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AFL to make final arguments against Northern Gateway Pipeline

EDMONTON – The Alberta Federation of Labour is making the case that the Northern Gateway Pipeline is not in the best interests of Canadians.

At a hearing today in Terrace, B.C., the AFL will argue that the pipeline, if approved, will ship some of our country's best potential jobs down the pipeline to China. In its presentation to the National Energy Board, the AFL will show that it makes economic sense to upgrade bitumen in Alberta – or at least in Canada – rather than exporting it raw to foreign markets.

"The proponents of this project have compared the pipeline to the CPR and called it an important piece of Canadian infrastructure. But the Northern Gateway Pipeline is a piece of Chinese infrastructure, not Canadian infrastructure," Alberta Federation of Labour president Gil McGowan said. "The ownership structure of the pipeline shows that the project will benefit China's state-owned oil companies, shipping good-paying oil sands jobs to Asia."

To date, evidence presented to the Joint Review panel considering the pipeline shows that:

• the pipeline will create only 228 permanent jobs in Canada
• only 1,500 construction jobs will be created for three years, then nothing more
• the Northern Gateway Pipeline will drive up costs for Canadian refineries more than $800 million, which could lead to refinery closures.

The AFL's evidence shows:

• At least 26,000 Canadian jobs would be created if we upgraded/refined the bitumen destined for China here at home.

"If we want Cadillac prices for our resources, then we have to sell a Cadillac product," McGowan said. "And that means selling upgraded bitumen, called synthethic crude, rather than raw bitumen. Some country is going to capture the value and create the jobs. We think that country should be Canada, not China."

The AFL's arguments against the Northern Gateway pipeline are the product of more than two years of sifting through evidence and participating in cross-examination on the economic benefits of the project.

The AFL represents 160,000 Alberta workers, including 25,000 in energy and energy-related construction.

"Governments at all levels pay lip service to wanting to keep good jobs in Canada," McGowan said, adding this is this is the AFL's fourth intervention against raw bitumen exports in recent years. "Through these pipeline hearings, Alberta's unions are holding governments to their word. Oil sands jobs belong to Albertans first."

AFL president Gil McGowan will be available for comment at 3:00 P.M. at the United Nurses of Alberta offices, 700-11150 Jasper Avenue, Edmonton.

AFL Backgrounder: AFL final arguments against the Northern Gateway Pipeline

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MEDIA CONTACT:

Olav Rokne, Communications Director, Alberta Federation of Labour at 780-289-6528 (cell) or via email [email protected]

AFL Final Written Argument Northern Gateway Pipeline

TERRACE, B.C. — Enbridge Inc. shot back at critics of its proposed Northern Gateway pipeline Monday, arguing the project is making enormous and costly commitments to avoid accidents and that the biggest risk to the country is not approving it.

In its final words to a panel of regulators reviewing the project, Northern Gateway lawyer Richard Neufeld said Canada is vulnerable to its only market, the United States, deciding it no longer wants Canadian oil.

"You want to see an economic Black Swan for Canada?" Mr. Neufeld said in addressing fears the pipeline exposes the country to an unpredictable event of massive proportions.

"How about a decision from the U.S. that it will no longer need Canadian oil? ... The $30-billion in export price discounting ... would be a drop in the bucket. Canadians would be facing, we suggest, an economic catastrophe of unprecedented proportion."

After a massive review that reached out to communities along Northern Gateway's proposed right of way from Edmonton to the Northern West Coast, proponents and critics of the oil sands pipeline are presenting their closing oral arguments in this picturesque frontier town about an hour's drive from Kitimat, its endpoint.

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In a packed banquet room in the town's main hotel, Mr. Neufeld dismissed the most common criticism of the project — that Enbridge hasn't provided enough information about its risks and the benefits for regulators to approve it.

Participants hold signs in Terrace, B.C., during an anti-pipeline protest, on Sunday June 16, 2013.

THE CANADIAN PRESS/Robin Rowland

"Given the volume of information that comprises the hearing record, it's an argument that appears quite hollow to use," Mr. Neufeld said.

"No amount of additional ... information would persuade any member of the tar sands campaign to support a pipeline such as this. They are never going to say that enough information has been provided."

There were no demonstrations at the start of the hearings, although a rally in opposition to the pipeline was held on Sunday in a local park.

