Posts Tagged ‘oil sands

Why NDP Leader’s Oil Sands Attack Is Smart Political Strategy

- June 20th, 2012

Mulcair-in-Commons

Let’s get a couple of things straight right off the bat:

 

1. I used the word”attack” intentionally. Although Thomas Mulcair and the NDP insist they are not against the Alberta oil sands themselves (just the way the Harper government currently allows them to be operated), Mulcair’s stance is very much an attack on the status quo of the oil sands.

 

2. This piece is not about the rights and wrongs of oil sands development. Don’t come at me with long screeds on how the oil sands are the economic engine of Canada or how Big Oil and a lapdog federal government are engaging in environmental vandalism: It just doesn’t matter in this context. Oh, those issues will be debated ad naseum in the next three years, but right now I’m talking solely about whether or not it is GOOD POLITICAL STRATEGY for the NDP to attack the Alberta oil sands.

It is. And here’s why:

 

Oil-sands-Syncrude_plant

A few relatively mild comments on CBC radio last month made New Democratic Party Leader Thomas Mulcair the Most Dangerous Man in Canada™ (for a while anyway, until Luka Magnotta became a household name).

 

Mulcair must be doing something right to arouse that much clamourous indignation.

 

From a long-term strategic perspective, he is. Mulcair has picked a battleground and intends to push. The game is on.

 

That recent flurry of ruffled feathers and regional hubris was just a sideshow, but a bit of the underbrush needs to be cut back before we can clearly see what this situation will mean when it really counts — at the next federal election (tentatively scheduled Oct. 19, 2015).

 

Let’s let the CBC’s Rex Murphy lead the charge for a while. Here are a few things Murphy has had to say about Mulcair in heated commentaries last month:

 

“It is the most divisive debut of any opposition leader I can recall and potentially very dangerous to Confederation.”

 

and

 

“These remarks have been his biggest mistake since becoming national leader.”

 

and

 

“This game of playing one part of the country against another — which effectively is what Mr. Mulcair’s statements do — is of no value to anyone.”

 

and

 

“(A) deliberate, antagonizing and quarrelsome bent toward a whole section of the country … Blaming a prosperous region for the temporary weakness of Central Canada is willful shortsightedness.”

 

Joining Rex Murphy in the attack on Mulcair were (not surprisingly) members the Harper government and (perhaps surprisingly, perhaps not) Liberal Interim Leader Bob Rae, who accused Mulcair of having double standards over issues that affect Quebec and Western Canada.

 

The premiers of Alberta, Saskatchewan and B.C. piled on, appearing to deliberately misinterpret Mulcair’s direct challenge to the prime minister to take great offence on various levels of personal, provincial and regional pride.

 

What beastly, nation-destroying things did Thomas Mulcair actually say to warrant this volcano of vitriol and venom?

 

Not much, actually, and nothing he hasn’t been saying for years.

 

His basic argument was that he wants the Harper government to enforce long-standing laws it is sworn to uphold, for the good of the people of Canada now and in the future.

 

Really. That was the central thesis of his remarks to interviewer Evan Solomon which ran on CBC Radio’s The House on Saturday morning, May 5.

 

Here’s a link to the interview  (the whole programme, actually) if you’d like to hear exactly what was said for yourself. The Mulcair interview starts at the 9:00 mark and goes to 17:30.

 

Solomon brought up “the Dutch disease” issue, noting that Conservatives were attacking Mulcair for mentioning it in an article published in the March 2012 issue of the journal Policy Options.

 

The discussion swayed into the Alberta oil sands around the 12-minute mark when Mulcair said, “The point I’m making is not that we should be against development  of the oil sands, but it has to be sustainable development.”

 

And then he launched into an attack on the Harper government for not enforcing Canadian environmental protection laws in regard to the oil sands and hammered on a “Polluter Pay, User Pay” theme.

 

“The way we are exploiting and developing the oil sands is causing an imbalance in our economy,” Mulcair said.

 

The core thesis was that Big Oil should be paying more now to cover the future costs of Alberta oil sands cleanup and that, because the oil industry is not paying a realistic price to extract and sell that oil, the Canadian dollar is artificially inflated, which in turn has a negative impact on the Canadian manufacturing sector’s ability to sell our goods abroad.

 

Ignoring the current imbroglio and the rights and wrongs of various positions as they exist in June 2012 (because they will be long forgotten by the time the next federal election rolls around in October 2015), here’s an analysis of why Mulcair has picked a high-grade battle issue from a strictly pragmatic, real-politik strategic perspective:

 

1.  This is an issue with staying power and growth potential.

 

As Mulcair told the Globe and Mail during the May hubbub:

 

“You realize that it’s not a three-day debate, it’s not a three-week debate, it’s not a three-month debate, it’s a three-year debate … We’ll just keep coming back with what the real issue is. The real issue is polluter pay. People in Alberta believe that polluters should pay. People in Saskatchewan believe that polluters should pay. People in B.C. believe that polluters should pay. It’s a consistent thing across Canada.”

 

And this is what he told Tom Clark of Global News around the same time:

 

“This is a fight we’ve been looking for. We see this as a defining element of the next election campaign in Canada.”

 

Mulcair may be under attack right now, but his position is one that will stand up to scrutiny — not against oil sands development, just Tory mismanagement and lack of oversight — and one that can grow stronger with time.

 

2. Mulcair is focused and he’s not going off-message.

 

“My fight is with Stephen Harper’s Conservatives,” Mulcair told Global News. “So when some of them started suggesting I was anti-Western Canadian, which, of course, I’ve never even talked about, my reaction was, ‘Look — let me deal with the person who’s responsible for the problem I’m describing.”

 

“We’re leaving the largest ecological, economic and social debt in our history in the backpacks of young people and we’re telling them they’ll pay for it,” he told CTV News. “We’re going to be the first generation in Canadian history to leave less to the next generation than what we ourselves received if we continue this way.”

 

3. Mulcair really doesn’t care how his message plays in Alberta or Saskatchewan — it’s all about Quebec and Ontario … and B.C.

 

He’s making nicey-nice with the Western premiers right now, but that’s just for show and doesn’t matter — except for B.C. where Liberal Premier Christy Clark will be replaced by a majority NDP government on May 14, 2013 if pretty much every poll taken in the province in 2012 holds up (although Clark says those polls are fatally flawed). Don’t forget: B.C. is the province of David Suzuki as well as Christy Clark.

 

Mulcair was quick to add in forestry and fishing — primary B.C. sectors — as well as manufacturing when he talked about industries hit by an inflated Canadian dollar.

 

The NDP has a grand total of one (1) seat in all of Alberta and Saskatchewan (Edmonton-Strathcona). In the next federal election, the NDP could pour more money into Alberta and Saskatchewan than it will spend in the rest of Canada and it might gain them only one or two more seats. That situation is not going to change for a long, long time despite Saskatchewan’s historic legacy as the home of Tommy Douglas and medicare. So, in a strategic electoral sense, It doesn’t hurt the NDP at all to alienate Alberta and Saskatchewan — as long as that stance translates into support for the party further east (and west, in B.C.).

 

Eighty of the NDP’s 102 seats are in Quebec and Ontario. Throw in B.C. and you’re talking 92 of 102 seats.

 

That enormous, unexpected, unbelievable bulge of 59 NDP MPs from Quebec is the party’s Achilles heel — it could recede in 2015 just as easily as it magically appeared last year.

