Friday, May 10, 2013

The Harper Government lacks a strategic vision for Canada's oil industry

400 parts per million ...
Those Albertans who have voted for Harper's Conservatives in election after election must be starting to wonder whether Stephen Harper and his Cabinet are the best choice for their main industry: oil.

They should start to worry, because the Harper Tories are displaying yet again their incompetence when it comes to the really important issues facing Canada. They are fine for scurrying around, giving out little slices of taxpayers' money to selected micromarkets, but when it comes to the really important things, they are sadly wanting.

The Meltdown Debacle

Take the financial meltdown of 2007-2008. 

Remember how Harper and his Cabinet were whistling past the graveyard, blissfully unaware of the massive threat to our civilization's financial underpinnings posed by the bank meltdown, until the opposition parties forced them to pay attention by signing the Coalition Accord.

Now Harper and his Cabinet have once more shown their inability to understand the really critical drivers of our economy, and to play a strategic role in protecting it, and advancing it with carefully selected government actions.

Simpson's Take on Harper's Ineptitude

As Jeffrey Simpson puts it in today's Globe & Mail, Harper blew it:

The biggest proponents of bitumen oil – the Alberta Progressive Conservatives, the Harper Conservatives and the oil industry itself – have, in some respects, been the authors of these troubles. They could have acted differently and possibly made things easier. But a different course of action would have required a different strategic understanding...
 The two governments insisted that critics were ill-informed when they said bitumen is dirtier than conventional oil. They swallowed the canard that bitumen oil is somehow “ethical” because Canada has better standards than Iran and Venezuela – standing ethics on its head by defining our practices against the worst, rather than the notional idea of the best.

These self-comforting but delusional starting points led to trouble. Instead of analyzing how to deal with criticism constructively, the governments decided it was to be denounced...

Instead, the governments, presumably with the industry’s blessing, acted as if salesmanship rather than statesmanship would suffice. As such, they have contributed to this sea of troubles.

When the nation needed statesmen, Harper played to his major strength, and gave it salesmen.

And salesmen just don't have the calibre to fix the problem facing Canada's dirty tar sands.

Two fold attack on Canada's energy industry

Our major export industry is under attack from two directions: those who want to use it as an example and stop or reduce the use of fossil fuels, and those who believe that the greenhouse gas emissions from fossil fuels pose an imminent danger to our earth and must be reduced.

Mark Jaccard from Simon Fraser is in the second camp, and is off to Europe to persuade the European Union to stick to their guns and penalize Canada's tar sand oil as unduly noxious:
One of Canada’s top environmental economists has a stark warning for the country’s oil sands producers: Find ways to dramatically cut carbon emissions or risk becoming the buggy-whip producers of the 21st century.
Simon Fraser economist Mark Jaccard has worked with governments in British Columbia, California and even Ottawa to fashion climate policies. 

But on Thursday, he said the federal government and the oil industry are embarked on a high-risk path that could leave billions of dollars in stranded assets, including pipelines like TransCanada Corp.’s proposed Keystone XL...

Governments around the world will eventually move to reduce emissions from fossil fuels, he said, meaning lower demand for gasoline in transportation and lower prices for crude, as well as more pressure for producers to virtually eliminate the release of carbon dioxide from their production methods. That will create survival issues for high-cost producers like those in the oil sands.

“It really depends on your ability to innovate,” he said.

His comments come at a sensitive time for the government on the energy file. Prime Minister Stephen Harper is heading to New York next week to press the case for approval of Keystone, and Natural Resources Minister Joe Oliver has been touring European capitals this week, making the argument in favour of developing the resource, one of the largest crude oil reserves in the world.

Dr. Jaccard joined a dozen scientists and researchers Thursday in releasing a letter to Mr. Oliver, arguing that Ottawa’s support for oil sands expansion and the pipelines needed to carry the crude to market is inconsistent with the stated goal of the Harper government and other G20 countries to prevent temperatures from rising more than 2 degrees Celsius. The economist is travelling to Europe on Friday with former NASA scientist James Hansen to rebut the arguments that Mr. Oliver made during his week-long tour.

Voters in Alberta should pay attention to the passages above that I have underlined. They spell out an existential threat to the very heart of Alberta's and Saskatchewan's heavy oil industry.

The Measurements of Evil

The spat right now between Harper's government and the EU revolves around a simple question: Is the heavy oil from Canada's tar sands worse than the oil that can be obtained from other sources, because the whole process of manufacture (from well to wheel, as it is put) and refinement results in more greenhouse gas emissions.

There are several ways to calculate the all-in greenhouse gas emissions of refined crude from tar sands and  shale deposits, depending on what you include in the calculation.

Here's a diagram of the Congressional Research Service's from well to wheel  factors:

From Well to Wheel

Canada's asleep-at-the-switch Harper government is arguing that the calculation should  be made for all processes involved, including transportation. Our heavy oil comes out a bit better if we do that, as this article in the Globe & Mail spells out:
Transportation is a hot point in the carbon debate because oil sands supporters want Alberta's production compared to other oil after transportation is taken into account. Shipping oil by tanker, for example, jacks up emissions. Oil used in France may have originated in Africa. Oil burned in Colorado may have been extracted in Venezuela. Oil sands proponents argue the emissions tied to shipping crude to refineries and then to consumers must be considered when comparing emissions. 