The three-member Joint Review Panel of the National Energy Board and the Canadian Environmental Assessment Agency is expected to wrap up the hearings in two weeks and make a recommendation to the federal government by Dec. 31 on whether the project is in the public interest.

Mr. Neufeld said the project has presented a path forward to address many of the concerns raised during the review, from the potential of an oil spill on land or in the ocean, to engagement with First Nations, and urged the panel to approve it.

"Tradeoffs are a fact of life," he said. "That does not mean that any person or community or region must be marginalized.... all it means is that in determining public interest we need to seek the balance that respects local interests, plans that deliver benefits to local communities, while still ensure that the projects that are needed for this country will proceed. We suggest that this project respect that balance."

But Art Sterritt, representing the province's Coastal First Nations, said Enbridge has failed to show the benefits are greater than the costs and the risks and approval would lead to "nothing but conflict.

"Remember this," he warned panel chair Sheila Leggett.

"Despite the hundreds of millions and effort by the proponents, B.C. First Nations and all of the public of B.C. have rejected this project ... I have never witnessed a project that has garnered such opposition, never in the history of B.C. I don't envy the position that you are in."

Up next are the Alexander First Nation, the Alberta Federation of Labour, B.C. Nature and Nature Canada, and then the province of British Columbia. These are all expected to present Monday.

Ottawa Citizen, Monday, June 17, 2013
Byline:  Claudia Cattaneo, Financial Post

The Alberta Federation of Labour gave its final arguments against the proposed Northern Gateway pipeline on Monday, begging the joint review panel to reject the project.

At a hearing in Terrace, B.C., AFL president Gil McGowan argued Gateway will hurt Canada's economy, creating few jobs locally and more jobs in Chinese refineries.

"The proponents of this project have compared the pipeline to the (Canadian Pacific Railway) and called it an important piece of Canadian infrastructure. But the Northern Gateway pipeline is a piece of Chinese infrastructure, not Canadian infrastructure," said McGowan.

"The ownership structure of the pipeline shows that the project will benefit China's state-owned oil companies, shipping good-paying oilsands jobs to Asia."

McGowan states the pipeline will create only 228 permanent jobs and 1,500 temporary construction jobs during a three year period. He also argues that the pipeline will drive up operating costs for Canadian refineries by more than $800 million.

The AFL is not opposed to selling oilsands product to lucrative Asian markets, says McGowan. Instead, McGowan favours refining bitumen in Alberta before selling it to foreign markets. The labour orgainization estimates that at least 26,000 Canadian jobs would be created if bitumen sold to China was refined in Alberta.

"If we want Cadillac prices for our resources, then we have to sell a Cadillac product," said McGowan.

"That means selling upgraded bitumen, called synthethic crude, rather than raw bitumen. Some country is going to capture the value and create the jobs. We think that country should be Canada, not China."

The AFL represents 160,000 Alberta workers, including 25,000 in energy and energy-related construction.

The Monday hearings were the final arguments to either supporting or denouncing the $6.5 billion pipeline that, if approved, will link the oilsands to the B.C. coast. From a port in Kitimat, bitumen will be loaded onto tankers heading to California and Asia, on the B.C. coast.

The largest hurdle is a coalition of aboriginal groups who argue they were poorly consulted by Enbridge, and that the pipeline will run through territory seen as culturally vital.

Enbridge and company supporters have spent approximately $500 million on environmental and engineering studies, as well as public and aboriginal consultations for the project. Enbridge also argues B.C.'s oil and gas industry could gain more than $18 billion in additional investments if the project is approved.

The joint review panel is expected to finish the hearings within two weeks and make a recommendation on the project's future to the federal government by Dec. 31.

When Alberta's oil sands started being commercially developed almost 50 years ago, the biggest challenge for companies was finding cost-effective production technologies. Producers such as Sun Oil Company (now Suncor Energy) and Syncrude focused on securing capital rather than launching public relations campaigns.

Industry and the Alberta government might have some regrets in that regard. As opposition to the carbon-intense development of the massive resource mounts, even seemingly benign pipelines have become vehicles in the battle over bitumen.

Energy corporations, as well as provincial and federal politicians argue the ability to move bitumen — either raw or upgraded — to markets is vital for Canada's economic prosperity. First Nations, environmental groups and landowners believe blocking pipelines will halt further development of oil sands and reduce the risk of oil leaks polluting land and water.