 

So a primary battle cry that is both ecologically hip and implies that reining in the excesses of Western Canada will benefit Eastern Canada is a platform that will sell well in Quebec. And, if Ontario’s manufacturing sector continues to decline over the next three years, the “Dutch disease” mantra may have a stronger resonance —it doesn’t have to be right, it just has to feel right in the gut of someone who’s on the edge of losing his or her job.

 

To put it another way, Alberta has become too successful and too single-minded for its own good. That economic power (which turned regional alienation into regional arrogance) and a blanket electoral loyalty to the Conservative Party also make Alberta a target. Because, even though Albertans now have great economic and political clout, the political power exists only because riding-rich Ontario decided in the last election to side with Alberta’s view of the world. Ontario being Ontario, the pendulum could just as easily swing to the left in the 2015 election if Ontarians think they’re being left behind economically.

 

If the NDP can make a breakthrough in Ontario and hold two-thirds of their unexpected Quebec support from the last election, you could be talking Prime Minister Mulcair in 2015, not Prime Minister Harper.

 

4. What’s wrong with divisiveness, anyway?

 

Let’s rewind Rex Murphy:

 

“It is the most divisive debut of any opposition leader I can recall and potentially very dangerous to Confederation.”

 

Let’s rewind even further to 2000, when Stephen Harper had this to say:

 

“I, too, am one of these angry Westerners … We may love Canada but Canada does not love us … Let’s make (Alberta) strong enough that the rest of the country is afraid to threaten us.”

 

Well, maybe fear is a legitimate basis for a good relationship — but I think even Rex Murphy would have trouble defending the paranoia of that 2000 Harper statement as less divisive than “Polluters Pay.”

 

Harper also advised then-premier Ralph Klein to build a “firewall” around Alberta to protect it from the depredations of ROC ( that’s the Rest of Canada if you don’t remember Alberta’s 1990s separatist rhetoric.)

 

But regional tension and economic envy and sibling rivalry have always been part of the Canadian mosaic. It’s nothing new, it’s constantly evolving and — so far — we’ve survived and thrived (relatively speaking).

 

5. The unspoken element of jealousy.

 

This is a subtext of the “divisiveness” issue. Nobody will actually talk about it (at least in public) but regional jealousy will always be there in the national debate: You have more than I do, I want what you have, and I don’t like you because you have what I want.

 

It’s a terrible worm in Canada’s gut but to deny it is to deny reality. The best leaders in Canada’s history recognized it was there and did their best to control it (none ever did completely) by trying to get Canadians to think in terms of national good instead of provincial and regional well-being. But when the divide between haves and have-nots (in both economic and political terms) becomes too great, the worm turns nasty.

 

We’ve seen Quebec use its electoral numbers to lash out in that situation. And Atlantic Canada would have done so over the past half-century if it could — but it just didn’t have the political numbers and so was forced to suffer in sullen resignation. The Conservatives are now in power in Ottawa because Harper was able to harness that worm in the West over the past decade and subdue it, at least temporarily, in Ontario. It’s hard to think of used-to-have-it-all Ontario in those terms, but the worm is there now.

 

If that worm is still in Ontario’s gut in three years time, the big numbers there spell trouble for Harper and Alberta. In Quebec, the NDP could very well ride a wave of resentment and jealousy into another strong showing. Nobody will actually talk about something as petty and base as jealousy, but recognizing (and accommodating) that unspoken element could be the hidden key to the NDP retaining a substantial part of its very fragile support in Quebec and making gains in Ontario.

 

Most voters wouldn’t admit the motivating factor of jealousy even to themselves. But if it’s there, they will find an issue to support, even an excuse, to feed that worm. And make themselves feel better, if only for a while.

 

6. It’s now a two-way fight between the NDP and Conservatives. The Liberals have been marginalized in the debate.

 

I’m not sure what Bob Rae was thinking when he joined the attack on Mulcair for being somehow anti-West. One or two or three years down the road, this debate is going to clarify along the lines of Big Business Profit versus Common Canadian Good (if the NDP has its way — and I think they have a good chance of pounding home their message.)

 

The Conservatives are going to be on the big business side of the proposition because that means prosperity, jobs and security. The NDP are going to be on the other side of the equation because the oil sands offer enough financial leeway that they can sell a game plan offering (less) prosperity but ecological and generational responsibility at the same time.

 

And where are the Liberals in all this? Nowhere. Yapping around the edges of the debate without a clearly defined profile.

 

If environmental responsibility and a legacy mandate become the central issues of the 2015 election, the Liberals will be left in limbo, trying desperately to create a relevant position. They sure aren’t doing that right now.

 

7. And it all comes down to how the economy is going in 2015.

 

We’re not talking about the well-being of corporations or Charles CEO — we’re talking about Johnny and Jacques Paycheque. The bottom line of the oil companies and the banks won’t matter. What will matter will be the bottom lines of Canada’s working families — especially in Quebec and Ontario.

 

If the economic engine of the Alberta oil sands is not able to create jobs and security in Ontario and Quebec over the next three years, then the NDP message is going to find fertile ground in those riding-rich provinces.

 

And that is why Stephen Harper is afraid of Thomas Mulcair — or should be, if he isn’t already.

 

If the Conservatives could form a majority government in 2011 with less than 40% of the popular vote and only five of the 75 seats in Quebec, surely it would be possible for the NDP to form a majority government in 2015 with only one or two of the 42 seats in Alberta and Saskatchewan.

Thomas_Mulcair_wiki

The next federal election will be determined by whether the Conservatives can hold on to their gains in Ontario and/or the NDP can hold on to their gains in Quebec while improving their position in Ontario.

 

One way or the other, the Alberta oil sands are going to determine how voters in Ontario and Quebec cast their ballots in 2015.

 

If, in the end, the 2015 election boils down to something as crude as the Conservatives representing the dreams and power of the West and the NDP representing the fears and needs of the East, then the numbers favour the NDP.

 

No matter what, Thomas Mulcair did not make a political blunder by attacking the Alberta oil sands. Whether you agree or disagree with him, you have to admit it makes perfect political strategic sense for Mulcair and the NDP to stake out that position.

 

It will be an interesting three years.

 

REWIND: How Oil Makes Canada Four (Or Five) Different Countries

- April 11th, 2012

UPDATE: I first posted this piece more than year ago. Despite all the upheaval in the Middle East and political gamesmanship in the U.S. in the intervening year, the oil situation in Canada remains basically unchanged. It’s a very complicated situation so I’ve decided to run it again — a REWIND — in the hopes that it helps other people understand what’s happening a little more (at least from my perspective).

barrel-of-oil-and-dollar-sign

I planned to write this several months ago but kept putting it off because, frankly, it’s a lot of work.

I would really prefer government and petroleum industry experts explain all this stuff clearly and succinctly, but they either won’t or can’t so I’m stuck doing it.

I may get the occasional fact muddled (in which case I’m sure the experts will suddenly pop out of the woodwork to correct me) but all the basic information is solid.

I will try to make this interesting as well as informative — but my main goal is to create as clearly as possible an overall picture of where Canada’s various regions stand in terms of oil production, distribution and consumption.

I normally dress up blog posts with lots of photos, but not in this case. I will stick mainly to maps because they’re important to understand where the oil goes — and doesn’t go. Read ‘em and weep.

