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The premier's claim that Alberta's financial woes are because of a bitumen bubble is being challenged by a provincial labour group.

The bitumen bubble refers to the growing gap between the price Alberta gets for its oil and the North American benchmark, West Texas Intermediate Crude.

Last week, the premier said the bubble will cost Alberta $6 billion in resource revenue in the coming fiscal year.

The Alberta Federation of Labour disagrees with Alison Redford's comments saying it believes the real causes of the budget crisis are royalty giveaways, tax cuts for the weather and a lack of provincial upgrading strategies.

"They've been using the differential as an excuse to explain why the province is running a deficit when the real problem is frankly that we have a broken system for taxes and royalties," said Gil McGowan, President, Alberta Federation of Labour.

McGowan says the AFL would like to see the government take advantage of the bubble to create opportunities for Albertans.

"The differential, far from being a disaster for Alberta, actually represents a unique and important opportunity for us to build the kind of energy future that most Albertans support and that's a future that's characterized by more Alberta-based upgrading which would create more jobs here in Alberta as opposed to sending down the pipeline to places like the United States and increasingly China," said McGowan.

The AFL says it believes 12,000 stable jobs could be created in Alberta if the province commits to upgrading our oil at home rather than sending it abroad.

CTV News, Wednesday, Jan. 30, 2013

The time is right for Alberta to profit from bitumen's low price by processing more of it at home, say the province's unionists.

The so-called bitumen bubble makes it economically feasible for more local processing, which would create tens of thousands of jobs rather than piping them — and oilsands product — to the U.S. And China, Alberta Federation of Labour President Gil McGowan said in Calgary Wednesday.

"We should be taking advantage of this moment in time instead of wringing our hands over the price differential," McGowan said in the lobby of the Palliser Hotel, normally the domain of kibbitzing energy sector brass.

He said the energy industry itself has long embraced the theory and with the price differential only widening recently, it makes even more sense to add value to taxpayer-owned resources.

"Why would we accept 30 percent of the the value when we could get 70 percent?" said McGowan.

"We have to starting acting like the owners of our resources."

He also said the province needs to emulate the Lougheed Tory government of the 1970s by creating a publicly-owned company to encourage such activity.

"Alberta is the only major oil producing jurisdiction that doesn't have its own champion in the industry," said McGowan, adding former Newfoundland Premier Danny Williams has followed Lougheed's example.

The province's attempts to realize a world market price for bitumen have failed miserably, he said, and will continue to.

"We'll never get a world price because bitumen is not oil...we should start using policy levers to make sure we're upgrading here," he said.

McGowan noted that about 50% of the province's extracted bitumen is processed in Alberta — a number, he said, that's expected to drop.

While it's true the price differential makes refining more feasible, the increasing production of the rival light crude in the U.S. undermines that argument, said energy analyst Jackie Forrest.

"It has merits in the short term but now we have a domestic oil boom in the U.S. and that means Canadian light crude is going to need new markets," said Forrest, a director with energy consultant IHS CERA.

That means more pipeline capacity would be needed to reach those new markets, she said — west coast routes facing increasing resistance in Canada.

As for government involvement in refining, the weak economic merits would demand considerable taxpayer investment at a time of squeezed budgets, said Forrest.

"Because it's pretty challenging for the economics, upgraders in Alberta would take a lot of government support," she said.

Labour to build the refineries would divert already scarce workers from other royalty-generating sectors of the industry, she said.

"You could argue that's not the case with job creation, given the labour constraints in the province," said Forrest.

Calgary Sun, Wednesday, Jan. 30, 2013
Byline: Bill Kaufman

When Premier Alison Redford talks about "a bitumen bubble," she's referring to the record amount of Alberta bitumen for sale, and the low price it's fetching in the U.S. these days.

That is partly because of competition from new supplies of higher quality crude oil from the U.S.

The price of bitumen dropped another $20 a barrel this month, so Redford's treasury will be short $6 billion by the end of next fiscal year.

Is this price gap between conventional oil and bitumen normal?