Lack of access to markets has Canadian crude trade at a massive discount to U.S. oil benchmark West Texas Intermediate, reaching a record $42.50 per barrel discount in December.

"If we do not go ahead with infrastructure, with pipelines to move our resources to tidewater and on to markets that want the resources, we will see them stranded and our legacy lost," federal Energy Minister Joe Oliver said in a recent interview. "The people who will be hurt by this will be Canadians and we don't want that to happen and we are determined it will not happen."

The gap between Canadian and U.S. crude prices is expected to narrow substantially by 2014 when pipeline expansions in Canada and the U.S. start flowing, increasing the value of exports by an estimated $8-billion per year. The discount currently hovers around $22 per barrel.

"The so-called 'bitumen bubble' is having serious consequences for government finances in Alberta and the rest of Canada and is costing the Canadian economy at least $20-billion per year," says Alex Pourbaix, TransCanada president of energy and oil pipelines. "Narrowing this price gap will ensure that Canadians and Americans realize the best possible value for their precious natural resources."

The so-called 'bitumen bubble' is having serious consequences for government finances in Alberta and the rest of Canada and is costing the Canadian economy at least $20-billion per year

Mr. Pourbaix says Keystone XL will also support job growth through increased corporate and tax revenues, adding there will be an estimated 2,200 jobs building the line through Alberta and Saskatchewan. The pipeline also is projected to add $3.5-million per year in Alberta property taxes and $1.3-million in Saskatchewan.

While TransCanada and the Alberta government are focused on trying to convince the U.S. public of Keystone's economic benefits, the pipeline is more important to Alberta and Canada, adds Frank Atkins. economics professor at the University of Calgary.

"If we don't get this, it's a big blow," he says. Keystone will help producers continue the expansion of the oil sands, while its delay — and uncertainty over accessing the U.S. — has some producers slowing or temporarily capping investments in the region.

The benefits of oil sands development extend far beyond Western Canadian borders, Mr. Atkins notes. Within the next 25 years, just under a million people will hold oil sands related jobs, up from 75,000 two years ago, and 126,000 of the total will be held by people outside of Alberta, according to a 2012 Conference Board of Canada report.

But for union leader Gil McGowen, Keystone XL would allow more than the movement of bitumen to market. The president of the Alberta Federation of Labour sees the pipeline drain jobs from Alberta and Canada, high-paying, long-term work associated with upgrading and refining bitumen in the province. "We think that pipelines like Keystone XL will simply act as conduits to take high-paying jobs in upgrading and refining out of the country, down the pipeline, to places like the American Gulf Coast and perhaps to China," he says.

Workers in upgraders and refineries earn about two-thirds more a week than the average worker in Canada, notes the association, which represents 145,000 unionized workers in Alberta.

The province of Alberta's own efforts to promote its bitumen royalty in-kind program in 2009 outlined the benefits of an upgrading, refining petrochemical hub as increasing provincial and municipal revenues by $748-million, adding almost 2 million jobs and increasing the GDP by more than $5-trillion over two decades.

Taking all into account, the loss of refinery jobs and spin-off jobs triple the loss for each dollar gained on exporting bitumen, Mr. McGowan argues.

The Canadian Association of Petroleum Producers notes oil sands employ 112,000 people across Canada, from which goods, materials and services used to build oil sands operations are sourced. But with a tight labour market expected to become more acute as boomers retire, the issue of jobs flowing south is a non-issue, says spokesman Travis Davies.

"This isn't about jobs. The oil sands are going to be supplying more jobs that we can handle," he says. "The economic case for building brand new refineries is a tough one; we have existing product and existing customers that want our product on the Gulf Coast and to the degree that we should take advantage of that [Keystone] is clearly good for Alberta and good for Alberta workers."

Getting the stuff to the U.S. is important, but we would still be a seller with one customer, which is not good for any business

Why go south? The region between Texas and Louisiana has the most oil refining capacity in North America at 8.5 million barrels a day, including about three million barrels of daily capacity for heavy crude. Producers such as Suncor, a major backer of Keystone, much prefer to flow bitumen to existing facilities rather than invest billions of dollars in developing their own. The veteran oil sands producer is expected to red light its $11.6-billion Voyageur upgrader project any day now after warning the economically challenged project was not a "strategic investment."