(NOTE: In seeing this posted, most of the maps look too small to read clearly. I can’t do anything about that, unfortunately, but all the maps are available out there in larger format on the Internet, so look ‘em up yourselves. The CEPA pipelines map is especially important.)

I’m doing this now because I see a lot of confusion about why gas prices keep going up at the pump when we keep being told that Canada is such an oil-rich country (and should thus be relatively immune from oil production crises in the Middle East, Africa, the Gulf of Mexico and elsewhere.)

Let’s get started:

In very, very rough terms Canada produces about 3 million barrels of oil a day and consumes about 2 million barrels of oil a day. So, overall, we are an oil-exporting nation.

However, we are also a major oil-importing nation.

Why?

Because, of the 3 million barrels of oil Canada produces every day, 2 million are shipped directly to the United States.

Only 1 million barrels a day of Canadian oil is shipped to Canadian markets. The missing 1 million barrels of daily Canadian consumption is made up by imports — from the the North Sea, the Middle East, Africa and South America.

Four — or five — Canadian “countries”

The four oil “countries” I refer to as composing Canada are: Atlantic Canada, Quebec, Ontario and Western Canada. The possible fifth is the North, but the Canadian Arctic’s oil future is still evolving, so it may have a separate oil reality or (more likely) be tied directly to Western Canada.

Don’t think of these divisions on geographic or cultural lines: Think of them strictly in terms of oil (although geography and culture play a role) because each region has a separate oil identity.

I’m calling these regions “countries” because — in the event of a major, long-term oil crisis — each region will be affected differently and will react differently. Hopefully we will all hang together as one Canada but, in a serious meltdown, regional self-interest could blow apart the connective tissue of the national dream.

I’ll start at both ends of the country and move to the middle because, in oil terms, I’m stuck in the middle with you, Ontario.

li-pumpjacks-620

Western Canada

We’ll start in the West because that’s where the oil is, baby.

In Alberta, to be specific. In the Alberta oil sands, to be even more specific.

Canada has proven oil reserves of about 180 billion barrels, second only in the world to Saudi Arabia and its 265 billion barrels of proven reserves (although serious doubts have been cast on that number, since we have to take the Saudis’ word for it — and the size of the reserves determines how much oil can be pumped, according to OPEC rules).

Coming up fast behind Canada are Iraq and Iran, but for now we’re still Number 2.

Of those 180 billion barrels of proven Canadian reserves, 98% is in Alberta — with a whopping 95% locked in the oil/tar sands. Alberta’s conventional crude deposits amount to a mere 3% of the Canadian total while Saskatchewan and Newfoundland each have a piddling 1% (and they’re damn happy to have that).

Several other provinces, notably B.C., Manitoba and Ontario, have thimblefuls of oil but the amounts are so infinitesimally small they aren’t worth counting.

That’s it in a nutshell.

Alberta has almost all of the oil and almost all of Alberta’s oil is of the “dirty” oil/tar sands variety. You can forget any attempts to stop further development of the oil sands. There will be lots of PR window-dressing in the future about how the oil sands extraction process is being cleaned up and its carbon footprint is being reduced, but it just doesn’t matter.

We’re oil junkies, the oil is in the tar sands, so we will exploit the tar sands regardless of the environmental impact or consequences.

NASAoilsands

oil_sands_open_pit_mining

In case you want to know how we/they get petroleum products out of the tar/oil sands, here’s the link to a pretty good YouTube video explaining the Shell extraction process.

Where does Alberta’s oil go?

As I said before, most of it goes to the U.S. through an incredible arterial network of pipelines.

Here’s a very good map of that pipeline network produced by the Canadian Energy Pipeline Association. It looks daunting but it’s less complicated when you know what you’re looking for. As you read on, keep referring back to this map. I’ll place it again further down the post, so you don’t have to scroll back quite as far.

Liquidpipeline

I don’t seem to be able to hook up a link at the moment but here is the address for the CEPA websitewhere you can pull up this map in PDF format and enlarge it to really see where the spiderwebs go:

http://www.cepa.com/pipeline101.aspx?page_guid=25BB423C-CF65-4D9E-992E-D650EAB844D6

Some of the Alberta oil goes east to Central Canada, but even that travels through pipelines in the U.S.

In the event of a major, major oil crisis, I think you can count on the U.S. looking after its national self-interest  and diverting all that Ontario-bound oil to  the U.S. Midwest (as it actually has the legal right to, according to the small print of the various Canada-U.S. agreements governing the movement of “our” oil).

(AL NOTE: As I said I might, I muddled facts in the above paragraph, mainly due to the fact that it’s been a couple of months since I researched some of this stuff and I was working on memory here. Elise Martin, a very good journalist at Les Affaires in Montreal, just reminded me that the NAFTA rules on oil exports don’t mean the U.S. can take pipeline oil bound for Canada. What they DO mean is that, in the event of a major crisis/shortage, Canada CANNOT reduce the flow of oil to U.S. markets by a greater proportion than it reduces the flow of oil through the pipelines to Canadian markets. So the U.S. can’t divert any extra oil from us, but we have to keep supplying oil to the U.S. even if we’re running short — at a ratio of two barrels to them for every one barrel to us. Sorry about that. And thank you, Elise, for catching my goof. Back to the post.)

Canada would not now exist as an independent nation if John A. Macdonald and the builders of Canada’s national railways had opted for the same “rational” southern (i.e. U.S.) routes around Lake Superior that Canada’s oil pipeline builders chose a century later.

Here is a Wikipedia map that shows the (green) route of the TransCanada NATURAL GAS pipeline that follows an all-Canadian route NORTH of Lake Superior. That’s the route the Interprovincial oil pipeline SHOULD have followed too, despite the horrendous construction difficulties posed by the terrain of Northwestern Ontario.

Wiki

(To be fair, the most important part of that Interprovincial Pipeline Ltd.  —now Enbridge — system was built in 1950, at a time when the resource and manufacturing economies of the U.S. and Canada had been completely intertwined by a decade of anti-fascist war and common cause against the (real) communist threat. Canada’s pipeline builders just did not contemplate a future world in which Canadian and American national economic and strategic interests might diverge. Welcome to the 21st Century.)

Back to the pipelines.

The TransMountain pipeline system currently carries Alberta oil west to Vancouver and then south to Washington state. Kinder Morgan also has some other pipelines that flow directly to the U.S.

Even more of that Alberta oil will be heading toward the U.S. if several new pipeline proposals are approved (as I am certain they will be eventually).

Enbridge is currently seeking National Energy Board approval for a $5.5-billion Northern Gateway pipeline through the Rockies to an ocean tanker port at Kitimat, B.C.

The supposed rationale for the pipeline is to expand our oil markets in China and the rest of Asia, thus reducing Canada’s current dependence on the U.S. as our only real export customer.

However, Enbridge’s filings to the NEB include data indicating about half the oil shipped through Kitimat will go to U.S. refineries in California and Washington state that now process crude from Alaska (which is quickly running out of oil, thus leaving those refineries gasping for Alberta crude to fill the vacuum.)

On the Living Oceans Society map below, the red Northern Approach is the route tankers to Asia would/will take. The yellow Southern Approaches route would/will carry Kitimat oil to U.S. refineries.

Kitimat-tanker_routes_website

While we’re in B.C., I should mention that offshore oil drilling has been banned along Canada’s West Coast since 1972, although both the federal and provincial governments have been making snuffling noises about lifting that ban in recent years.

