The Alberta Federation of Labour (AFL) has added its voice to those worried about the ramifications of Canada's role in China's energy plans.

Following Prime Minister Stephen Harper's approval of state-run China National Offshore Oil Corporation's (CNOOC) takeover of Nexen, the AFL released China's Gas Tank, a report outlining how it believes China is moving to control all stages of its Alberta oil operations.

The report says three state-owned Chinese oil companies, CNOOC, PetroChina and Sinopec, have major investments in the oilsands. It points out these companies' U.S. tax filings admit the three companies are affiliated and sell oil to one another. Chinese state and private investment in the oilsands is unclear, but significant. For example, Chinese-owned Sunshine Oilsands "holds seven per cent of the total oilsands leases in the Athabasca region, or 1.15 million acres of oilsands leases," according to the report.

The report also points to the proposed Northern Gateway pipeline that would run from Alberta to the British Columbia coastline and is ostensibly intended to ease shipment of oil and natural gas to Asian markets. Sinopec is one of the 11 companies investing in that pipeline. Four remain unidentified.

Finally, the AFL asserts the Canadian federal government did a poor job negotiating the Foreign Investment Protection Agreement (FIPA) with China, and should renegotiate before it is officially passed.

"From our perspective the big problem is that the Chinese have interests that run counter to the interests of the Canadian public," says AFL president Gil McGowan. "It's clear that the Chinese are assembling the pieces necessary for what we would describe as a low price strategy for Canadian bitumen.

"What I've been told by people in government and in industry is that we can't be picky about what we send to those markets... we basically have to give them whatever they want.... Frankly I don't buy that argument because they need us more than we need them. But it's not challenged," he says.

Gordon Holden, director of the University of Alberta's China Institute, echoes McGowan's observations. He says China is not happy buying oil from Iran, Saudi Arabia and Sudan, and is looking for more stable sources.

"Alberta is rock solid in terms of the manner of doing business — relatively transparent, but also just without the complications," says Holden.

McGowan says the AFL, which represents 27 labour unions in Alberta, is not alone in its alarm over Canada's hasty business dealings with China. Even internationally, the public is asking Canada to slow down. U.K.-based Avaaz.org is an online campaign network with 17 million members that develops petitions and protest campaigns on social and environmental issues it believes are important to its members.

Avaaz is currently campaigning against the present form of the Canada-China FIPA. Nearly 38,000 people have pledged support to the campaign.

"As the owners of the resource, I think Albertans deserve to know what's going on and what's being lost, but they don't," says McGowan.

Fast Forward Weekly, Thursday, Dec. 27, 2012
Byline: Susy Thompson for News

The President of the Alberta Federation of Labour is offering some free financial advice to the Redford government as it wrestles with rising red ink.

AFL boss Gil McGowan says the governing Tories only have themselves to blame for the financial mess the province is in.

McGowan tells 660News, Alberta is among the richest jurisdictions in the world and there is no excuse for the government to be running a deficit.

He says it's time Alberta imported something from south of the border, namely the current fiscal cliff discussions.

McGowan is calling for an increase to tax rates especially for corporations and for the government to increase it's take from the sale of resources.

The AFL fears the Redford government will do what previous government's have done to erase the red ink, freeze employee wages while gutting programs and services.

On Wednesday Alberta's finance minister admitted the government might not be able to fulfill it's promise to balance the 2013 operating budget.

660 News, Thursday, Dec. 30, 2012
Kevin Usselman

The federal government's new rules around foreign investment by state-owned enterprises (SOEs) could potentially result in less investment in the Alberta oilsands and that could make it more expensive to operate those projects, the province's energy minister has warned.

"The impact of that is that it will simply increase the cost of capital, that it will add on one more slice of cost of production in this province," Ken Hughes told a conference in Calgary Monday. "We already have challenges of operating business in Alberta."

Alberta is a high-cost place to do business because of the competition between the private sector, and the oil and gas sector in particular, and all other sectors, he told the conference, Canada in the Pacific Century, hosted by the Canadian Council of Chief Executives and The School of Public Policy at the University of Calgary.

Last week, Prime Minister Stephen Harper approved a $15.1-billion bid by CNOOC Ltd. for Nexen Inc. and a $5.3-billion takeover of Progress Energy Resources Corp. but said foreign state control of oilsands development has reached the point at which any further foreign state control would not be of net benefit to Canada (DOB, Dec. 10, 2012).

"Friday's announcement was an important inflection point in the history of this country and the oilsands that we should not underestimate how it will affect future investment in this province," said Hughes.