Mr. Atkins points out Enbridge Inc.'s Northern Gateway pipeline project, from Alberta to Kitimat, B.C., is also an important option for producers and Canada.

"If you can get to the west coast, you can get it to Asia and Asia has huge demand we've got to capitalize on it because if we don't we miss out on a big market," he says. "Getting the stuff to the U.S. is important, but we would still be a seller with one customer, which is not good for any business."

Production of non-upgraded bitumen is expected to increase by 17% to 1.04 million barrels per day. Bitumen upgraded to refinery-ready feedstock is slated to rise to 1.03 million barrels per day.

And come what may, the product will ship to markets, either by pipeline, railcar, truck or barge — all alternatives being used and expanded on by Canadian producers.

The debate on bitumen pipelines out of Alberta could cool down once Keystone XL's future is determined, but don't expect the issues around transportation to go away, says analyst Phil Skolnick, managing director with Canaccord Genuity.

"Keystone is a big fix but it's not a permanent one," Mr. Skolnick says. "We'll run into that situation again when other oil sands projects come online in 2020-2021."

Edmonton Journal, Friday Apr 12 2013
Byline: Dina O'Meara, National Post

Internal report in 2010 warned of fiscal consequences from royalty cut

Edmonton – Recently uncovered internal reports show that the Government of Alberta had long predicted this year’s deficits and budget cuts.

The confidential draft document “Energizing Investment Phase 2:  Royalty Curves and Adjustments,” shows the government projected a 2012/2013 surplus of $505 million in 2012/2013 without the reductions to royalty rates for unconventional oil and gas production, or a $142 million deficit if the rates were reduced.

On May 27, two days after this document was created, the government went ahead with the royalty reductions.

“They’ve been acting like this year’s deficit came as some kind of surprise to them, and they’ve tried to point fingers at bitumen prices,” Alberta Federation of Labour president Gil McGowan said. “But the deficit was predictable, and was predicted in this report to the minister. Royalty reductions were to blame, and were blamed in this report.”

The document projects that those royalty reductions will have larger revenue impacts in 2013/2014 and 2014/2015, though it does not show adjusted budget surpluses or deficits for those years.

“Royalty rates are part of the adult conversation Albertans need to have about revenue,” McGowan said. “Let’s start with looking at what royalty giveaways have already done to this province.”

The document goes on to show that the low rate on royalties mean that in some cases, oil and gas companies can recoup their capital costs in under a year.

“The decision to lower royalty rates in 2010 was a panic decision,” McGowan said. “And you don’t make good choices when you’re panicking. The royalty rates were unwarranted.” 

AFL Backgrounder:  Unconventional Royalty Breaks caused last year’s deficit confidential government documents

MEDIA CONTACTS:

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].

The demise of the $11.6-billion Voyageur upgrader project won't change the Redford government's hands-off approach around oilsands processing, provincial Energy Minister Ken Hughes said Thursday.

Hughes also suggested the Progressive Conservative government won't alter its policies to meet the goal set by former premier Ed Stelmach of processing two-thirds of Alberta's bitumen into light oil by 2020.

"It's an interesting goal," Hughes said in an interview.

"If that was physically possible with private sector initiatives, then that would be something we could accomplish. But I would argue that if the only way to accomplish that goal is by doing things that are financially and economically unnatural, then I would say that would not be wise for Alberta."

In 2011, 56 per cent of bitumen was upgraded in the province, according to the Energy Resources Conservation Board (ERCB). With an expected major increase in oilsands production, that figure is expected to drop to 44 per cent by 2021.

That figure could drop further with Suncor's Wednesday cancellation of Voyageur, which was intended to convert 200,000 barrels of bitumen per day from the Fort Hills oilsands mine into refinery-ready synthetic crude oil starting in 2017.

A glut of light oil in the North American market helped make the economics of the project unfeasible.

The Tory government has made gaining access to new markets through pipelines to the U.S. Gulf Coast, B.C. and Eastern Canada a priority.

While the price differential between conventional oil and bitumen has narrowed considerably in recent weeks - shrinking to $14.35 a barrel on Thursday - the government says the discount for oilsands has led to a massive revenue shortfall this year.

Hughes said the province shouldn't be concerned only with increasing upgrading within its own boundaries.