At the same time, oil tanker traffic down the coast has been restricted to the outer/westward side of the island chain extending down the B.C. coastline. This “exclusion zone” policy, however, is only voluntary. As you can see from the Living Oceans map, approval of the Northern Gateway pipeline will blow that tanker traffic ban all to hell. Can you say Exxon Valdez?

Again, back to the pipelines.

Enbridge rival TransCanada Corp. is patiently awaiting U.S. government approval (which will come eventually despite the equally inevitable environmental lawsuits) of its Keystone XL pipeline to carry Alberta oil to the Texas and Louisiana refineries that are quickly running out of oil from beneath the Gulf of Mexico.

TransCanada’s original Keystone pipeline just went operational in June 2010, carrying Alberta oil to Patoka, Illinois, south of Chicago and to the U.S. oil hub of Cushing, Oklahoma.

KeystonePipeline

When (not if) approved, the Keystone XL pipeline will also run down to Cushing and then continue on to Port Arthur, Texas, on the Gulf Coast.

One of the big things holding up Keystone XL approval is the fact that rival carrier Enbridge had a major leak last summer in its Line 6B carrying Alberta oil down through the U.S. Midwest to Sarnia. The rupture allowed about 20,000 barrels of oil to spew out, of which an estimated 6,000 barrels got into the Kalamazoo River system.

ENB_US_Line-6B_leakMarker

Line 6B — one of the two Enbridge pipelines feeding Western Canadian oil to the U.S. Midwest and Ontario — was shut down for months for repair and cleanup operations. The closure caused a shortage of crude for Ontario refineries late last summer (although production levels ramp down at that time of year anyway) but, more importantly perhaps, it gave the reputation of Canadian oil carriers a black eye — one that is making it very hard for the U.S. State Department to approve the Keystone XL plan.

Two other smaller leaks on other Enbridge lines in September didn’t help American attitudes to the company or Canadian pipelines in general either.

So that, in rough terms, is where Alberta’s oil is going. In the event of an international oil crisis, Western Canada will do just fine (as we always knew it would).

But in the same oil crisis, those 175-178 billion barrels of proven Alberta reserves won’t do the rest of Canada east of Manitoba a lot of good.

The North

I’m not really going to get into Arctic Canada at this time — it’s too big a subject with too many international implications.

Let’s just say there is a lot of oil — and many other resources — up there. And what we think is ours may end up belonging to someone else before current diplomatic dancing is done.

Russia already claims “our” North Pole as part of its territorial jurisdiction and plans to grab a lot more of the Arctic before it’s done. Russia, Canada, the U.S., Greenland and Norway are currently in the midst of UN-adjudicated technical wrangling to determine who owns exactly what up there.

A 2008 U.S. Geological Survey estimated there are about 90 billion barrels of undiscovered, technically recoverable oil north of the Arctic Circle, most of it offshore. My bet is there is a lot more than that.

The internal Canadian debate about whether we SHOULD recover that Arctic oil may not matter a whit if we are not able to establish sovereignty over what we think is ours.

As for the Mackenzie Valley natural gas pipeline, which finally got full National Energy Board  and federal cabinet approval this week, forget about it. Ain’t gonna happen. At least not now.

The $16-billion pipeline probably should have been built 20 or 30 years ago (when it would have cost one-tenth the present estimate) but too much other natural gas has been found in much more accessible locations closer to major markets in the intervening years.

Maybe when those reserves are depleted in another 20 or 30 years, the Mackenzie Valley pipeline will be economically feasible again. But by then the price tag could be $160 billion.

Let’s look at Atlantic Canada now

canadarig

Yes, we know Newfoundland has oil. But as I pointed out further up, it doesn’t have as much as we tend to think.

And what it does have is running out pretty fast. There are hopes in Newfoundland that some recent deepwater discoveries will soon bring new sources of oil online, but that oil is very, very deep in treacherous waters and it still has to be determined if enough can be reached and retrieved to make the investment worthwhile.

That explains, in large part, why Newfoundland and Nova Scotia last year made the historic decision to build an undersea power line from the vast hydro-electric resources of Labrador to the vast, power-hungry markets of the U.S. East Coast. Newfoundland’s offshore oil may run out in a few decades, but hopefully the raging rivers of Labrador will keep pumping water through hydro dams far into the future.

Just under half of Newfoundland’s (roughly) 300,000-barrel-a-day  offshore oil production is processed at Newfoundland’s sole refinery at Come By Chance. The rest is shipped directly by tanker to refineries in the U.S.

The Come By Chance refinery was built in the early 1970s by American entrepreneur John Shaheen, who finagled a huge amount of financial backing from Joey Smallwood’s provincial government. The refinery processed crude shipped in from the Middle East at the time.

By 1976 — overwhelmed by the OPEC Arab oil boycott and astronomical price increases for crude —  Shaheen’s company was bankrupt and the refinery was shut down at great loss to Newfoundland taxpayers.

In 1980, the $120-million refinery was bought for $10 million by the Canadian government through Petro-Canada, just to get it out of limbo.

The refinery was not reopened until 1986 when Petro-Canada sold it to Bermuda-based Newfoundland Processing (later Energy) Ltd. for the princely sum of $1 (that’s one dollar).

But here’s the really incredible part: A condition of sale was that Newfoundland Processing and any subsequent owners were forbidden FOREVER from selling oil products from the Come By Chance refinery to ANY Canadian market apart from Newfoundland & Labrador.

As a result, to this day, about 10% of the oil refined at Come By Chance supplies the Newfoundland & Labrador domestic market, while the other 90% is shipped directly to the U.S. Not a drop goes to Nova Scotia, New Brunswick, P.E.I., Quebec or Ontario.

Incredible, eh?

I don’t know for sure why that strange codicil was added to the sales agreement, but I am fairly confident in deducing that it was as a result of pressure from the private owners of refineries in Halifax, Saint John and Montreal who didn’t want a taxpayer-dollar-leveraged Newfoundland refinery cutting into their markets in the Maritimes and Quebec.

Perhaps it made sense at the time (I think not) but what it did do was cut off Eastern Canada from oil produced in Eastern Canada.

And where, exactly, does the oil come from that feeds those refineries in Halifax (Dartmouth, actually), Saint John and Montreal?

Why, it comes from all those dangerous places in the Middle East, Africa and South America that the U.S. is trying so desperately to steer clear of by glutting itself on Canadian oil.

The Eastern Canadian refineries used to get most of their oil from British and Norwegian sources in the North Sea and from the Persian Gulf states, but as those sources dry up or become more troubled, the refineries in Dartmouth, Saint John and Montreal have turned more and more to places like Libya (shiver), Nigeria, Angola, Venezula and Mexico.

Getting back to the Come By Chance refinery for a moment, it was sold in 1994 to the Vitol Refining Group, after which its name was changed to North Atlantic Refining Ltd.

In 2006, the refinery was sold to Alberta-based Harvest Energy and, in 2009, Harvest in turn sold North Atlantic Refining to the Korean National Oil Corporation, owned by the South Korean government.

So you’ve got the only oil refinery processing Newfoundland crude owned by the South Korean government, while the other oil refineries in Eastern Canada process oil pumped from wells located halfway around the world.

It’s enough to make you shake your head, as dear old Lloyd Robertson would say.