The fact is there has always been a gap between the North American price of conventional oil (West Texas International) and a barrel of sticky, thick bitumen, known as Western Canadian Select. (The world price, known as the Brent price, is another benchmark set by North Sea oil).

WTI is hovering around $95 a barrel, Brent slightly higher around $110, while bitumen, usually about $20-a-barrel less, dropped to $50 last month.

Bitumen fetches a lower price partly because it needs more upgrading before it can be turned into gasoline, says Michael Moore, energy expert in the University of Calgary's School of Public Policy. That costs money, so refineries won't pay as much for bitumen.

Usually the gap has hovers around 20-25 per cent, and in the last few months it went higher. But the gap has been higher in the past.

The lack of pipeline capacity makes it more difficult to get bitumen to market and using rail is expensive, says Moore. But there are other challenges, he adds.

The new supplies of lighter, easier-to-use oil from North Dakota are more attractive to refiners.

Then, not all U.S. refineries can handle bitumen, says Moore. Alberta bitumen has to get to specially adapted refineries on the U.S. Gulf coast.

But there's competition at those special refineries too - from heavy oil from Venezuela and Mexico which can get there cheaper, says Moore.

"So the refiners call the shots and they establish the discount. Our oil always had to go a long way and takes more processing."

So will more pipelines help?

Yes, the Keystone pipeline to the U.S. Gulf coast will be a big help, says Moore - "though we will still be trading in competition with other heavy oil like ours from Mexico. Right now, there's a lot of competition."

Gil McGowan of the Alberta Federation of Labour says there's no doubt Alberta is facing a glut in the oil market and that puts downward pressure on the price of bitumen.

The low price is a sign the market doesn't want to buy more Alberta bitumen, he says. The better solution is to upgrade the bitumen into synthetic crude in Alberta, "so we can sell a product the market wants."

"For Redford to suggest the only solution is to build more pipelines is not only simplistic, it is misleading. There are many other options," McGowan said.

Synthetic crude (upgraded bitumen), produced by a handful of oilsands companies, can be used in any refinery to make jet fuel or gasoline and it has occasionally fetched higher than the WTI price of oil, he noted.

U of C economist Ron Kneebone said the government has created its own problems by continuing to rely on volatile oil and gas revenues - despite frequent warnings from economists and its own advisers.

Calgary Herald, Wednesday, Jan. 30, 2013
Byline: Sheila Pratt, Edmonton Journal

Public sector unions are girding to fight impending provincial cutbacks driven by a multi-billion dollar cash crunch.

And a prominent economist says Premier Alison Redford's TV address to Albertans Thursday fails to come to grips with a looming budget shortfall larger than the province is letting on.

Even before Redford's speech, the Alberta Federation of Labour was readying a public relations offensive to offer alternatives to slashing spending on crucial programs, said AFL President Gil McGowan.

"The public sector unions have been meeting the past couple of weeks to discuss the implications of the budget and like a lot of Albertans, we're prepared for the worst," McGowan said Friday.

Alberta's fiscal chickens are coming home to roost after years of tax-slashing for wealthier Albertans and a resource revenue giveaway to a wildly profitable energy industry, he said.

"Our provincial GDP is literally 75 percent higher than the rest of the country yet we can no longer afford even to have run-of-the-mill services," said McGowan.

"I call it the great Alberta disconnect."

After meeting with Finance Minister Doug Horner last Tuesday, McGowan said it's clear areas like education and health care won't be spared drastic action in the budget expected in March.

"Everything we've heard is suggesting the budget won't be as bad as what we saw in the Klein years but worse than anything we've seen since," he said.

University of Calgary economist Dr. Jack Mintz said Redford's TV address muddied the fiscal waters, adding unmentioned obligations like financing requirements could see a shortfall of up $8-$10 billion.

"This government has considerable credibility problems as far as their budget plan," he said.

Even with budget cuts averaging 5% over all departments — or a $2 billion slim-down — an ocean of red ink will remain because the discount on Alberta bitumen will also persist for years, added Mintz.

"If they don't make major cuts this years, the sustainability fund will be depleted and they'll be borrowing because they don't want to take it from the heritage fund," he said.