The federal government had an extremely difficult decision to make but it balances Canadians' interests "not badly," he said.

"The last thing the energy industry and Alberta need is for Canadians to feel really uncomfortable about any foreign investment so you have to modulate foreign investment and where it comes from and that's not a bad objective from a foreign-policy point of view and from a social licence perspective."

Alberta has always turned to foreign investment of one kind or another because it has never had enough capital or human resources to develop its own energy resources in this province, said Hughes, adding for the longest time most of that support came from the United States.

Last year the oilsands alone attracted more than $22 billion in investments and the Alberta government does not expect that to slow down, he said.

The government also fully expects there will continue to be campaigns against oilsands and pipelines and the way to address that is to perform well, to tell people what the industry is doing to perform well and to continue to fund innovation in the province, said the minister.

Michal Moore, professor at the School of Public Policy at the University of Calgary, told the conference one does not have to read very far between the lines of the federal government's new policy to see that it could have tentacles reaching out to other areas such as manufacturing and to other provinces.

He asked the energy minister about the extent the Alberta government participated in the federal government's decision. Hughes responded that while the province had been "appropriately engaged" more engagement would have been welcome.

With its takeover of Nexen, CNOOC will hold 100 per cent of the Long Lake in situ oilsands project and 7.23 per cent of the Syncrude Canada Ltd. oilsands consortium.

Gil McGowan, president of the Alberta Federation of Labour (AFL), asked if the Alberta government had considered the possibility that on the subject of oil prices the interests of CNOOC and the Chinese government run counter to Alberta's and particularly to that of the AFL.

Nexen is not only an oil producer but a marketer of 300,000 bbls of oil per day as well and possibly a shareholder in the proposed Gateway pipeline, he said.

"Our concern is that through CNOOC, Sinopec and other investments that the Chinese are pursuing their national interests by controlling the development, the pipelines and the marketing and if they control the marketing, will they be marketing for our interests or theirs, and their interest is low price, not high price," said McGowan.

Hughes said that even if Alberta were to get world prices for all its products it wouldn't be "all sweetness and light from there on in" because it will be subject to the usual vagaries of the commodities market.

Also, even with China's might and breadth and depth it can't get to the point where it can control the world market; there will always be transparent markers in the market place to indicate what the market really is, said the energy minister.

"Transparency as a result of market forces is the force that balances out any one player trying to corner the market," said Hughes, adding China's now roughly 10 per cent interest in oilsands production is "far from a dominant position."

He noted that Nexen does market on behalf of the Alberta government in a process the government opened to competition. "We're ensuring that we have access to transparent market signals."

Hal Kvisle, president and chief executive officer of Talisman Energy Inc., said Friday's announcement by the federal government provided clarity to the industry and bodes well for the future of its structure. It clearly sets the stage for joint ventures with Canadian companies thus providing an opportunity for state-owned enterprises to participate in oilsands and natural gas projects with Canadians operating them, said Kvisle.

Indicating a slide with Peters & Co. statistics saying Canada owns 59 per cent of the oilpatch leaving 41 per cent foreign-owned, Kvisle said that's a remarkable reversal in the numbers since he began his career in the 1970s.

Canada can work very well with foreign companies, he said, noting Talisman's joint venture this year with China's Sinopec International Petroleum Exploration and Production Corporation.

Talisman entered into a US$1.5 billion joint venture with Sinopec, which bought 49 per cent of the shares of Talisman's U.K. North Sea business (DOB, July 23, 2012).

Paul Evans, professor at the Institute of Asian Research and Liu Institute for Global Issues at the University of British Columbia, said in some ways Harper's decision was not just a decision about a particular commercial transaction nor even the oilsands.

"This is a broader marker in where Canada is going in the Pacific century and how we're going to come to terms with business organizations, governments [and] rules of the game that vary from what we have been accustomed to in Canada in the era of Western domination," said Evans.

On a domestic political level, Harper's decision was tactical brilliance but showed "severe ambiguity" for Canada's future as a global player in the oil industry and how the country will deal with state-owned enterprises and forms of capitalism that are "basically playing our game but not quite by our rules," said Evans, adding, "This is in some ways the most important decision made on the Pacific century by the Harper government."

While he acknowledged there is a threat from state-owned enterprises, it's very manageable, he said. "China has all of the capability, very few of the rules and all of the strategic interests in various areas that are important to Canadians, from telecommunications to energy."