Skipping over to the other Atlantic Canada refineries, the one in Dartmouth, N.S., is owned and operated by Imperial Oil while the one in Saint John, N.B., was built in 1960 by the Irving family empire, the dominant economic force in New Brunswick in the 20th Century.

hi-res-Irving-colour-logo

The Irving Oil refinery is the largest in Canada, daily processing more than 250,000 barrels of crude from the Persian Gulf, the North Sea and Venezula. The Irvings have their own fleet of tankers to bring the oil to Saint John, where the refinery dominates the city.

And now the multi-billion-dollar question: Why is Canada importing a million barrels of oil a day from other countries when it’s got its own oil supply?

Mainly because the same pipeline builders who decided to run “our” national pipeline through the United States also decided it was not economically viable to extend the InterProvincial pipeline to the Maritimes when its second leg — from Sarnia, Ont., to Montreal — was built in the mid-1970s. Which is really weird, seeing as how the pipeline extension was ordered by the Canadian government on national security grounds after the scare of the OPEC Arab oil boycott.

I think the decision may also have been affected by the Irving family’s determination that the Irving empire would retain greater control over oil flowing into the Maritimes if the oil kept coming by ship instead of pipeline. And I think the Irvings also determined they could get crude oil cheaper elsewhere in the world than from Western Canada. I guess nobody wants to be a hostage to a single provider. I always hated being a hostage of the monolithic Irvings when I lived in New Brunswick.

I’ll get back to oil pipelines and where Quebec and Ontario stand, oil-wise, in a minute, but I want to round off the Atlantic Canada discussion first.

There is one other major oil facility in Atlantic Canada, the super port at Port Hawkesbury, N.S., created accidentally as a year-round ice-free deep-water port by the construction of the Canso Causeway connecting Cape Breton with mainland Nova Scotia.

The Canso super port, however, has virtually nothing to do with Canada. It is almost exclusively a transshipment point to move oil delivered from the Middle East and Africa by massive supertankers to smaller vessels that then deliver the oil to U.S. East Coast refinery ports that can’t accommodate the ultra-large crude oil tankers.

Now let’s move on to Quebec

As I said a little while ago, the Interprovincial pipeline was pushed through from Sarnia to Montreal in 1975-76 at the behest of the federal government.

At the time, the Montreal area had four oil refineries. That number dropped to three, then two and finally one when Shell ceased processing operations at its refinery at the end of 2010.

Now Montreal’s only refinery is the Suncor facility (Petro-Canada before it was absorbed by Suncor in 2009).

And where does the Montreal Suncor refinery oil come from?

It comes by pipeline, but not from Western Canada.

Liquidpipeline

Because the flow of more expensive oil from Alberta to Montreal had slowed to a trickle by the early 1990s. The eastbound pipeline was finally shut down in the mid-’90s and in 1999, the flow was reversed to carry overseas oil westward from Montreal as far as Sarnia.

Crude oil for the Montreal refinery and the westbound flow to Sarnia is from all the usual Mideast, African and South American suspect countries. The oil is delivered by tanker to the deepwater port of Portland, Maine, then pumped north through the Portland-Montreal Pipe Line.

The original Portland-Montreal lines were built during World War II when German U-boat activity in the Gulf of St. Lawrence was strangling the supply of overseas oil to Canada. Since Alberta’s major oil deposits weren’t discovered until after the war, the safe overland pipeline route from then-neutral  U.S.A. was the best way to feed the war industries of Quebec and Ontario.

But times change.

As Alberta oil has become more competitive economically — and definitely more secure — new pipeline reversals are the order of the day.

Enbridge (successor operator of the Interprovincial network)  is right now applying to the National Energy Board to change back the westward flow of oil from Montreal to Sarnia.

For starters, Enbridge wants to re-engineer its Line 9 pipeline from Sarnia to Westover, southwest of Toronto, to feed Alberta crude to Imperial Oil’s Nanticoke refinery on Lake Erie via Line 11 and to connect with U.S. markets through New York state via Line 10.

Take a look at this Enbridge map to see what I’m talking about.

enbridge-eastern-region-pipelines-map

Enbridge figures if it gets prompt approval, it can start work on the changeover this summer and have oil flowing east again by spring 2012.

Enbridge hasn’t applied for Phase 2 of its conversion yet, but that will follow as night follows day.

Phase 2 would see the oil again flow eastward on Enbridge Line 9 from Westover to Montreal. That will happen eventually and Quebec, at least, will no longer be totally dependent on foreign oil. But, like Ontario, it will suddenly become dependent on one or two pipelines feeding through the United States.

The biggest motivator for that change is that the Portland-Montreal Pipe Line oil flow can also be reversed. Thus safe and secure (if “dirty”) Alberta oil can then be pumped down to Portland, where tankers will carry it to U.S. East Coast refineries.

Who knows, maybe someday the Maritimes will finally get their own pipeline extension and finally get refined Canadian oil and gas from Alberta.

Better yet, why not let the rest of Atlantic Canada buy Canadian oil and gas refined in Newfoundland? What a concept.

There is currently a downside to these imminent changes.

And this is where we finish up on Quebec and move into Ontario

Despite everything, the oil and gas products refined from foreign crude at Montreal are still cheaper than the oil and gas products refined in Ontario from Alberta crude.

And that is why pump prices in eastern Ontario are lower than in the rest of the province.

Even as far west as Cobourg and Port Hope, pump prices are lower than in Toronto.

Again, why?

Because Suncor gas stations there are getting their supplies from the Montreal Suncor refinery and are charging lower pump prices. Competing chains have to lower their prices to stay competitive, even if it means lower profit or an actual loss (not likely, but never mind).

Amazing but true. And, of course, it’s a situation that won’t last. So get your cheaper gas east of Toronto while the getting’s good.

Ontario is, of course, the biggest energy consuming province in Canada, followed by Quebec and Alberta.

Quebec fills most of its industrial energy demand with relatively cheap hydro-electricity, either from its own hydro grid or from the cheap Labrador hydro supply Quebec ripped off in an outrageously unfair but legally unbreakable deal it cut with the Newfoundland & Labrador government decades ago.

Alberta’s energy consumption has soared in the past two decades, partly because of the population boom but mainly because the oil industry — especially the tar/oil sands component — is immensely energy-eating. Alberta’s energy consumption is two-and-a-half times the national average … but when you’ve got all the oil, you’ve got oil to burn.

tarTrucks

Suncor-oil-sands-plant

Ontario, on the other hand, has no oil but uses a lot of it — about one-third of all the oil consumed in Canada. Most of that is used for transportation nowadays, because Ontario industry has moved substantially to electricity and natural gas, away from heavy oil, and the residential heating market is also almost weaned off oil.

But we burn up more than 700,000 barrels of oil a day in Ontario and produce zilch for all intents and purposes (although there are still a few low-output working oil wells in the southwestern part of the province).

With hydro production flat and nuke plants and coal-fired generators now considered pariahs, you can see why the McGuinty government pinned its hopes on optimistic and monumentally ill-conceived plans for development of a green energy economy.

Maybe someday, but not anytime soon and not ever based on the existing, fatally flawed Liberal government blueprint. The whole thing will have to be reworked from scratch — by somebody else with more competence and common sense and a more realistic, achievable vision.