Pipeline companies also use the argument when lobbying for support of their proposals and Alberta's oil sands. Trans- Canada, citing the U.S. Department of State, notes the Keystone XL oil sands pipeline will offset as many as 200 ocean tankers a year. This equates to lowering greenhouse gas emissions by 19 million tonnes. Using trains to move oil, TransCanada notes, produces three times as much greenhouse gas as pipelines.

The Failure of the Harper Government

This strategic challenge facing our oil industry is not new, and was easily predictable given events over the past decade or more.

However, Canada's lack of preparedness for this major threat is directly the result of the Harper government's inability – or wilful blindness – to manage our country's economy properly.

We as voters expect our federal government to be looking out for our country, by keeping their heads up, and preparing for challenges. Yet the Harper government seems genetically incapable of doing any really significant  long range planning.

I believe part of the reason for this blind spot in the Harper government arises from the fact that as a political party – and now as a government – the Harper Conservatives have adopted lock, stock and barrel the Tea Party DNA and the Tea Party worldview.

Harper and his Cabinet ministers do not seem to believe that our federal government has a significant role to play in protecting our economy. 

Witness the inability to act duting the financial meltdown. And witness also their dangerous reduction of the revenues of the federal government (through the reduction in the sales tax rate, and other tax reductions). Instead of properly managing the country during good times so that it better placed to weather bad times, Harper and his Cabinet seem to lack the ability to think beyond the next few months.

Steps an Efficient Canadian Government could have taken

Could Harper have done something different to foresee the attack on our oil industry, and to prevent or reduce it?

Simpson gives some examples in his article of steps the Harper government could  have taken, but did not.

The pressure on fossil fuels due to their spewing noxious greenhouse gases into our common atmosphere is not a surprise. It has been building for a long time, is scientifically based, and will not go away, for the simple reason that our earth is indeed in peril.

If Harper and his party were not wedded to a policy of inaction (and reduction of the federal government), Canada could have played a major role in organizing worldwide acceptance of the threat posed by global warming. 
We could have lead the charge, along with the EU, to verify the scientific findings of increasing carbon dioxide (now close to 400 parts per million), and to encourage states and citizens of all states, to take meaningful steps to reduce our consumption of fossil fuel energy and switch to other less harmful energy sources. I deal with the problem posed by the 400 parts per million in our book about global warming, Obelisk Seven.

But the Harper government does not believe in a proactive government, so we did none of these things.

We could have thought through the strategic implications of the GHG emissions from our oil sands, and planned to deal with the easily foreseen problems that we now face, if our government believed that it was their role to be proactive rather than simply reactive.

As a country, we could have had a vigorous debate over the role of our tar sands, and the importance of our oil industry to the country as a whole. We could have adopted policies which internally gave the various stakeholders a more meaningful role in and stake  in that industry (including a fair sharing of the profits from exporting up to 3 million tons of bitumen oil for other nations to refine and use as fuel).

And we could have lead the world in massive, significant and effective steps to reduce GHG emissions through energy reduction methods in all spheres, both private and public.

We could also have lead in the proper measurement of the GHG emissions of various energy sources, and in the world adopting a common set of measurements so that as citizens of the world we could discuss from a shared base the price we pay for our alternative energy sources.

This would have allowed a Canadian government that focused on strategic issues (and not just petty politicking), to have adopted a measurement system that measured emissions from the well to the wheel, with scientifically verifiable means adopted to moniter emissions.

Instead we have Harper and his Cabinet acting as salesmen, selling what many view as snake oil, and demonizing those who oppose them.

What a mess!

Let's fix things up come the 2015 election, starting with a new government to replace the tired, myopic and inept Harper government.

1 comment :

  1. Sorry but I have to disagree with your premise, Glenn. We know, given the relatively exact determination of the quantity of greenhouse gases already in the atmosphere and the atmosphere's carbon carrying capacity if we're to avoid tipping points that trigger real trouble - uncontrollable runaway feedback or forcing systems, that we can burn no more that one-fifth to one-third of already known fossil fuel reserves. The rest is going to have to be left safely sequestered where it is, in the ground.

    What does that mean? As a blue ribbon panel of financiers, politicians and scientists informed the governor of the Bank of England in January, 2012, we're in the midst of a very large and dangerous Carbon Bubble. Fossil fuel reserves, carried at artificial values, are in fact sub-prime. What they first warned of has been borne out by others since that time.

    Just over a month ago, Britain's prestigious 'Financial Times' reported on sub-prime fossil fuels and the shift on the part of investment analysts and managers to move their clients out of high-carbon fossil fuels before they become "stranded assets." They'll still invest in conventional, low-carbon petroleum but they're moving out of coal and bitumen.

    Bitumen is not only high-carbon but it's high-cost. Coal is cheap. So too is most conventional oil. Alberta's notorious boom & bust cycles plainly speak to the vulnerability of bitumen.

    There was a reason Harper had to approve the Nexen sale to the Beijing communists. That was the only decent offer to be had.

    Alison Redford whimpered to her constituents about a mean old "bitumen bubble" but without explaining to them the peril that presented to the economic stability of Alberta. Her solution is to double down on a proven terrible bet and get those pipelines up and running to what her kind like to call "tidewater."

    Everyone knows the Carbon Bubble is bound to burst and sooner rather than later. What we're not willing to recognize is that there's a high likelihood it will burst first in Athabasca and we'll be left with an economic and ecological disaster in its wake.


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