Bitumen upgrading should be top priority: AFL

In front of a government panel on Tuesday, a labour group argued in favour of increasing refining operations in Alberta, instead of sending unprocessed bitumen to foreign refineries.

Alberta Federation of Labour president Gil McGowan told the province's Standing Committee on Alberta's Economic Future that upgrading bitumen locally should be a top priority for resource development and job growth.

The committee was debating whether or not Alberta should renew the Bitumen Royalty in Kind program, where the province receives oil from producers instead of royalties and then uses that bitumen to feed upgraders.

Under BRIK, the program has created capacity to upgrade up to 75,000 additional barrels per day. Established by former premier Ed Stelmach in 2007, Stelmach pledged to upgrade 72% of Alberta's bitumen locally by 2016.

Although a new, $5.7 billion refinery is currently being built near Redwater, no new refinery has been built in Alberta since 1984, despite the sudden demand for Canadian oil.

A refinery that would have been operated by several First Nations bands was dismissed by the government in early 2012, after the project's proponents failed to impress the province with their business model.

There is also talk about creating a pipeline linking the oilsands to refineries in Ontario, Quebec and New Brunswick. However, McGowan and the AFL have focused most of their criticism towards pipelines that aim to send bitumen to foreign refineries.

"This is the time to be investing in the long-term prosperity of this province," said McGowan. "75,000 barrels per day may sound like a lot, but it's really little more than a drop in the bucket."

The AFL has continually argued against projects like the proposed Northern Gateway and Keystone XL pipelines. McGowan says most of the jobs created would be short-term, temporary jobs and would only provide job growth to refineries in the United States and Asia.

Government reports obtained by the AFL through freedom of information requests show exporting bitumen provides a 35% return in value, while locally upgrading synthetic crude captures 70%.

After Premier Alison Redford told Albertans that the upcoming budget would see a $6 billion loss in resource revenue – a phenomenon she called a "bitumen bubble" – McGowan has repeatedly asked the province to look into domestic refining.

"The latest government projection is that we will only be upgrading 26% of our bitumen by 2020," said McGowan. "Something needs to be done to turn this ship around."

Although Redford told Albertans that her province would be facing "tough decisions" to solve the province's current financial woes, McGowan says the bitumen bubble may offer a silver lining.

"The price of bitumen is low right now because we're flooding the market with bitumen," McGowan told Today in early February.

"The solution they're proposing is building more pipelines to flood the market even further. That's just not how markets work," he said. "We need to refine the bitumen here, so that we're selling what the international markets want: synthetic crude."

Fort McMurray Today, Thursday, Feb. 28, 2013
Byline: Vincent McDermott

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