Please don’t rule out next-generation nuke power. Bill Gates and Microsoft are currently working with Japanese partners to develop a new type of nuclear reactor that is fed by old spent radioactive fuel and is self-perpetuating. The whole package is sealed up and just feeds on itself for 70 or 100 years until it’s used up (and the radioactive residue is negligible). At least that’s the theory. Check back in 5-10 years when the first prototypes are supposed to be up and running.

(I know the above paragraph seems alarming in light of Japan’s earthquake/tsunami/nuclear disaster, but the next-gen reactors Gates & Co are working on are meant to eliminate exactly those meltdown dangers Japan is currently facing. Whether they actually work or not will be clearer a few years from now.)

In the meantime, Ontario lives and dies on its oil consumption. As I said before, some foreign oil imports make their way as refined product into eastern Ontario from Suncor’s Montreal refinery. Other foreign crude is still pumped (for the time being) westward from Montreal to Ontario’s refineries for processing.

The majority of our oil comes to four Ontario refineries through the two aforementioned Enbridge pipelines — Line 5 and Line 6A/B — that cross Alberta, Saskatchewan and Manitoba before dropping down into the U.S. at Superior, Wisconsin.

twip929a-jpg

When the Interprovincial Pipeline (Line 5, basically) was built in 1950, Superior was the land terminus of the pipeline and lake tankers then carried the oil to Sarnia.

Obvious problems with that system (the Great Lakes are impassable in winter) meant that the land pipeline was extended the full way to Sarnia in 1953. In 1957, the pipeline was extended to Toronto and in 1975-1976 to Montreal.

As a national pipeline, it should have gone north through Canadian territory around the top of Lake Superior, but for economic and logistical reasons it was decided to run the line south through the upper and lower Michigan peninsula, crossing the Strait of Mackinac underwater, south of Sault Ste Marie, and then on down to cross the St. Clair River back into Canada at Sarnia.

So that’s Line 5, considered the northern pipeline.

Line 6A/B, built later,  is the southern pipeline. It also starts at Superior, Wisconsin, but drops south to run around the bottom of Lake Michigan past Chicago, through Illinois and Indiana before heading north through Michigan (Michigan’s a strange state, geographically speaking)  to terminate finally in Sarnia.

Here’s the Enbridge map for Ontario again, showing where the pipelines go once they reach Sarnia.

enbridge-eastern-region-pipelines-map

Three of Ontario’s four remaining oil refineries are located in Sarnia. The Sarnia refineries operated by Shell Canada, Imperial Oil and Suncor (formerly Petro-Canada) churn out a combined refined product output of almost 300,000 barrels a day.

The fourth Ontario refinery is the Imperial Oil operation at Nanticoke (at the end of Line 11) on Lake Erie. It was built in 1978 by Texaco and became an Imperial Oil facility when Imperial bought Texaco Canada’s assets in 1989. Nanticoke adds another 100,000-plus barrels a day of refinery production.

The only other Ontario pipeline is Line 10, which runs down into the U.S. at Buffalo to service northern New York state.

The bottom line on Ontario oil is that we are right royally screwed in any kind of major international petroleum disruption or dispute..

Once the pipeline flow from Sarnia to Montreal is reversed to carry Alberta crude eastward through the whole system, we will be entirely dependent on two pipelines carrying “our” oil through the United States to a production and distribution bottleneck at Sarnia.

If, as has already happened, one or both of those pipelines is shut down by a leak or explosion or other calamity, we are fried.

Ontario could easily be looking at pump prices two, three  or four times higher than what is being paid in Western Canada or in adjacent American states (supplied by Canadian oil).

Bring on the solar power, wind power and electric cars — but do it fast — and do it a lot better than anything the McGuinty government has proposed.

I don’t mean to end on a downer, but that’s the only realistic conclusion one can reach about Ontario’s energy future.

We’re addicted to oil and we’ve got to kick that addiction — somehow — before it’s too late. It has to be a massive commitment by the Ontario and federal governments on a scale to rival the commitment that saw the creation of Ontario Hydro by Adam Beck and other energy visionaries more than a century ago.

The downside is that billions and billions and billions of taxpayer dollars can disappear down the drain if it’s done in the goofus, incompetent, wasteful, irresponsible way that is so far the pattern of Ontario’s green energy programme.

As a short aside, the U.S. is also divided into five oil-based regional units called PADDs. The Petroleum Administration for Defense Districts (PADDs) were set up in World War II and continue to this day.

PADD_Map

In terms of where Canadian oil is going, Newfoundland oil is going by tanker to PADD 1 on the U.S. East Coast.

Alberta oil is going to PDD 2 (the Midwest) by a network of pipelines that include Enbridge Line 5 and Line 6B that feed Sarnia and points east in Ontario.

PADD-3-Map

A separate U.S.-only network of Canadian-owned pipelines pump more Alberta oil Into PADD 2  and the proposed Keystone XL project will push Alberta oil right down to PADD 3 (the Gulf Coast).

If and when Enbridge gets approval for its Northern Gateway pipeline to Kitimat, B.C., Alberta oil will then also be feeding U.S. West Coast refineries in PADD 5.

With Canada already supplying more than half of American oil imports, that figure is only going to keep going up and up. And almost all of that oil will be coming from the “dirty” Alberta oil/tar sands.

The United States and Canada are locked in to using tar sands oil for  as long as we continue to use oil, so you just have to get used to it until we finally kick the oil addiction.

Personally, I’ve put my car in storage. But come summer, when the driving is fun and easy, I may pull it out again. We’ll see.

How Oil Makes Canada Four (or Five) Different Countries

- March 10th, 2011

barrel-of-oil-and-dollar-sign

I planned to write this several months ago but kept putting it off because, frankly, it’s a lot of work.

I would really prefer government and petroleum industry experts explain all this stuff clearly and succinctly, but they either won’t or can’t so I’m stuck doing it.

I may get the occasional fact muddled (in which case I’m sure the experts will suddenly pop out of the woodwork to correct me) but all the basic information is solid.

I will try to make this interesting as well as informative — but my main goal is to create as clearly as possible an overall picture of where Canada’s various regions stand in terms of oil production, distribution and consumption.

I normally dress up blog posts with lots of photos, but not in this case. I will stick mainly to maps because they’re important to understand where the oil goes — and doesn’t go. Read ‘em and weep.

(NOTE: In seeing this posted, most of the maps look too small to read clearly. I can’t do anything about that, unfortunately, but all the maps are available out there in larger format on the Internet, so look ‘em up yourselves. The CEPA pipelines map is especially important.)

I’m doing this now because I see a lot of confusion about why gas prices keep going up at the pump when we keep being told that Canada is such an oil-rich country (and should thus be relatively immune from oil production crises in the Middle East, Africa, the Gulf of Mexico and elsewhere.)

Let’s get started:

In very, very rough terms Canada produces about 3 million barrels of oil a day and consumes about 2 million barrels of oil a day. So, overall, we are an oil-exporting nation.

However, we are also a major oil-importing nation.

Why?

Because, of the 3 million barrels of oil Canada produces every day, 2 million are shipped directly to the United States.

Only 1 million barrels a day of Canadian oil is shipped to Canadian markets. The missing 1 million barrels of daily Canadian consumption is made up by imports — from the the North Sea, the Middle East, Africa and South America.

Four — or five — Canadian “countries”

The four oil “countries” I refer to as composing Canada are: Atlantic Canada, Quebec, Ontario and Western Canada. The possible fifth is the North, but the Canadian Arctic’s oil future is still evolving, so it may have a separate oil reality or (more likely) be tied directly to Western Canada.