Ray Boisvert, president of I-Sec Integrated Strategies, a firm specializing in risk mitigation and the use of advanced analytics to combat cyber and other emerging threats, said he is comfortable with investment from China because it is needed.

Much of Canada's success as a world-class leader in the energy sector is due to its know-how -- its intellectual property - and that has to be protected, said Boisvert, former assistant director of intelligence at the Canadian Security Intelligence Service where he was responsible for the directorate that sets intelligence collection priorities as well as the service's foreign relations and academic outreach programs. He also led CSIS's counter terrorism program

"When we engage with others, especially those who don't play by rules we're used to, there could be consequences so we have to be mindful of that," he said.

Boisvert said Canada needs to be on the lookout for corruption and to verify its supply chain as it gets more engaged with China and other SOEs. "We must move forward with eyes wide open and that means being smart that others will eat your lunch," he said.

He cautioned that SOEs may want to gain access to not just resource plays but also technologies and warned producers to manage their information, communications, databases, engineering reports and sales teams.

"I can tell you honestly that a lot of countries are taking advantage of those systems, those communications, to get insights on deals," he said.

Also on the panel was John Zahary, president and chief executive officer of Sunshine Oilsands Ltd., whose shares are traded on the Hong Kong Stock Exchange as well as the Toronto Stock Exchange.

Nearly half of Sunshine's shares are owned by Asian investors.

Zahary was asked if he has any concerns that -- while Harper is being praised for his balanced decision, until the details of what constitutes a "net benefit" has been determined or what the "exceptional circumstances" are that would allow some deals to go ahead -- that decision sends a message to Beijing that the brakes have been applied to investments in Canada.

Zahary said it may be in Canada's best interest that net benefits are not precise, that it is appropriate the federal government has some discretion and generally the rules are well understood. What's important are employment, capital and transparency, he said.

Daily Oil Bulletin,
Byline: Lynda Harrison

Harper’s new ownership guidelines won’t stop Chinese from exerting control in Alberta’s oil sands,
according to new AFL report

CALGARY – Albertans concerned about the future of the oil sands should not be reassured by new guidelines for state-owned enterprises (SOEs) unveiled by Prime Minister Stephen Harper late Friday afternoon.

A new report prepared by the Alberta Federation of Labour entitled “China’s Gas Tank” shows that the Chinese have a plan for the oil sands – a plan that is not in the long-term best interests of the citizens of Alberta who are the real owners of the resource.

“Now that they own Nexen, the Chinese government will have control over the marketing of about 300,000 barrels of bitumen a day and they will increase their control of Syncrude, Canada’s largest oil sands producer, which will now have representatives from Sinopec and CNOOC on its board wielding veto power,” says AFL president Gil McGowan.

AFL president Gil McGowan will be available for media at the Canadian Council of Chief Executives conference in Calgary at the Palliser Hotel.

Where:
Outside the Alberta Ballroom
Palliser Hotel Calgary
133 - 9th Ave. SW, Calgary

Monday, Dec. 10, 12:30 p.m.

Who:
Gil McGowan, President, Alberta Federation of Labour (780) 218-9888

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Harper’s new ownership guidelines won’t stop Chinese from exerting control in Alberta’s oil sands, according to new AFL report

CALGARY – Albertans concerned about the future of the oil sands should not be reassured by new guidelines for state-owned enterprises (SOEs) unveiled by Prime Minister Stephen Harper late Friday afternoon.

A new report prepared by the Alberta Federation of Labour entitled “China’s Gas Tank” shows that the Chinese have a plan for the oil sands – a plan that is not in the long-term best interests of the citizens of Alberta who are the real owners of the resource.

“Now that they own Nexen, the Chinese government will have control over the marketing of about 300,000 barrels of bitumen a day and they will increase their control of Syncrude, Canada’s largest oil sands producer, which will now have representatives from Sinopec and CNOOC on its board wielding veto power,” AFL president Gil McGowan said.

“The Chinese government doesn’t need majority ownership of the oil sands to exert a significant degree of control. It’s already happening. And if more isn’t done to protect the interests of Canadians, we can kiss goodbye to our hopes and dreams about moving up the value ladder.”

The AFL report is based on new documents and testimony about Chinese ownership released as part of the ongoing regulatory hearings into the proposed Northern Gateway Pipeline, as well as documents that CNOOC and Sinopec have been required to file with the U.S. Security Exchange Commission (SEC).