Educators watched Redford with considerable interest, hoping the province's commitment made to them last year in a three-year funding pact will hold in March, said Calgary public school board vice-chairman Lynn Ferguson.

"We are certainly aware of the economic challenges facing the province," said Ferguson.

"I would hope since education is a consistent priority for Albertans, that value would be reflected even in a difficult budget year."

She noted there's a possibility the province could delay funding building projects, noting her district has 16 projects including modernizations and new schools, one of them a northeast high school.

"I would like them to know in a growing community like Calgary, new schools are always needed," she said adding 24 Calgary communities have no public schools.

Ferguson also voiced some concern about the fate of its full-day kindergarten program.

Redford said an unforeseen discount on the province's bitumen is largely to blame for the fiscal gap.

But the AFL's McGowan echoed right-wing critics like the Wildrose Party in arguing that situation has long existed.

"That differential between world oil and bitumen prices has existed for years," he said.

The Calgary Sun, Friday, Jan. 25, 2013
Byline: Bill Kaufman

CALGARY - Public sector unions are bracing to fight impending provincial cutbacks driven by a multi-billion dollar cash crunch.

And a prominent economist said Premier Alison Redford's TV address to Albertans Thursday fails to come to grips with a looming budget shortfall larger than the province is letting on.

Even before Redford's speech, the Alberta Federation of Labour was readying a public relations offensive to offer alternatives to slashing spending on crucial programs, said president Gil McGowan.

"The public sector unions have been meeting the past couple of weeks to discuss the implications of the budget and, like a lot of Albertans, we're prepared for the worst," McGowan said Friday.

Alberta's fiscal chickens are coming home to roost after years of tax-slashing for wealthier Albertans and a resource revenue giveaway to a wildly profitable energy industry, he said.

"Our provincial GDP is literally 75% higher than the rest of the country, yet we can no longer afford even to have run-of-the-mill services," said McGowan. "I call it the great Alberta disconnect."

After meeting with Finance Minister Doug Horner last Tuesday, McGowan said it's clear areas like education and health care won't be spared drastic action in the budget expected in March.

"Everything we've heard is suggesting the budget won't be as bad as what we saw in the (Ralph) Klein years, but worse than anything we've seen since," he said.

University of Calgary economist Dr. Jack Mintz said Redford's TV address muddied the fiscal waters, and unmentioned obligations like financing requirements could see a shortfall of $8-$10 billion.

"This government has considerable credibility problems as far as their budget plan," he said.

Even with budget cuts averaging 5% over all departments - or a $2-billion slim-down - an ocean of red ink will remain because the discount on Alberta bitumen will also persist for years, added Mintz.

"If they don't make major cuts this years, the sustainability fund will be depleted and they'll be borrowing because they don't want to take it from the heritage fund," he said.

Educators watched Redford with considerable interest, hoping the province's commitment made to them last year in a three-year funding pact will hold in March, said Calgary public school board vice-chairman Lynn Ferguson.

"We are certainly aware of the economic challenges facing the province," said Ferguson.

"I would hope since education is a consistent priority for Albertans, that value would be reflected even in a difficult budget year."

Sun News, Friday, Jan. 25, 2013
Byline: Bill Kaufmann

Social justice lawyer Fay Faraday says it's time for Canadians to insist on sweeping reforms of the federal Foreign Temporary Workers Program to protect workers from the kinds of abuses reported on in the three previous articles in this series. "It's a systemic problem and we will keep hearing those horror stories until we do something about it."

Faraday offers 22 recommendations in her Metcalf Foundation funded report titled "Made In Canada: How the Law Constructs Migrant Workers' Insecurity," which found that abuse of migrant workers is endemic. Faraday's proposals include allowing work permits to be tied to an industry or a province rather than a single employer. She also advises the government to "reverse" the trend of temporariness and allow all workers the chance to apply for Canadian residency.

Faraday, together with other lawyers, Ai Li Lim and Charles Gordon, and union leaders Joe Barrett and Gil McGowan, emphasize the need for enforcement mechanisms: a civil body or employment standards investigators to ensure labour laws are respected. It's not like it's not possible. In Manitoba, for example, all employers and recruitment agencies must be registered with the provincial government, and inspectors are sent to worksites.

