Keystone pipe.
Ordinarily this would be a popular argument in Canada, linked as it is to the old fear that residents of the resource-rich country will only ever be hewers of wood and drawers of water. The need to add value before exporting raw lumber, fish, minerals or oil has long been a popular refrain of Canadian governments of all political stripes. Peter Lougheed, a revered former premier of the province of Alberta, recently voiced these concerns anew. When the first part of the Keystone pipeline was built, the union commissioned a study showing that Canada would have had 18,000 more jobs if its oil were refined first in Canada.
So far, however, these concerns have gotten lost in the din between environmentalists on one hand—who call the tar sands as a blight on the planet and want them shut down—and the oil industry, backed by both the provincial and federal governments, on the other. They have promoted so-called “ethical oil” from friendly Canada as the answer to American woes ranging from unemployment to national security. (Proponents say Canadian oil is ethical because it comes from a liberal democracy and not a politically repressive regime, a suggestion that caused some friction with the government of Saudi Arabia when it appeared in Canadian television ads.) Stephen Harper, the prime minister, said recently that American government approval of the proposed pipeline should be a “no-brainer”. His natural-resources minister says it will create 20,000 construction jobs for Americans.
Neither side has an answer to Mr Coles. At the moment, the heavy, black, viscous oil known as bitumen extracted from the tar sands undergoes a preliminary processing in Alberta known as upgrading, so that it is liquid enough to be shipped through a pipe to an oil refinery. Most of those refineries are in the United States, which imports about 1.1m barrels per day (b/d) of tar-sands oil (and another 900,000 b/d of Canadian conventional oil). Canada had plans to expand its refineries and build new ones before the global financial crisis, but most have now been put on hold. The Alberta government is planning to build a refinery in partnership with an oil company capable of processing 50,000 b/d of tar-sands crude.
Meanwhile, the Keystone XL pipeline will have the capacity to carry 830,000 b/d to refineries in Texas that are either already processing similarly heavy oil from Mexico and Venezuela or expanding their ability to do so. This makes sense from the perspective of the North American oil industry, which is integrated on a continental basis. And it makes sense for the tar-sands producers, who expect to get a better price from the Texas refineries than they currently do in the Midwest, where recent increases in American production have produced a glut at the refineries. For now, Albertan workers are not suffering from the lack of value-added exports: the provincial unemployment rate of 5.6% is well below the national average of 7.3%, and most forecasts call for an even tighter job market as tar-sands production increases. But long-held fears about becoming a mere supplier of raw materials to foreigners will prove very hard to shake.
http://www.economist.com/blogs/americasview/2011/10/canada%E2%80%99s-oil...