The report makes a number of significant revelations about the Chinese government’s practices and intentions, including the following:

• The Chinese are attracted to the oil sands because they want access to cheap feedstock for their refineries. Specifically, they want to lock in an alternative to high-priced oil from Saudi Arabia. As a result, selling to Chinese SOEs won’t result in an “Asia Premium” for Alberta producers: China wants to pay less, not more.

• Nexen will help China reach its goals because the company’s marketing arm handles about 300,000 barrels of bitumen a day. Nexen’s marketing expertise is currently used to get the best (i.e. highest) prices for shareholders. But it could easily be used to get the lowest prices for Chinese refiners – and that means downward pressure on bitumen prices for Canadian producers and the Alberta public.

• CNOOC in their own words in their April 2012 filing to the SEC: “We sell a significant proportion of our production to CNOOC-affiliated companies Sinopec and PetroChina.”

• The Nexen deal means the Chinese will strengthen their influence over Syncrude, Canada’s largest oil sands producer. Sinopec already owns nine per cent of the company and they have used their stake to veto any new Canadian upgrading projects. Nexen owns seven per cent of Syncrude, meaning that the Chinese government’s stake in the company will now increase to 16 per cent.

•  Rumors continue to swirl that the Chinese intend to buy significant stakes in Canadian Oilsands Ltd., which owns 36 per cent of Syncrude. If this happens, China could move from a position of significant influence to one of outright control at Canada’s largest oil sands producer.

• The Chinese also have what is likely a controlling interest in the proposed Northern Gateway Pipeline. The project has ten funding partners, only six of which have been named publicly. The publicly-named partners include: Sinopec; Nexen (now owned by CNOOC); MEG (owned 15 per cent by CNOOC); Total E & P Canada (in joint venture partnership with Sinopec); Suncor (in joint venture partnership with Teck Resources, which is 17 per cent owned by state-owned China Investment Corporation); Cenovus.

“What’s happening here is an elegant plan to gain control of all steps in the oil sands production chain: from extraction to marketing to transportation,” McGowan said. “Once that’s done, the Chinese will be able to keep prices low and keep the raw bitumen flowing to refineries in China. This will mean lower profits for Albertans who own the resource, lower royalties for Canadian governments and the loss of thousands of potential Canadian jobs in upgrading.”

McGowan says that stopping the CNOOC takeover of Nexen would have been one tool to protect the interests of Canadians. But now that the Harper Conservatives have dropped that ball, he says it’s even more important to stop the Canada-China investment treaty (FIPA) and the Northern Gateway pipeline.

“Northern Gateway would provide the plumbing to drain profits and jobs from Alberta and FIPA would tie the hands of future governments who might want to change the rules,” McGowan said.

“At the end of the day it’s clear that China’s interests are at odds with Canada’s interests. It’s also clear that we can’t rely on the so-called free-market companies to save the day, because they’re all in bed with the Chinese. What we need is a government that’s willing to step in and impose a national energy strategy that puts the interests of Canadians ahead of the interests of foreign governments and profit-seeking corporations that focus only on their short-run self interest.”

-30-

MEDIA CONTACT:

Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email [email protected].

China’s Gas Tank

Three Steps Toward Selling Out Canadian Energy Security

December 17, 2012

Chinese-Canadian business relations are being redefined, as we cede decision-making power about our natural resources to state-owned foreign businesses. These businesses are not bound by market pressures and will not act in the best interests of Canadians.

The economic relationship between Canada and China is being redefined.

Over the past year, three major events have dominated the headlines on Canadian business pages. These stories are each part of a larger picture in which Canada’s national interests are being subverted, and the country’s strategic energy assets are being taken over. From exploration and production to transportation and marketing, control of the oil sands is being ceded to state-owned foreign companies.

The China National Offshore Oil Corporation (CNOOC) takeover of Nexen gives a Chinese state-owned oil company marketing control over several hundred thousand barrels per day of oil sands bitumen. Marketing control gives CNOOC power over the price – which means we are handing over control of Alberta’s most important source of royalty revenue to a state-owned enterprise.

At the behest of funding partners that are backed by Chinese state-owned oil companies, the Northern Gateway Pipeline locks in a future where Alberta’s resources leave the country in their rawest form possible. This will ship good paying jobs to China.

“Harper is saying what Canadians want to hear while doing what they don’t want” - AFL president

Edmonton – Prime Minister Harper’s supposedly “tough new conditions” for foreign takeovers are nothing more than a public relations ploy aimed at masking the fact that he has just allowed a foreign government to seize unprecedented control over Canada’s energy resources.