Alberta Federation of Labour President Gil McGowan calls the Manitoba government's system the "gold standard" of protection for migrant workers. Because of the oversight, the federal government will not process an application for a migrant worker if the provincial government believes that an employer would break labour laws. To Faraday, this collaboration suggests that "national standards" can be accomplished to provide "front-end protection against migrant worker exploitation."

Manitoba also transitions many migrant workers into permanent residency through the Provincial Nominee Program, through which 90 per cent of its economic immigrants come. From 2005 to 2009, Manitoba granted residency to 13,089 foreign workers, representing 38 per cent of all nominees, whereas Ontario accepted only 1,247 in that same four-year span.

In 2011 the federal government introduced changes to the TFWP to "provide further protections for temporary foreign workers while alleviating temporary labour shortages." These three changes include:

• ensuring the "genuineness" of the job offer;

• banning employers for two years if they fail to respect wages and working conditions;

• imposing a limit of four years in which migrant workers are eligible to stay in Canada -- and they cannot return until another four years has passed.

The first change, say critics, is virtually meaningless, while the second is not being enforced. There is currently not a single employer on the blacklist -- and no regulating body exists to find and ban bad employers. Only the last change -- limiting stays to four years -- is actually implemented by the government, which, say critics, merely serves to heighten workers' disposability in Canada. Within four years, workers most likely would have improved their language skills, have learned their rights, and be more willing to unionize.

Protections do exist: government

An October report by Jeremy J. Nuttall in The Tyee that a recruiting company was asking Chinese coal miners to pay an illegal $12,500 recruitment fee to gain work in B.C. through the Temporary Foreign Workers Program raised further concerns about the mistreatment of migrant workers. Two Canadian unions responded by launching a judicial review to investigate whether the workers were given employment authorizations, also known as a Labour Market Opinion, that ensures Canadian workers were sought before recruiting miners from China. As the controversy over the HD coal mine in Murray River grew, Human Resources and Skills Development Canada announced that it was already investigating the entire Temporary Foreign Worker Program.

HRSDC says the government is concerned over the "integrity" of the program. "When Canadians are not available to fill vacancies, temporary foreign workers who are hired must be treated fairly and the same as Canadians doing the same job," says Marian Ngo, press secretary for Human Resources Minister Diane Finley.

The other federal department that oversees the TFWP, Citizenship and Immigration Canada (CIC), says it has plans to further protect workers. In an email, CIC communications representative Paul Northcott told The Tyee that the government introduced "new legislative authorities that will allow for inspections of employers, including site visits, to verify their compliance with program requirements" as part of the Economic Action Plan 2012. He also highlighted separate efforts of provincial governments to prevent abuse, such as Ontario's June 2012 inspections of recruitment agencies, Manitoba's and Nova Scotia's requirement for employers and recruiters to be provincially registered, and Alberta and Saskatchewan's new legislation to crack down on unscrupulous agencies and improve transparency.

Alberta Federation of Labour president Gil McGowan isn't impressed. The provinces took responsibility because they had to "fill the vacuum" of inaction on the part of Ottawa, he said.

"The federal government has literally spent tens of millions of dollars on expanding the TFWP and introducing mechanisms to speed approval for the employers but they spent barely a cent on investigation and enforcement [to protect the workers]," he added.

McGowan also expressed doubt about the CIC's announced changes, noting that he and the Alberta unions have been asking for changes for at least five years. "Given the Harper government's reluctance to spend on public services, I remain skeptical about whether or not they will actually put the resources in place to make these rules anything more than a paper tiger."

Temp workers and Canada's job landscape

Earlier in this series we met Costa Rican Jose Salguero, one of the imported workers who helped build the Canada Line railway for pay so low they took action by joining a union and winning a BC Human Rights Tribunal decision. We met Filipino Alfredo Sales, who fought to reclaim over $6,000 in lost wages from Denny's, and leads a class action suit on behalf of dozens more migrant workers the restaurant chain employed. Workers like Jose Salguero and Alfredo Sales require courage to stand up for themselves by filing legal action. According to McGowan and Faraday, low-wage workers in general tend not to complain to the authorities over employment violations until after they quit and find work elsewhere. Adding their temporary status to the equation makes it all the more risky.

