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Stephen Harper’s Petro-State Is Built On Tar Sands

Stephen Harper’s Petro-State Is Built On Tar Sands

Late 21st-century graduate students of business studying the growing problem of stranded assets will almost certainly focus on the history of Canada’s Athabasca Oil Sand (aka tar sands). The case studies they read will either describe the gradual abandonment of the world’s largest reserve of bituminous crude, or they will read about the tar sands’ miraculous last-minute escape from becoming the world’s largest stranded asset. For either outcome, the turning point they will look back on is just about now.

In some respects Alberta’s gigantic deposits of bitumen, a dense mixture of sand and heavy crude oil, third in size only to the reserves of Saudi Arabia and Venezuela, were stranded from the start by location. Situated in the heart of a vast boreal forest at the center of a very large continent, they are hundreds of miles from the nearest refinery and thousands more from navigable tidewater.

Of course, some of Alberta’s crude has made its way to market, but so much slower than it could have, or was projected to, that producers, refiners, shippers, banks and other investors, in tar-sands development are beginning to wonder whether they have backed a good play by investing over $160 billion to turn tar into oil.

So the economic stranding process has already begun. Five global energy giants — Shell, Total, Suncor, Statoil and Occidental — have cut bait on major bitumen deposits in Alberta, in which they had already invested billions. Suncor has just slashed another billion dollars from its capital spending program and $800 million more from operating expenses. And as oil prices slide lower, commercial and investment banks are reconsidering future underwritings. An industry that recently envisioned doubling production over the next two decades is now looking at something closer to the opposite, a halving of production or worse in far fewer than 20 years.

American media coverage of the tar sands has focused primarily on the approval of the Keystone XL Pipeline, which, if completed, would carry 830,000 barrels of Athabasca crude, every day, to the world’s largest refining center near Houston next to a booming export hub. Because American and Canadian politicians and oil execs have lobbied so hard for its approval, Americans tend to believe that construction of Keystone will secure the future of the tar sands. Not true. To even approach break-even, at least four other pipeline routes will be needed to carry bituminous crude to the world’s market: two to the Canadian west, one to the east and one north. If two or three of those lines are somehow stopped, and that’s quite likely to occur, the stranding of the tar sands will escalate, Canada will cease being a petro-state, and its business leaders will begin their search for yet another staple to drive its national economy.

Canada has always been what economists call “a staples economy,” reliant almost completely on one staple resource after another. Fur was followed by cod, then wheat, potash, minerals, timber, and hydropower. Today, Canada’s staple resource is carbon, some of which derives from coal but most of it from oil. Oil, in fact, represents 46 percent of Canada’s commodity production. Unfortunately, over 90 percent of its reserves are bitumen, the costly production of which nets only 4 percent to Canada’s GDP. But oil represents 40 percent of the country’s exports. So the urgency to develop and export the tar-sands oil has become a national priority.

Canada’s tar-sands booster-in-chief is Prime Minister Stephen Harper, an Alberta-based petrolero who rose to prominence in politics as Chief Policy Officer of the Reform Party, Canada’s version of the American Tea Party. Founded in 1987, Reform merged in 2000 with the floundering Progressive Conservative Party to form a new and almost unbeatable national coalition calling itself the Canadian Conservative Reform Alliance (after adding “Party” to its name, it became CCRAP, and was nicknamed “see-crap”). Harper became party leader of CCRAP, which has since won two national elections. It’s as if Ted Cruz became the Republican frontrunner and won the White House twice.

Once a member of Canada’s Young Liberals and a supporter of Pierre Trudeau, Harper went west as a young man, worked in Alberta’s oil fields and followed his father into employment with Imperial Oil, Canada’s second-largest petroleum company (69 percent owned by ExxonMobil). There, like so many other western Canadians, he grew to despise Eastern Canada, rather like the scion of a prominent American family moving from Connecticut to Texas. In Calgary, he became an outspoken and eloquent opponent of Trudeau’s National Energy Plan, which seemed set upon nationalizing Canada’s last staple resource. While there is still talk of nationalizing oil and tar-sands oil in Canada, and in some polls a majority of Canadians support the idea, that couldn’t possibly happen with Harper in power.