Don’t think of these divisions on geographic or cultural lines: Think of them strictly in terms of oil (although geography and culture play a role) because each region has a separate oil identity.

I’m calling these regions “countries” because — in the event of a major, long-term oil crisis — each region will be affected differently and will react differently. Hopefully we will all hang together as one Canada but, in a serious meltdown, regional self-interest could blow apart the connective tissue of the national dream.

I’ll start at both ends of the country and move to the middle because, in oil terms, I’m stuck in the middle with you, Ontario.

li-pumpjacks-620

Western Canada

We’ll start in the West because that’s where the oil is, baby.

In Alberta, to be specific. In the Alberta oil sands, to be even more specific.

Canada has proven oil reserves of about 180 billion barrels, second only in the world to Saudi Arabia and its 265 billion barrels of proven reserves (although serious doubts have been cast on that number, since we have to take the Saudis’ word for it — and the size of the reserves determines how much oil can be pumped, according to OPEC rules).

Coming up fast behind Canada are Iraq and Iran, but for now we’re still Number 2.

Of those 180 billion barrels of proven Canadian reserves, 98% is in Alberta — with a whopping 95% locked in the oil/tar sands. Alberta’s conventional crude deposits amount to a mere 3% of the Canadian total while Saskatchewan and Newfoundland each have a piddling 1% (and they’re damn happy to have that).

Several other provinces, notably B.C., Manitoba and Ontario, have thimblefuls of oil but the amounts are so infinitesimally small they aren’t worth counting.

That’s it in a nutshell.

Alberta has almost all of the oil and almost all of Alberta’s oil is of the “dirty” oil/tar sands variety. You can forget any attempts to stop further development of the oil sands. There will be lots of PR window-dressing in the future about how the oil sands extraction process is being cleaned up and its carbon footprint is being reduced, but it just doesn’t matter.

We’re oil junkies, the oil is in the tar sands, so we will exploit the tar sands regardless of the environmental impact or consequences.

NASAoilsands

oil_sands_open_pit_mining

In case you want to know how we/they get petroleum products out of the tar/oil sands, here’s the link to a pretty good YouTube video explaining the Shell extraction process.

Where does Alberta’s oil go?

As I said before, most of it goes to the U.S. through an incredible arterial network of pipelines.

Here’s a very good map of that pipeline network produced by the Canadian Energy Pipeline Association. It looks daunting but it’s less complicated when you know what you’re looking for. As you read on, keep referring back to this map. I’ll place it again further down the post, so you don’t have to scroll back quite as far.

Liquidpipeline

I don’t seem to be able to hook up a link at the moment but here is the address for the CEPA website where you can pull up this map in PDF format and enlarge it to really see where the spiderwebs go:

http://www.cepa.com/pipeline101.aspx?page_guid=25BB423C-CF65-4D9E-992E-D650EAB844D6

Some of the Alberta oil goes east to Central Canada, but even that travels through pipelines in the U.S.

In the event of a major, major oil crisis, I think you can count on the U.S. looking after its national self-interest  and diverting all that Ontario-bound oil to  the U.S. Midwest (as it actually has the legal right to, according to the small print of the various Canada-U.S. agreements governing the movement of “our” oil).

(AL NOTE: As I said I might, I muddled facts in the above paragraph, mainly due to the fact that it’s been a couple of months since I researched some of this stuff and I was working on memory here. Elise Martin, a very good journalist at Les Affaires in Montreal, just reminded me that the NAFTA rules on oil exports don’t mean the U.S. can take pipeline oil bound for Canada. What they DO mean is that, in the event of a major crisis/shortage, Canada CANNOT reduce the flow of oil to U.S. markets by a greater proportion than it reduces the flow of oil through the pipelines to Canadian markets. So the U.S. can’t divert any extra oil from us, but we have to keep supplying oil to the U.S. even if we’re running short — at a ratio of two barrels to them for every one barrel to us. Sorry about that. And thank you, Elise, for catching my goof. Back to the post.)

Canada would not now exist as an independent nation if John A. Macdonald and the builders of Canada’s national railways had opted for the same “rational” southern (i.e. U.S.) routes around Lake Superior that Canada’s oil pipeline builders chose a century later.

Here is a Wikipedia map that shows the (green) route of the TransCanada NATURAL GAS pipeline that follows an all-Canadian route NORTH of Lake Superior. That’s the route the Interprovincial oil pipeline SHOULD have followed too, despite the horrendous construction difficulties posed by the terrain of Northwestern Ontario.

Wiki

(To be fair, the most important part of that Interprovincial Pipeline Ltd.  —now Enbridge — system was built in 1950, at a time when the resource and manufacturing economies of the U.S. and Canada had been completely intertwined by a decade of anti-fascist war and common cause against the (real) communist threat. Canada’s pipeline builders just did not contemplate a future world in which Canadian and American national economic and strategic interests might diverge. Welcome to the 21st Century.)

Back to the pipelines.

The TransMountain pipeline system currently carries Alberta oil west to Vancouver and then south to Washington state. Kinder Morgan also has some other pipelines that flow directly to the U.S.

Even more of that Alberta oil will be heading toward the U.S. if several new pipeline proposals are approved (as I am certain they will be eventually).

Enbridge is currently seeking National Energy Board approval for a $5.5-billion Northern Gateway pipeline through the Rockies to an ocean tanker port at Kitimat, B.C.

The supposed rationale for the pipeline is to expand our oil markets in China and the rest of Asia, thus reducing Canada’s current dependence on the U.S. as our only real export customer.

However, Enbridge’s filings to the NEB include data indicating about half the oil shipped through Kitimat will go to U.S. refineries in California and Washington state that now process crude from Alaska (which is quickly running out of oil, thus leaving those refineries gasping for Alberta crude to fill the vacuum.)

On the Living Oceans Society map below, the red Northern Approach is the route tankers to Asia would/will take. The yellow Southern Approaches route would/will carry Kitimat oil to U.S. refineries.

Kitimat-tanker_routes_website

While we’re in B.C., I should mention that offshore oil drilling has been banned along Canada’s West Coast since 1972, although both the federal and provincial governments have been making snuffling noises about lifting that ban in recent years.

At the same time, oil tanker traffic down the coast has been restricted to the outer/westward side of the island chain extending down the B.C. coastline. This “exclusion zone” policy, however, is only voluntary. As you can see from the Living Oceans map, approval of the Northern Gateway pipeline will blow that tanker traffic ban all to hell. Can you say Exxon Valdez?

Again, back to the pipelines.

Enbridge rival TransCanada Corp. is patiently awaiting U.S. government approval (which will come eventually despite the equally inevitable environmental lawsuits) of its Keystone XL pipeline to carry Alberta oil to the Texas and Louisiana refineries that are quickly running out of oil from beneath the Gulf of Mexico.

TransCanada’s original Keystone pipeline just went operational in June 2010, carrying Alberta oil to Patoka, Illinois, south of Chicago and to the U.S. oil hub of Cushing, Oklahoma.

KeystonePipeline

When (not if) approved, the Keystone XL pipeline will also run down to Cushing and then continue on to Port Arthur, Texas, on the Gulf Coast.