Industry argues that Canada is a big country with a lot of tough or specialized jobs that need doing in hard places, and that foreign workers can be the only way to fill the need. But critics respond that the Temporary Foreign Worker Program, wittingly or unwittingly, creates Third World conditions for migrant workers, and risks putting similar pressures on the domestic workforce. By moving entire employment categories, which Canadians will always have a need for, to non-resident workers, the TFWP encourages economic dependency abroad while discouraging the development of local job markets. It's outsourcing by insourcing from abroad, a two-tiered system wherein no one wins.

The lack of enforceable rules allows major corporations, medium-sized businesses and even middle-class Canadians who need caregivers to do as they please with migrant workers. Neither SELI and SNC Lavalin, who paid their Latin workers a fraction of what they paid Europeans, nor Denny's, who did not pay for Filipino workers' airfares and overtime work, -- nor even Sinopec, who was ruled responsible for the deaths of two Chinese oilsands workers, due to safety violations -- have paid any fines. Nor have they been banned from hiring migrant workers in future.

Becoming the 'Dubai of the North'

McGowan believes that the continued use of migrant labour will heighten racial tensions, as local and foreign workers are pitted against each other. "It flies in the face of Canadian values and it's being used as a tool to undermine the Canadian labour market," he says. The AFL believes that the system is broken, that the Temporary Foreign Worker Program should be scrapped and replaced with permanent immigration -- the way Canada was before.

"We're not saying that Canada should stop bringing workers from overseas to work in our economy, he says. "What we are saying is that this is not the way to do it."

The risk with the current loosely regulated system is that the hard-won rights to eight-hour work days, overtime pay, medical coverage and worker protections may be eroded by transnational corporations who have access to a cheap workforce that is more docile by the nature of the regulatory framework.

"If they can mistreat foreign workers I don't think it's long before they mistreat domestic workers as well," says lawyer Charles Gordon. He also says eventually migrant workers will want to stay – and they will, "legally or illegally." Other experts anticipate that the nearly half a million migrant workers present in Canada in 2011 could go underground when they are expected to return to their home countries after four years in accordance with new legislation.

"The United States is an example of that, where you have a lot of illegal foreign workers but they're working and they're a significant part of the economy," Gordon says.

McGowan draws a comparison to other countries. "We're becoming the Dubai or Saudi Arabia of the North, not only because we have oil, but because we're abandoning real immigration in favour of using an exploitative guest worker program to fill our most menial and undesirable jobs. We've joined a global underground railway trading in human misery. It's a shameful transformation and a betrayal of Canadian values and our traditional approach to immigration."

The Tyee, Thursday, Jan. 10, 2013
Byline: Krystle Alarcon

Reports of exploited foreign temps have grown as fast as the federal program.

First in a series.

They hand you a soothing cup of Tim Hortons, pack frozen beef in factories, pick blueberries and apples on Abbotsford farms, serve fast-food meals and wipe tables, excavate mines and drill for oil in Western Canada, and raise your kids as if they were their own. Typically paid far less than Canadians, unprotected by labour laws, and disposed of when their contracts end, these migrant labourers have become ubiquitous while remaining all but invisible.

Under the Conservative government, the pool of migrant labour has expanded rapidly with almost no public discussion or oversight -- yet who benefits, and at what cost?

There were 300,111 migrant workers in Canada in 2011-- a more than three-fold increase over the previous decade. Another 190,769 entered that year, creating a temporary foreign workforce of nearly half a million. In 2010, the government accepted one and a half times more migrant workers than permanent Canadian residents.

Migrant workers have been cycling in and out of Canada since 1972, when the Non-Immigrant Employment Authorization Program was introduced. In 2002 it expanded to become the Temporary Foreign Worker Program (TFWP) to service the oil and gas industries in Alberta.