In an announcement late Friday, Dec. 7, Prime Minister Stephen Harper green-lit Chinese oil giant CNOOC’s $15-billion takeover of Alberta-based Nexen, but claimed that new conditions would prevent such deals in the future. 

“The Conservatives are spinning this as a ‘sweeping overhaul’ of foreign investment rules,” McGowan said.“The new ‘guidelines’ for foreign takeover decisions will still see the process take place behind closed doors and be conducted by the Industry Minister.”

“The ‘new process’ Harper has proposed is the same as the old process, which just brought us the largest foreign oil patch takeover in Canadian history,” McGowan said. “They’re saying what Canadians want to hear, but doing exactly what Canadians don’t want. It’s the Republican Tea-Party playbook: tell a bald-faced lie, and hope no one questions you.”

Under the new conditions proposed, the federal government will weigh how much influence state-owned foreign takeovers will have over their acquisitions and an industry, and how much control over Canadian resources this will give the foreign government. Regulators will examine this in private, behind closed doors, and with no public input required.

 “How do you measure this influence? What is the measurement on which this will be evaluated? These are meaningless rules – it’s just a smokescreen,” McGowan said. “Sinopec only has a nine per cent stake in Syncrude…but they used that nine per cent stake to veto upgrading projects. Is there a measurement of how bad that is for Canada?”

The proposed CNOOC takeover has been criticized by Canadians across a broad political spectrum, including Preston Manning, the New Democratic Party and the Communications Energy and Paperworker’s Union.

“CNOOC is not your typical oil company. It doesn’t operate on market principles, and it isn’t beholden to investors. If they had been serious about defending the interest of Canadians, they would have nixed the deal outright,” McGowan said. “They had a good pretext already – Harper’s 2006 campaign pledge ‘not to export more raw bitumen to countries with laxer carbon standards than North America’s.’ If they had cared about state-owned foreign ownership, they would have scuttled this deal.”

The AFL will release a comprehensive report on China’s involvement in Alberta’s Oil Sands on Monday in Calgary.

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MEDIA CONTACT:

Gil McGowan, President, Alberta Federation of Labour at 780-218-9888 (cell)
Olav Rokne, AFL Communications Director at 780-289-6528 (cell) or via email [email protected].

New ownership not enough to restore confidence in 'Alberta's brand'

Brooks, AB – The Alberta Federation of Labour and United Food and Commercial Workers are calling on Premier Alison Redford to stand up for a key Alberta industry by conducting an independent public inquiry.

In a public letter sent to the Premier on Thursday, October 18, AFL president Gil McGowan and UFCW Local 401 president Doug O'Halloran explained the reasons a public inquiry into the causes of the E.Coli outbreak at the Lakeside plant in Brooks would be in the best interest of consumers, the cattle industry and of Albertans.

"Only a public inquiry can ask the right questions," McGowan and O'Halloran said. "Are meat processing facilities being allowed to police themselves? Are federal cuts and changes to CFIA mandates leading to food safety crises? Is there adequate training and whistle-blower protection for workers?"

In the letter, the union says an independent inquiry needs to investigate the level of authority, autonomy and mandate of Canadian Food Inspection Agency employees, as well as examining line speeds, update reporting policies and implement effective food safety precautions.

The cattle industry employs more than 20,000 Albertans and accounts for more than $11.6 billion of the provincial economy. McGowan notes that recent change in management at the Lakeside plant does not resolve the ongoing problems in the cattle industry.

"The results of Canada's system of self-regulation have already been criticized by American inspectors," McGowan and O'Halloran said. "Over the last decade, several USDA inspections have flagged problems with beef processing plants in Alberta."

The meat packing industry in Canada has been dominated by large, multinational players for some time; the entrance of Brazilian-owned JBS USA solidifies that trend. Given their market dominance, these companies are often considered "too big to fail."

"Workers, government and business leaders share an ethical responsibility to ensure the safety of Canadian consumers," McGowan and O'Halloran said. "The independence and thoroughness of such an inquiry would be valuable in restoring public confidence in the safety and cleanliness of Canadian beef, both at home and abroad."

-30-

MEDIA CONTACTS:

Gil McGowan, AFL President at 780.218-9888

Doug O'Halloran, UFCW 401 President at 403.861-2000

The technical hearings on economic issues raised by the Northern Gateway pipeline recently concluded in Edmonton. In these quasi-judicial hearings, Enbridge and intervenors (labour organizations, First Nations, environmental NGOs and the provinces of BC and Alberta) presented expert testimony and cross examined the experts of other parties. The Northwest Institute summarized the 15 days of hearings. Here are some highlights.