At the 2012 World Economic Forum, in Davos, Switzerland, Harper announced that the expanded production and export of tar-sands bitumen was a national priority. Canada, he predicted, was set to become an energy superpower. In Ottawa, he took immediate and aggressive steps to weaken environmental protections like the Navigable Waters Protection Act, which was hindering pipeline construction, and to fast-track tar-sands production.

But Harper’s focus remained on Europe, where in 2012 the European Parliament and member European Union governments were debating terms of a revised Fuel Quality Directive (FQD) and considering an official ban on the import of “dirty fuels”— oil shale, liquid coal and tar sands, all of which have high extraction impacts, releasing more greenhouse gas than conventional oil through their “well to wheel” life cycle. A Stanford University study that many members of the EU Parliament relied on projected a 23 percent increase of lifecycle carbon emissions from tar-sands production.

Harper and his advisors immediately saw the danger of that study and the disaster a European ban on dirty fuel represented for Canada’s largest new staple. One vote in Brussels could leave the tar sands stranded immediately and forever, even if oil producers found a route to the Chinese market.

During the two years leading up to the EU parliamentary vote on the issue, Harper mobilized Canadian oil executives and his cabinet behind a $30 million nation-to-nation lobbying effort. Their first target was the Stanford study, which they drove into the ground with their own industry-funded studies.

Week after week, planeloads of oil execs and PR flacks crossed the Atlantic, Harper aboard whenever he could be, laterally threatening a trade war with Europe if the vote went the wrong way. Side trips were made to Washington. And members of the European Parliament were flown to Ottawa and Alberta for gold-plated junkets.

Without Harper’s effort, the Parliament in Brussels would almost certainly have voted to ban dirty fuels. After two years of intense lobbying, the measure lost by a 12-vote margin, 337 to 325, with 48 abstentions. A few months later, in the fall of 2014, the first shipment of tar-sands crude arrived in Europe, with many more to follow, as a vote on the Fuel Quality Directive will not come up again for at least four years.

In the meantime, if a few EU member nations condemn tar-sands oil, and ban its import, more small nails will be driven into the tar-sands coffin. And if two of the proposed source-to-port pipelines on the drawing boards are blocked (see map and sidebar here), more producers and investors will abandon the sands.

If Canada’s tar sands do one day become stranded, the equivalent annual emissions of over 65 coal-fired plants and 50 million passenger vehicles will remain underground. And a lot of the credit (or blame) will go to environmental activists, aboriginal communities, litigious farmers and groups like Greenpeace, NRDC and 350.org, who have added to their anti-pipeline advocacy a campaign to pressure institutional investors to divest their “Big Fossil” holdings. Even before divestment began, 9 of 10 tar-sands producers’ stocks had underperformed the market. So they are vulnerable.

According to the Institute for Energy Economics and Financial Analysis, a think tank in Cleveland, the campaigns of environmentalists and native communities have already cost tar-sands producers $17 billion. But that has not stemmed the determination of the North American fossil-fuel industry to move Athabasca crude to refineries around the world.

Despite the insistence of American Republicans and petroleros that everything rests on completion of Keystone XL, the pipeline means little to the U.S. economy. In Canada, however, economists estimate that U.S. rejection of the pipeline could cost the country as much as $1.7 billion a year, far more significant than the loss of two or three hundred permanent jobs the pipeline would create in the U.S. And by simply raising break-even higher than it already is for bitumen producers, stopping Keystone could place the tar sands in far greater danger of being stranded.

While assets like the tar sands should be stranded, because mining and burning them will raise the temperature of an already overheated planet a degree or more, they are more likely to become stranded, because they are either unable to reach market or have lost market value.