Since the Conservative government of Stephen Harper came to power in 2006, the TFWP has expanded rapidly, becoming an unseen pillar of Canada's economic policy. That year, migrant workers admitted to Canada exceeded permanent residents for the first time. And for the first time, employers no longer had to advertise for a minimum of six weeks on a national job bank before being granted permission to hire a migrant, but could do so after just seven days. The shortened processing was a gift to employers, who were allowed to designate workers they needed under "Occupations Under Pressure."

So fast growing are such designations that between 2007 and 2011, the program created a total of almost 30 per cent of all new jobs -- this at a time when the government, grappling with the financial crisis, claimed that creating jobs for Canadians was a key priority. And in 2012, under a little-noted provision of the omnibus budget bill that managed to avoid public debate by sliding in with so much other legislation, the Conservatives introduced changes for high-skilled workers such as dropping application times from 12 weeks to 10 days and permitting employers to pay them 15 per cent less than the average Canadian salary for the same work.

Critics argue that such changes lower standards for all workers, and that it won't be long before the majority of migrant workers, who are considered "low-skilled" in fast-growing sectors such as construction, hospitality, caregiving and agriculture, can legally be paid less than Canadians -- a trend that is already happening, due to the lack of oversight. Many endure mistreatment that, in the most severe case to date, has cost lives.

On April 27, 2007, Canadians woke up to news that two Chinese migrant workers employed by Sinopec Shanghai Engineering Canada near Fort McMurray had been killed when a tank's structure fell on them. Charged with violating safety standards, Sinopec, a part owner of the pipeline transport company Enbridge, initially argued that the Chinese state-owned company "has no official presence" in Canada and therefore did not fall under Canadian jurisdiction. Only recently, on Oct. 10, 2012, did the company plead guilty to three safety violations.

Growing list of abuses

Reports of migrant workers being exploited by powerful corporations have increased almost as fast as the TFWP.

In Oct. 2008, migrant workers at Maple Leaf Foods in Edmonton went on strike with their Canadian counterparts for not receiving the $15 per hour promised in their contracts. Many relied on food banks during the strike as they couldn't survive on the strike wage of $230/week and could not, because of the nature of their work permits, work elsewhere.

On Christmas Eve of 2009, four migrant workers, whose names and the company they worked for were not disclosed, died when the scaffolding of the building they were constructing fell on them.

In May 2009, youth and multiculturalism critic and Liberal MP Ruby Dhalla was criticized for allegedly abusing her caregivers from the Philippines, by forcing them to do work outside their contract and underpaying them.

In Nov. 2010, the UN's International Labour Organization found Ontario, and Canada, guilty of violating the rights of 100,000 migrant and domestic farm workers in the province by banning farm unions. In May 2011 three Filipino temporary workers, dubbed "the Three Amigos," were deported when their permits became invalid after their employers in Alberta laid them off due to the recession. They worked at a Manitoba gas station for another employer who promised to change their permits, but never did.

Roof collapse

Storage tank roof collapsed in April 2007 killing two Chinese migrant workers employed by Sinopec Shanghai Engineering Canada near Fort McMurray. (CBC)

In May 2012, a union staged a blacklist tribunal in front of the Mexican consulate for all the farm workers who have allegedly been sent home for attempting to unionize. Later in June, the exotic dancer stream of the TFWP was cut after the immigration and the human resources departments deemed that there were risks of human trafficking and exploitation within the stream. And this fall the premier of B.C. was severely criticized for advertising a Chinese mining project as a way to bring jobs to Canadians, when up to 2,000 Chinese migrant workers will be recruited to work in mines -- rather than offering the jobs to locals, including the First Nations from those areas. The job ads also listed Mandarin as a language requirement, ruling out most Canadians from applying.

It was also discovered in an investigation by The Tyee that Chinese workers were being charged recruitment fees of more than $12,500 in exchange for work in the mine. Two unions have challenged the Chinese workers' entries, through a judicial review that was approved by the Federal Court. As the controversy grew, Human Resources and Skills Development Canada announced it was reviewing the entire program.

XL Foods, based in Alberta, also came under fire for laying off 2,000 workers, 800 of whom turned out to be migrant workers, after the massive beef recall in September 2012.