"Adding value to Alberta products anywhere in Canada is really good for Alberta as well. It doesn't overheat our economy ... and it does get our product to the market in a way that creates goodwill in other parts of Canada," he said. "It creates jobs in other parts of Canada, it creates economic stability in other parts of Canada."

But the Tories have faced considerable criticism, from the NDP and elsewhere, for focusing their attention on promoting pipelines to ship bitumen out of province, rather than providing incentives for upgrading.

Alberta Federation of Labour president Gil McGowan said the Voyageur situation shows that oilsands processing can't be left solely in the hands of the private sector.

Upgrading within the province will create products that fetch a better price than raw bitumen and create thousands of new jobs, he argued.

"Alberta will never move up the value ladder unless the government gets involved more aggressively in decisions over how our resources are developed," McGowan said, adding he wants actions such as conditions included on oilsands leases, not "subsidies or handouts."

Hughes said it was "naive" to think the province has the capacity to process all the bitumen produced.

But he noted the government does provide incentives through its Bitumen Royalty in Kind (BRIK) program, in which the province receives oil for its share of royalties from producers. The program is being used with the $5.7-billion North West Upgrading project near Edmonton, which will see bitumen refined into diesel.

In February, Premier Alison Redford and Saskatchewan Premier Brad Wall held preliminary discussions on a strategy to work with Ottawa and industry to boost Western Canada's refining and upgrading capacity.

Hughes said the governments are interested in talking to companies about whether a new model akin to the BRIK program could be developed to provide further incentives to industry.

But direct investment is not on the table and private companies must be in the lead, he said.

The Calgary Herald, Monday, Apr. 01, 2013
Byline: James Wood

Albertans collect lower revenues from heavy crude oil than war-torn African nation

Calgary – Albertans are getting less for our heavy crude oil than other nations with comparable resources, according to Alberta's Department of Energy.

In a report obtained by the Alberta Federation of Labour, government analysts compared royalty and tax rates for heavy crude oil and found that Alberta charges significantly less for their resource than other nations with comparable heavy crude such as Norway, Russia and Angola.

“Oil companies in Alberta benefit from the political stability, first-world infrastructure and an educated workforce,” AFL president Gil McGowan said, noting that some of the nations in the report are known for civil turmoil. “Royalty and corporate tax rates have an impact on the lives of everyday Albertans. Higher oil royalties have helped Angola turn a budget deficit of 8.6 per cent of GDP in 2009 into a surplus of 12 per cent of GDP in 2012. The country is improving, in part thanks to reasonable oil royalties.”

Angola suffered more than 1.5-million casualties during a 27-year civil war that ended in 2002. Despite ten years of landmine clearing efforts, according to United Nations estimates the country is littered with 10-20 million landmines, or about one landmine per person living in the country.

According to the internal government document, Alberta offers an extreme value to this long-lasting resource by reducing the otherwise high risk premium in some regions of unrest.” Research from the World Bank shows Angola having a far greater degree of political instability and presence of violence than Alberta.

“Companies operating in Alberta don’t have to deal with landmines. That has to be considered a competitive advantage,” McGowan said. “But we only collect 54 to 58 per cent of the value of our heavy oil in royalties. We’re 25 per cent behind Norway, 13 per cent behind Russia, and more than 22 per cent behind Angola.”

Norway, which is ranked highly by the United Nations for its stability, peacefulness and infrastructure, collects about 80 per cent of the value of its resources in royalties. Russia, where police corruption and violence are cited by the U.N. as obstacles to oil extraction, collects 73 per cent. Angola, which is eighth in the world in child mortality and whose citizens boast a life expectancy of 54.5 years, collects 71 per cent.

"The negative implications of our irresponsibly low royalties are clear: we have paltry savings in the Heritage Fund and we're slashing the public services that Albertans need and value,” McGowan said. “If we didn't give away our resources, we would be doing much, much better."

The research, which was presented to the Energy Minister in April 2011, is included in the government report “Oil Sands Fiscal Regime Competitiveness Review.” The report includes a comparison of Oil Sands and Conventional Oil Government Share, which is a measurement that includes corporate taxes, royalties and other government fees.

AFL Backgrounder: Oil Sands Royalties

MEDIA CONTACTS:

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].

2013 Backgrounder_Oil Sands Royalties