The sad irony is that before Canada selected tar-sands crude to be its staple export, the country was poised to become a major global contributor to clean energy. It had signed climate treaties, promoted solar-energy, developed hydroelectric power and had a prosperous renewable-energy industry under sail, for which the country possessed all the necessary natural and financial resources. Then one powerful neo-liberal free-market zealot decided to double down on high-carbon fuels and announce to the world that tar sands would become the next nation-building staple for his country.

It appears he was wrong about that, which would not be a bad outcome for the planet.

Journalist Mark Dowie is the author ofConservation Refugees: The Hundred Year Conflict Between Global Conservation and Native People.

This article appears in the March 2015 issue ofThe Washington Spectator.

Photo: Stephen Harper via Flickr

Obama Should Gut It Out; Ditching Keystone Is A No-Brainer

Obama Should Gut It Out; Ditching Keystone Is A No-Brainer

By Mark Weisbrot, Tribune News Service (TNS)

Ditching the Keystone XL pipeline should be a no-brainer.

The 1,179-mile pipeline extension would carry some of the world’s dirtiest oil from the tar sands of Alberta, Canada to the Gulf Coast of Texas.

And it shouldn’t be necessary to repeat this, but since we have a Congress controlled by a party that denies the reality of climate change, it is: 97 percent of climate scientists agree that human activity has warmed the Earth.

The evidence of climate disruption is all around us, from warming ocean surface and land temperatures, melting Antarctic ice sheets and glaciers, rising sea levels, and increasing heat waves and other changes in extreme weather events.

Supporters of the pipeline have tried to argue that the oil from Canada’s tar sands will be exploited anyway, with or without the pipeline. There wasn’t much to that argument a year ago, but after a 50 percent fall in oil prices, there is nothing left of it.

This oil is expensive to produce, and without a guarantee of cheap transportation, oil companies are not going to invest in expanding production in the 170-billion barrel reserves of Canada’s tar sands.

This is important because it is estimated that if we are to have even a 50 percent chance of avoiding the 2-degrees Celsius (3.6-degrees Fahrenheit) warming that scientists have set as an upper limit, at least two-thirds of the world’s proven reserves of oil must remain unexploited.

Keeping this oil in the ground will be one of the great struggles of future years, since oil companies could lose hundreds of billions of dollars of assets, and they are politically powerful.

But the longer any oil stays undeveloped, the less likely it is to be used: exploitation delayed is exploitation denied. And since the oil from Canada’s tar sands brings much higher carbon emissions than the average oil produced today, it is a prime candidate for staying in the ground.

Unfortunately, although lower oil prices make the exploitation of more expensive and environmentally destructive oil less profitable, the net effect of cheaper oil is to accelerate the pace of oil consumption and therefore of climate change.

This is another reason for adopting a carbon tax that would reduce carbon-intensive energy use and bring the price of these energy sources more in line with their real — including environmental — costs.

The argument that the pipeline would create jobs is beyond exaggeration; it would create about 50 permanent jobs and about 2,000 temporary construction jobs.

The last refuge of scoundrels on the dirty oil front is the “energy security” argument.

Americans are rightfully sick and tired of endless wars, and naturally welcome the idea that becoming more self-sufficient in oil production — with Canada apparently included as part of “self” — might keep us out of wars.

But America’s wars are not so much about securing access to oil — countries with oil tend to sell it on the world market, regardless of who governs them. Even when the U.S. had sanctions against Saddam Hussein and was trying to topple his government, Iraq was still one of the United States’ biggest oil suppliers from the Middle East.

Washington has had conflicts with oil-exporting countries — Iraq, Iran, Venezuela — not so much because it wants their oil, which it has not had a problem buying. It is more of an empire thing: Those who control access to oil have more power in the world, which is what many of our most powerful political leaders crave most.