Cross examination of Enbridge Experts

Labour: refine the dilbit in Canada and create jobs

The Alberta Federation of Labour (AFL) questioned the export of raw dilbit (diluted bitumen, the tar sands' crude oil) rather than refining it in Canada. Enbridge responded that markets aren't looking for refined oil. They are looking for feedstock for their own refineries. No one could make money doing it, according to Enbridge, so there would be no benefit to Canada. Ninety percent of the claimed benefit to Canada is the "price uplift" that Enbridge claims will raise the selling price for all Canadian oil producers.

In later questioning, the AFL asked an expert for the Government of Alberta about the $8 per barrel "discount" for tar sands crude. The Alberta expert explained that tar sands crude fetches its highest price in the limited number of refineries capable of refining it for optimal value. When those refiners reach capacity, the price for tar sands crude drops $8. The $8 discount would be avoided by the Northern Gateway during its first year. Any pipeline (Northern Gateway, Keystone, Trans Mountain) would have the same "up lift" but, after the first few years, more heavy crude than refining capacity will trigger the discount and things will be back to where they are. Still, the Alberta expert concurred with Enbridge that, in his government's view, building upgraders in Alberta would not be commercially viable.

BC: an underinsured pipeline

The Province of BC questioned Enbridge about its insurance coverage. Enbridge stated that it was looking at exposure of $60 million for the cleanup cost of a spill once every 250 years. BC noted that works out to $280 million for a 20,000 barrel spill. That's the size of the spill in Kalamazoo which has already cost more than $767 million. BC also questioned whether the proposed separate corporate structure for the pipeline was intended to limit the liability of the corporate giant. Enbridge denied this. It stated that it would not consider a commitment to guarantee 100% of the clean up.

eNGO Coalition: National benefit from a pipeline that is half foreign owned?

A coalition of environmental NGOs (Forest Ethics Advocacy, Living Oceans ad Raincoast Conservation Foundation) established that Enbridge has ten potential funding participants who may each acquire a 4.9% interest and suggested that foreign ownership of the pipeline would impact the purported national benefit. Enbridge responded that the corporate structure would be modified for Enbridge to retain a controlling interest.

Later, the Coastal First Nations noted that, given 47% foreign ownership of Canada's oil and gas industry, that same percentage of the asserted $17 billion of benefit to private interest presumably would leave the country.

Chris Peters: Externalized cost of greenhouse gas emissions

Chris Peters, a Prince George engineer, calculated that the "well to wheels" greenhouse gas emissions would be 37 million tons (2/3 of BC's total emissions in 2010) and suggested this social cost should be entered into the equation. Enbridge responded that Canada is not responsible for emissions it exports to other countries, underscoring Peters' point that the social costs of the emissions enabled by the proposed pipeline are not accounted for anywhere.

Haisla First Nation: An undersized study

The Haisla First Nation's traditional territory will have more impacts than other First Nations because it is affected by all three aspects of the proposal: the pipeline, the terminal and the super tankers. The Haisla established that Enbridge gave different financial forecasts to different audiences – higher to the public, which inflates the claimed public benefit of a "price lift," - and lower to investors.[xii] Enbridge responded that the different forecasts were insignificant to the project's viability. The Haisla also raised concerns that the condensate costs and risks were not adequately addressed. Enbridge responded that this was the responsibility of the shippers. The Haisla noted that Mark Anielski's "natural capital and ecological goods and services" study included no impacts beyond the right of way, no river or salmon impacts and less land than the pipeline would actually occupy.

Coastal First Nations: Enbridge admits that a spill is 93% likely

The CFN noted that neither the provincial nor federal governments have exclusive jurisdiction to decide whether the project will proceed given that the First Nations have never ceded their traditional territories. The CFN couldn't evaluate impacts to salmon because they hadn't been provided the necessary information. "Whose responsibility is that?" CFN council asked. Enbridge responded that they had tabled sufficient information for a determination by the JRP.

Enbridge agreed that there is a 93% chance of a tanker spill, terminal spill, or full bore pipeline rupture happening within 50 years. In a heated exchange, CFN pointed out that there was no accounting of the social costs of the conflict that the pipeline would cause if the project goes forward.

Economist Robyn Allen: risks from tanker traffic increases are exponential

Enbridge's questions to the Alberta Federation of Labour panelist economist Robyn Allen allowed her to point out that if the pipeline were to increase from its stated capacity (525,000 barrels per day) to its potential capacity (850,000 barrels per day), this would increase tanker traffic by over 50 percent as well as activity in the marine terminal. "Risk is not additive," she said. "It is exponential."