And earlier in November four Mexican migrant workers filed a human rights case against their employer at Tim Horton's in Dawson Creek, B.C., who they say gave them the "double-double" treatment, by doubling them up in bunk beds and charging them double in rent, as well as withholding their passports and calling them, according to reports, "Mexican idiots" -- charges their employer said were "made up."

Alberta's two-tier labour system

Alberta currently has the highest per capita use of migrant workers, largely due to the oil sands projects -- 22 times higher than the rest of the Canada -- and their situation reveals troubling rates of mistreatment. As a 2010 audit by the Alberta Ministry of Employment and Immigration discovered, 74 per cent of migrant workers were mistreated by their employers, who typically violated labour laws on overtime, holiday and vacation pay.

Gil McGowan, president of the Alberta Federation of Labour, sees the treatment of migrant workers as an issue that affects Canadians directly. "They are being used as pawns to drive down wages and conditions across the board, especially in the service sector but also in higher income sectors like construction."

McGowan thinks the growing reliance on temporary foreign labour is a move backwards for Canada: "The Harper government is changing that model in a profound way without any kind of public discussion: to replace the citizenship-based model with a model focused on creating underclassed ghettos of exploitable workers."

He foresees future labour tensions, such as those in Western Europe and the Middle East where "guest workers" perform work their citizens refuse to do. "It set off a powder keg of resentments and animosities between the guest workers and the citizens of the countries in which they are working," he says. The citizens felt that the guest workers "were being used to undermine their wages and conditions, which frankly, they are."

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 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

CALGARY – Nexen Inc. began 2012 as a troubled oil and gas company struggling to meet its production targets and appease its shareholders.

It ends the year on the brink of being sold to China's CNOOC Ltd. for $15.1 billion – the Asian superpower's largest-ever overseas foray.

The transaction reverberated beyond Nexen's sleek glass office tower in downtown Calgary, past the pocketbooks of its investors, all the way to Ottawa.

It forced Prime Minister Stephen Harper to weigh whether foreign state-owned enterprises ought to own Canadian resource companies and, if so, which players are welcome and what extent of control is acceptable.

He ultimately decided that SOEs deserve more scrutiny than private ones, and that the oilsands – the third-biggest reserves on the plant – warrant greater protection than other resources.

"Harper was caught a little flat-footed in the sense that I don't think he fully understood both the political reaction to the CNOOC bid and that there might be subsequent bids from state-owned companies coming into the Canadian oilsands," said Queen's University business professor David Detomasi.

Nexen started 2012 in a rough spot. Marvin Romanow made an abrupt exit as CEO in January. The company's flagship Long Lake oilsands project had yet to come close to producing the volume of crude it was designed to, outages at a North Sea offshore platform were causing headaches and Yemen had just booted it out of a major oil project.

Investors' patience was wearing thin.

It would later be revealed that negotiations to sell Nexen to CNOOC began in earnest once Romanow was out the door.

CNOOC was rebuffed twice before Nexen (TSX:NXY), under the leadership of interim CEO Kevin Reinhart, accepted its offer.

But winning over Nexen's board of directors and shareholders would be the least of CNOOC's challenges.

Gordon Houlden, the head of the University of Alberta's China Institute, said the subject would not have been so prickly if it had been France or Norway bidding for Nexen, and not China.

"Certain state enterprises, certain countries, come with more baggage and China is that because of its size, because of its internal complexities, its history, its profile," said Houlden, a former diplomat with postings in China.

On Dec. 7, the CNOOC-Nexen deal was given Ottawa's blessing.

So, too, was the $6-billion acquisition of Progress Energy Resources Corp. (TSX:PRQ) by Malaysia's state oil and gas company. That deal would have been relatively uncontroversial under ordinary circumstances, but it had the misfortune of being announced right before CNOOC and Nexen dropped their bombshell this summer.

The approvals came with a key caveat for future deals – that state control in the oilsands will only be allowed in "exceptional" cases from now on.