“Energy security” won’t keep us out of wars until Americans force their leaders to adopt a less militaristic and more law-abiding foreign policy.

Photo via Wikimedia Commons

Senate Approves Keystone XL Pipeline Bill Despite Veto Threat

Senate Approves Keystone XL Pipeline Bill Despite Veto Threat

By Lisa Mascaro, Tribune Washington Bureau (TNS)

WASHINGTON — After three weeks and nearly 50 amendment votes, the Senate on Thursday approved legislation to expedite construction of the Keystone XL pipeline.

Passage secured not only a top Republican policy victory, but a political success for new Senate Majority Leader Mitch McConnell, who made Keystone his priority. The issue also became the first test of his promise to return the Senate to freewheeling debate and a more open amendment process.

“We had a whirlwind,” said a noticeably upbeat McConnell, as he opened the chamber on Thursday morning. “Let’s notch one more win for the middle class by passing this Keystone project.”

Even though White House has threatened to veto the pipeline bill, nine Democrats joined all Republicans present on the 62-36 vote.

But passage Thursday doesn’t quite yet set the stage for what many expect to be a veto showdown between President Barack Obama and the new Republican Congress.

The bill will need to return to the House, where the Republican majority will have to accept — or reject — the changes made by the amendments in the Senate, or negotiate a compromise. Timing on that step has not yet been set.

“We hope President Obama will now drop his threat to veto this common-sense bill,” said Speaker John A. Boehner (R-OH).

Based on Thursday’s vote, Keystone supporters do not appear to have enough support to override a veto.

The turnaround in the Senate on Thursday came just days after a handful of Democratic senators who support the $5.3 billion pipeline project withheld their needed votes to advance the measure.

They were protesting what some Democrats viewed as McConnell’s attempt to cut short the debate on their amendments.

The strategic move by Democrats put the GOP leader in a bind. McConnell had already allowed the Senate to process 24 amendments — more than in all of 2014 under Democratic control — and he wanted to wrap up the issue. But with 54 Republicans in the Senate majority, the Kentucky Republican needed a handful of Democrats to reach the 60-vote threshold to break a filibuster and push the bill forward.

Cooler heads ultimately prevailed, and an agreement was reached to allow more votes on more amendments, mostly Democratic ones. On Wednesday, the Senate processed another 12, followed by more on Thursday. Most failed.

“What we’ve seen over the last several weeks is the Senate I remember,” gushed Sen. Richard Durbin of Illinois, the assistant Democratic leader.

But not everyone has been pleased with the expanded debate.

Though only a few amendments have so far been accepted, even the failed ones often forced politically painful votes for Republican senators — who are certain to relive the experience in campaign ads by their opponents.

For example, while the Senate overwhelmingly approved a Democratic amendment that climate change “was real and not a hoax,” it rejected several amendments that would have required something to be done about it.

Also failing was a Democratic proposal requiring that the oil being shipped on the pipeline from Canada remain in the U.S., rather than be sent for export; another would have mandated using only U.S.-made steel in the pipeline construction.

The project would be among the biggest infrastructure developments in the nation, bringing 3,900 construction jobs — and tens of thousands of indirect jobs during the building.

Potential job growth made Keystone a draw not only for Republicans, but also trade unions and some Democrats along the Midwestern route to Nebraska.

Ultimately, though, permanent jobs operating the pipeline will number just 35, according to a State Department analysis — drawing critics who say the project is not worth the environmental risks from possible spills.

Opponents argue another new pipeline will only worsen dependence on oil and contribute to climate change, though studies show Keystone alone would not likely have a major effect on greenhouse emissions.

In the Senate on Thursday, the mood was clearly improved after the long weeks slogging through the debate.

The pipeline legislation has been a top priority for the new Republican Congress, which wants to pressure Obama to approve the stalled project.

The White House has warned it would veto the measure, setting up a showdown both sides seem game to begin.