JRP panelist Kenneth Bateman asked Allen about the value of Enbridge giving a "parental guarantee" that it would backstop all costs of a major oil spill. When Allen stated Enbridge won't entertain that, Bateman implied that it could be required by the federal government.

Next Steps

The technical hearings will continue through December. Beginning October 9, the JRP will convene in Prince George to hear expert evidence regarding the construction and impacts of the pipeline. Beginning November 22, the JRP will travel to Prince Rupert to hear expert testimony on marine and First Nations issues. Community hearings in southern BC are scheduled to begin in January 2012. The final arguments on technical evidence will be in April, 2013. The 2012 Federal Budget and Bill C-38 require the JRP to submit its report by the end of 2013. The federal cabinet will make the final decision.

Earth Matters, Oct 05 2012
Byline: Carrie Saxifraze

But we can win says economist Robyn Allan. Last in a series on Norway's petro-policies and lesson

[Editor's note: The Tyee sent veteran energy issues journalist Mitchell Anderson to Norway to learn how it amassed a $600 billion oil savings fund for its population of under 5 million, a stark contrast to Canada. To finish the series we invited him to share his views on how those lessons could be applied here. With input from economist Robyn Allan, here they are.]

Why do we tolerate homelessness and poverty in Canada? Underfunding for our schools and health care system? Why is our government eliminating 20,000 public sector jobs in a supposed effort to balance the books?

Imagine instead if Canada was a country capable of developing a national oil strategy similar to what has been achieved in Norway. This tiny nation enjoys full employment and enviable social programs, has no public debt, $600 billion in the bank, and remarkable public buy-in about their petroleum industry. Could we do it here? Do we have the guts to seize our economic destiny?

Such a system might seek to maximize employment, tax revenues and environmental protection -- exactly the opposite motivations of most extractive industries. There is another public policy goal that is of no interest to private companies: the energy security of our nation.

Seen through this lens, how is Canada doing? Abysmally, by four measures:

1. Dependency. Even with our vast oil wealth, Canada currently relies on other countries for about 50 per cent of our supply -- so-called "unethical oil" from the volatile Middle East. Proposals to pipe unrefined bitumen from western Canada to Asia will increase this dangerous dependence since Alberta will have to import vast amounts of condensate from the Middle East to dilute thick bitumen enough for pipeline transport.

2. Staying in the red. Alberta has been unable to balance the books since 2007, burning through $17.7 billion of past oil wealth, with another $3 billion deficit forecast for the coming budget.

3. Draining at full tilt. Labour and production costs are through the roof, at least until the next employment bust. Both the Alberta Federation of Labour and the late premier Peter Lougheed have both called for slower the pace of oil sands growth. Ten proposed upgraders have been cancelled since the 2007 recession, replaced instead with pipeline proposals for unprocessed diluted bitumen. With resource values rising relative to global currencies, what's the rush?

4. Getting global black eye. The oil sands have such a credibility problem the Alberta government spends $25 million a year countering "baseless" criticism from environmental groups.

Robyn Allan's prescriptions

Robyn Allan thinks we can do better. She is a British Columbia economist, former CEO of the provincial insurance corporation and outspoken critic of the Northern Gateway proposal to pipe diluted bitumen to Kitimat. She also believes the recent retreat from value-added processing in Alberta is not only a threat to the B.C. coastline, but to the entire Canadian economy. In an interview for this series she told The Tyee:

"Canada has an energy strategy, but it is being developed in a handful of boardrooms of multinational oil companies and national oil companies of foreign governments. And that strategy seems to be to extract oil sands bitumen as quickly as possible, mix it with distillate imported in increasing amounts from the Middle East, and move it down pipelines to Asia and the U.S. Gulf Coast. And that strategy is going to hollow out Canada's oil sector, move us away from creating jobs and value-added refining, and increase pressures on our exchange rate and the non-oil sectors of our economy. And when the boom becomes a bust, we won't have a strong economic fabric to fall back on."

So why does she feel so many state-owned oil companies now clamouring for a piece of the oil sands?

"More than 80 per cent of global oil reserves are controlled by state own oil companies, and there's good reason for that. Canada is the only major oil-exporting country in the world without a national oil company. Of the remaining global oil resources open for private sector investment, Canada has the majority. That's why national oil companies from China, Korea and Norway, and now maybe Kuwait and India, are coming here to buy up our resources -- it's the last big game in town."

