Refine it at home to pop bitumen bubble: AFL

Alberta's current financial woes may offer a silver lining, says the Alberta Federation of Labour. Two weeks after Premier Alison Redford warned the province that resource royalties were expected to drop by $6 billion in the next fiscal year, AFL President Gil McGowan says Alberta's "bitumen bubble" could provide an opportunity for increased upgrading and refining jobs in Canada.

"The price of bitumen is low right now because we're flooding the market with bitumen," says McGowan.

"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."

McGowan justifies his arguments with a 2011 internal government report the labour group obtained through a Freedom of Information request. The report shows that the price difference between Alberta's heavy oil and the benchmark West Texas Intermediate grows, resource projects that both mine and upgrade bitumen locally become economically viable, while only mining becomes less economically beneficial.

"These documents paint a picture of a government that knows what needs to be done, but is afraid to act," said McGowan. "This 'bitumen bubble' has a silver lining, and the province knows it. They wrote the documents to prove it."

There are currently seven pipelines that carry oilsands crude to markets outside Alberta, with the majority heading to the U.S. Midwest.

The AFL, and several other Canadian labour groups, have argued against the proposed Keystone XL and Northern Gateway pipelines, instead favouring more domestic refining and upgrading operations. The AFL argues that building more refineries in Alberta, instead of relying on refineries in the U.S. and Asia, will create more long-term jobs and net better value for the oilsands, since the refined product garners a stronger price.

However, the day before the AFL released their documents, Suncor Energy announced its planned Voyageur upgrading project might not happen due to decreased demand for Canadian crude. A decision regarding the project will not be made until the end of March.

At the same time, North West Upgrading Inc. has partnered with Canadian Natural Resources Ltd. to build the $5.7-billion Sturgeon upgrader and refiner. The plan will provincially-owned bitumen to privately-owned refineries. The Sturgeon project will be the first refinery to be built in Alberta in approximately 30 years.

"By not requiring upgrading in Alberta, we're pumping out more of the wrong thing," McGowan said. "We're shipping good oilsands jobs elsewhere, when the economics of upgrading make a lot more sense."

Fort McMurray Today, Thursday, Feb. 7, 2013
Byline: Vincent McDermott

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