The Harper government's handling of the Nexen-CNOOC file was "reactive in nature," said Wenran Jiang, a senior fellow at the Asia Pacific Foundation of Canada.

It's a stance Jiang found curious, given that the Conservatives had for years been actively courting Chinese investment – not the other way around.

CNOOC, having been burned by its unsuccessful bid for U.S. energy company Unocal seven years earlier, was getting the signal that perhaps the conditions were right to try again.

Instead, Ottawa found itself having to navigate around negative public sentiment toward Chinese investment that Jiang sees as largely "misinformed."

"Somehow we're the boy scout and the Chinese are just coming to invite themselves for dinner and then they're ready to roll us over," he said.

"It's not the case at all. We invited them for dinner. We invited them to come and they bought a big dinner ticket and that's why they thought they were coming – for a good party."

By contrast, Jiang praised Liberal leadership candidate Justin Trudeau for arguing in a newspaper column that foreign investment is good for Canada and that the Nexen takeover must go ahead.

It's an approach Jiang would have liked to have seen from Harper.

"You need to make a passionate, positive and proactive case for China needing energy. There's nothing sinister about it."

China is no stranger to Canada's oilpatch. For the past two decades its companies have been gradually building up their presence through joint-venture deals and small-ish acquisitions.

Jiang said it's hard to argue that their track record has been anything but good, but fears that China is up to something nefarious have nonetheless dominated the conversation.

Still, there are concerns that CNOOC's chain of command does ultimately end with communist government in Beijing.

While an ordinary corporation driven by commercial considerations alone would want to sell its oil for the highest price possible, the Alberta Federation of Labour says CNOOC and other Chinese-state-owned outfits are more interested in getting a lower price, so that the Chinese economy benefits.

AFL leader Gil McGowan brought that concern up during a question-and-answer session at a conference on Asian oilpatch investment, held in Calgary on the Monday after the Nexen-CNOOC verdict.

He bristled at the suggestion that anyone who raises those alarms just doesn't understand the issue.

"People who raise these concerns are not immature, we're not jingoistic, we're not xenophobic," he said.

"We're raising legitimate concerns about business ventures which are not business ventures in the way that we understand them."

One of the conference's speakers, the University of British Columbia's Paul Evans, said a more nuanced discussion needs to take place on the matter of what "state-owned" means.

"There's a view that to do business with China means that you are dealing with the Chinese state, and that when you're dealing with the Chinese state, you're dealing with the Chinese Communist Party," he said.

"When you're dealing with the Chinese communist party, you're dealing with a regime and an approach that is repressive on human rights, on espionage, a whole frame of things."

Evans, with UBC's Institute of Asian Research and Liu Institute for Global Issues, asked: "They're state owned but are they state controlled? What does control mean? What are the actual mechanisms for intersections with the Chinese Communist Party?"

There's been minimal hand-wringing within Alberta's oilpatch over what the government's decision will mean for investment going forward.

Provincial Energy Minister Ken Hughes did warn that "there is the potential for less investment coming into oilsands in Alberta and the impact of that is it will simply increase the cost of capital."

But John Zahary, CEO of early-stage oilsands company Sunshine Oilsands Ltd. said that while it's good to have all options on the table, his company will be able to fund growth through equity, debt and joint-ventures.

"We don't need a takeover, and so we don't feel exposed with respect to this decision."

Hal Kvisle, CEO of Talisman Energy Inc. (TSX:TLM), said foreign dollars will continue to flow into Canada through joint-venture partnerships, which he sees as a less disruptive way to do business than building a company only to sell it all to the highest bidder.

And so what if the oilsands have been singled out? There's "all sorts of good stuff going on there" even if all-out takeovers are mostly off the table, Kvisle said.

It's the natural gas players that are hurting right now, and there's no reason to believe they'll stop attracting Asian partners to help build liquefied natural gas facilities, like the one Petronas will be pressing ahead with now that its deal with Progress has closed.

"I think the government has played this brilliantly, actually," said Kvisle. "I think the Harper government deserves full marks for what they've done here."

Global Edmonton, Wednesday, Dec. 12, 2012
Byline: Lauren Krugel, The Canadian Press