Allan believes our country is becoming dangerously exposed in a world increasingly short of energy, especially as we allow state-owned interests from other nations to snap up our globally-strategic resources.

"Canada is being outplayed. We are losing control of our natural resources. We're losing control of our environmental standards. And we're losing the ability to upgrade and add value in Canada. We're not even beginning to use the leverage in this country that we have to control and manage the pace of our development and ensure that oil resource returns come to the people of Canada."

So what can we do about it? Allan feels one of the key problems is that our petroleum continues to be sold in American, not Canadian currency.

"When the price of oil goes up, the value of our dollar goes up and this creates problems not only for the manufacturing sector but for our oil industry as well. Because we trade our oil in U.S. dollars, any Canadian oil producer finds that their profits fall when they sell their product in U.S. dollars and have to repatriate those revenues into Canadian dollars. The ability of the oil industry to expand and grow is hamstrung by an appreciation of the Canadian dollar. The oil sector itself hurts, it not just manufacturing, tourism, forestry and other sectors."

She also sees a linkage between our inflated currency and the cancelled upgrading facilities in Alberta.

"We need to address the issue that maybe because our currency has appreciated in value, it's not as economic to build upgraders in Canada. We have a natural resource in Canada that's traded in U.S. dollars. Why? When Russia decided to trade their oil with China they elected not to do it in U.S. dollars, but their own currencies. We have to start thinking about what is in the long-term interest of Canada, not what is in the best interests of a handful of oil companies."

Upgrade here first, then ship

By choosing Canada instead of China, Allan believes Albertans would benefit from higher prices and greater economic stability. Nation building through such mutually profitable arrangements might prove far more productive than past interprovincial posturing.

"One of reasons that bitumen is not capturing the value that western producers want is that its not good enough quality. So if we upgraded it in Alberta into a product that North America wants, we might solve so many problems. Everybody in Canada could win if less expensive western Canadian crude got to eastern Canada.

"At the recent Northern Gateway Hearings in Edmonton, the Joint Review Panel was told by Enbridge's expert witnesses that right now Eastern Canada is buying imported crude at $20 to $30 more than the price of western Canadian crude. If that's the case, that works out to about 15 cents a litre at the pump. Western producers could get a price premium of five cents a litre over what they are getting now, the refiners in eastern Canada could save five cents a litre on their crude supply and consumers could save five cents a litre when they fill up at the pump.

"So if that happened, producers and refiners would make more money and consumers would spend less money. That's got to have a stimulative effect on our Canadian economy."

Allan points out that shipping upgraded crude rather than bitumen would also require half as much pipeline capacity since we would not need to build supply lines for imported condensate. And most importantly, upgraded Alberta crude should be moving east rather than unrefined bitumen moving west.

"TransCanada Pipelines have said they are looking at converting one of their natural gas pipelines to ship Western Canadian crude to eastern Canada. That could be up to 800,000 barrels a day and would be a tremendous boost to the Canadian economy. We should be focusing everything we can to get that to happen. And the way to get that to happen is to say no to the Northern Gateway pipeline. The best thing that British Columbia could do is restrict bitumen from coming into this province, period. That would essentially be a little bit of tough love to Alberta."

The late premier Peter Lougheed urged Albertans to "think like an owner." That determination to do what's in the interest of Canadians rather than companies is what Allan seems to be championing as well.

"I would hope that the real issue here is what can we do to support and develop the future health and long-term growth of the Canadian economy. We need to stop responding to the preferences of corporations that don't have the Canadian national interest at heart. They don't. They're not meant to.

"Every single time issues are raised such as energy security in Canada, value-added and upgrading, concerns over the appreciation of our dollar -- the oil industry goes crazy. And the reason they do is because these are serious issues that need to be addressed and they could be addressed relatively easily for our long-term benefit. What the oil industry doesn't yet understand is that many of these changes would be for their long-term benefit as well."

A challenging question

The Enbridge and Kinder Morgan pipelines will obviously benefit China and the shareholders of private oil companies, but what is in Canada's interest? Are we even asking that question?

At the end of this series I'm left reflecting on the blunt advice of Norwegian petroleum engineer Rolf Wiborg: "You have to leave the feudal thinking and leave the idea that people coming to exploit you have the right to tell you what to do.... It can be done, but do the Canadian people have the power and the will? Do they have the collectiveness and guts to do it?"

How about it Canada? Do we?

The Tyee, 3 Oct 2012
Byline: Mitchell Anderson