But the bumpy process in the Senate has tested patience. The Senate has been debating the bill since shortly after the new Congress began Jan. 6.

AFP Photo/Jewel Samad

Senate Debates 18 Amendments To Keystone Pipeline Bill

Senate Debates 18 Amendments To Keystone Pipeline Bill

By Chuch Raasch, St. Louis Post-Dispatch (TNS)

WASHINGTON — The Senate debated on Wednesday 18 amendments to the Keystone XL Pipeline Bill, more than it considered on all bills debated in all of 2014.

It’s a new day in the Senate under Republican control of “the world’s most deliberative body.”

Many of the Keystone amendments were offered by Democrats and have virtually no chance of passing. Republicans say their return to “regular order” will be far more tolerant to such amendments than what was allowed under former Senate Majority Leader Harry Reid (D-NV), and that Wednesday proved their point.

Republicans, with Sen. Roy Blunt (R-Mo) taking a lead, long complained that Reid stifled legislation to protect his fellow Democrats from unpopular votes and President Barack Obama from having to take stands on tough issues.

But Reid’s deputy leader, Sen. Dick Durbin (D-IL), said Wednesday’s debate was possible only because, unlike the Republicans when they were in the minority last year, his party has decided to be the “constructive minority” and not gum up Senate procedural works with constant threats of filibusters and other parliamentary delaying tactics.

No matter who gets the blame or credit, the early result is more wide-ranging debate on high-profile issues such as Keystone. Some of the amendments offered have been aimed more at making political points or getting fellow senators on record than on getting changes into law, but Blunt said that was not all bad.

Senators, he said, have a right to bring forth legislation they think is important and to try to persuade other senators to take a position on it. Until the past six years, he said, the Senate traditionally was “the place where national issues had an opportunity to be discussed.”

Blunt will spearhead legislation, after the Keystone XL pipeline, that illustrates how divisions will continue to play out. Republicans will push a vote on House-passed legislation to cut off funding of Obama’s controversial executive order easing deportation on millions of people who have illegally entered the country.

Blunt and other Republicans think Obama’s actions represent both bad policy and executive overreach. But his side needs six Democrats to go along to allow a final vote, and the math is on the Democrats’ side. On Tuesday, 41 Democrats — including Durbin and Sen. Claire McCaskill (D-MO) —  signed a letter essentially saying they would oppose the House-passed bill, meaning that as it stands now Blunt is short of the magic 60 to proceed. But that reality won’t stop debate on the issue.

Blunt said Republicans would push it, anyway, both to try to persuade enough Democrats to come over to the GOP side, and to get senators on the record.

Including himself, less than two years before the 2016 election, when his Missouri term is up.

“People deserve to know,” said Blunt.

Durbin, who was just re-elected, is pushing legislation to consolidate into one independent office all federal food-safety programs, which he said are now under the purview of 30 offices in 15 scattered federal agencies. He’s tried several times to get this legislation passed since 1999, and Republicans now running the Senate are unlikely to go along with legislation establishing another federal agency.

But Durbin said he believed his legislation, which Rep. Rosa DeLauro (D-CT) has introduced in the House, would actually save money by trimming overlaps. Durbin said that if his bill got wide debate he may be able to persuade fiscally conservative Republicans to go along.

Durbin and DeLauro used a federal version of the chicken and the egg to illustrate their case for reform. Starting with the chicken, they said, and depending on whether the egg is freshly laid or long processed, as many as 30 federal offices in those 15 agencies — ranging from the Department of Agriculture to the Food and Drug Administration — are part of the regulatory scramble.

“They are stumbling over one another, handing off eggs and broken eggs and fried eggs,” Durbin said.

With the amendment process opened up, Durbin has a better chance of making that case on the Senate floor by offering his bill as an amendment to another.

“Yes, it is a new Senate in terms of amendments,” Durbin said, “but it is working because the Democrats have not stopped the train.”

Photo: 350.org via Flickr