One of the big things holding up Keystone XL approval is the fact that rival carrier Enbridge had a major leak last summer in its Line 6B carrying Alberta oil down through the U.S. Midwest to Sarnia. The rupture allowed about 20,000 barrels of oil to spew out, of which an estimated 6,000 barrels got into the Kalamazoo River system.

ENB_US_Line-6B_leakMarker

Line 6B — one of the two Enbridge pipelines feeding Western Canadian oil to the U.S. Midwest and Ontario — was shut down for months for repair and cleanup operations. The closure caused a shortage of crude for Ontario refineries late last summer (although production levels ramp down at that time of year anyway) but, more importantly perhaps, it gave the reputation of Canadian oil carriers a black eye — one that is making it very hard for the U.S. State Department to approve the Keystone XL plan.

Two other smaller leaks on other Enbridge lines in September didn’t help American attitudes to the company or Canadian pipelines in general either.

So that, in rough terms, is where Alberta’s oil is going. In the event of an international oil crisis, Western Canada will do just fine (as we always knew it would).

But in the same oil crisis, those 175-178 billion barrels of proven Alberta reserves won’t do the rest of Canada east of Manitoba a lot of good.

The North

I’m not really going to get into Arctic Canada at this time — it’s too big a subject with too many international implications.

Let’s just say there is a lot of oil — and many other resources — up there. And what we think is ours may end up belonging to someone else before current diplomatic dancing is done.

Russia already claims “our” North Pole as part of its territorial jurisdiction and plans to grab a lot more of the Arctic before it’s done. Russia, Canada, the U.S., Greenland and Norway are currently in the midst of UN-adjudicated technical wrangling to determine who owns exactly what up there.

A 2008 U.S. Geological Survey estimated there are about 90 billion barrels of undiscovered, technically recoverable oil north of the Arctic Circle, most of it offshore. My bet is there is a lot more than that.

The internal Canadian debate about whether we SHOULD recover that Arctic oil may not matter a whit if we are not able to establish sovereignty over what we think is ours.

As for the Mackenzie Valley natural gas pipeline, which finally got full National Energy Board  and federal cabinet approval this week, forget about it. Ain’t gonna happen. At least not now.

The $16-billion pipeline probably should have been built 20 or 30 years ago (when it would have cost one-tenth the present estimate) but too much other natural gas has been found in much more accessible locations closer to major markets in the intervening years.

Maybe when those reserves are depleted in another 20 or 30 years, the Mackenzie Valley pipeline will be economically feasible again. But by then the price tag could be $160 billion.

Let’s look at Atlantic Canada now

canadarig

Yes, we know Newfoundland has oil. But as I pointed out further up, it doesn’t have as much as we tend to think.

And what it does have is running out pretty fast. There are hopes in Newfoundland that some recent deepwater discoveries will soon bring new sources of oil online, but that oil is very, very deep in treacherous waters and it still has to be determined if enough can be reached and retrieved to make the investment worthwhile.

That explains, in large part, why Newfoundland and Nova Scotia last year made the historic decision to build an undersea power line from the vast hydro-electric resources of Labrador to the vast, power-hungry markets of the U.S. East Coast. Newfoundland’s offshore oil may run out in a few decades, but hopefully the raging rivers of Labrador will keep pumping water through hydro dams far into the future.

Just under half of Newfoundland’s (roughly) 300,000-barrel-a-day  offshore oil production is processed at Newfoundland’s sole refinery at Come By Chance. The rest is shipped directly by tanker to refineries in the U.S.

The Come By Chance refinery was built in the early 1970s by American entrepreneur John Shaheen, who finagled a huge amount of financial backing from Joey Smallwood’s provincial government. The refinery processed crude shipped in from the Middle East at the time.

By 1976 — overwhelmed by the OPEC Arab oil boycott and astronomical price increases for crude —  Shaheen’s company was bankrupt and the refinery was shut down at great loss to Newfoundland taxpayers.

In 1980, the $120-million refinery was bought for $10 million by the Canadian government through Petro-Canada, just to get it out of limbo.

The refinery was not reopened until 1986 when Petro-Canada sold it to Bermuda-based Newfoundland Processing (later Energy) Ltd. for the princely sum of $1 (that’s one dollar).

But here’s the really incredible part: A condition of sale was that Newfoundland Processing and any subsequent owners were forbidden FOREVER from selling oil products from the Come By Chance refinery to ANY Canadian market apart from Newfoundland & Labrador.

As a result, to this day, about 10% of the oil refined at Come By Chance supplies the Newfoundland & Labrador domestic market, while the other 90% is shipped directly to the U.S. Not a drop goes to Nova Scotia, New Brunswick, P.E.I., Quebec or Ontario.

Incredible, eh?

I don’t know for sure why that strange codicil was added to the sales agreement, but I am fairly confident in deducing that it was as a result of pressure from the private owners of refineries in Halifax, Saint John and Montreal who didn’t want a taxpayer-dollar-leveraged Newfoundland refinery cutting into their markets in the Maritimes and Quebec.

Perhaps it made sense at the time (I think not) but what it did do was cut off Eastern Canada from oil produced in Eastern Canada.

And where, exactly, does the oil come from that feeds those refineries in Halifax (Dartmouth, actually), Saint John and Montreal?

Why, it comes from all those dangerous places in the Middle East, Africa and South America that the U.S. is trying so desperately to steer clear of by glutting itself on Canadian oil.

The Eastern Canadian refineries used to get most of their oil from British and Norwegian sources in the North Sea and from the Persian Gulf states, but as those sources dry up or become more troubled, the refineries in Dartmouth, Saint John and Montreal have turned more and more to places like Libya (shiver), Nigeria, Angola, Venezula and Mexico.

Getting back to the Come By Chance refinery for a moment, it was sold in 1994 to the Vitol Refining Group, after which its name was changed to North Atlantic Refining Ltd.

In 2006, the refinery was sold to Alberta-based Harvest Energy and, in 2009, Harvest in turn sold North Atlantic Refining to the Korean National Oil Corporation, owned by the South Korean government.

So you’ve got the only oil refinery processing Newfoundland crude owned by the South Korean government, while the other oil refineries in Eastern Canada process oil pumped from wells located halfway around the world.

It’s enough to make you shake your head, as dear old Lloyd Robertson would say.

Skipping over to the other Atlantic Canada refineries, the one in Dartmouth, N.S., is owned and operated by Imperial Oil while the one in Saint John, N.B., was built in 1960 by the Irving family empire, the dominant economic force in New Brunswick in the 20th Century.

hi-res-Irving-colour-logo

The Irving Oil refinery is the largest in Canada, daily processing more than 250,000 barrels of crude from the Persian Gulf, the North Sea and Venezula. The Irvings have their own fleet of tankers to bring the oil to Saint John, where the refinery dominates the city.

And now the multi-billion-dollar question: Why is Canada importing a million barrels of oil a day from other countries when it’s got its own oil supply?

Mainly because the same pipeline builders who decided to run “our” national pipeline through the United States also decided it was not economically viable to extend the InterProvincial pipeline to the Maritimes when its second leg — from Sarnia, Ont., to Montreal — was built in the mid-1970s. Which is really weird, seeing as how the pipeline extension was ordered by the Canadian government on national security grounds after the scare of the OPEC Arab oil boycott.

I think the decision may also have been affected by the Irving family’s determination that the Irving empire would retain greater control over oil flowing into the Maritimes if the oil kept coming by ship instead of pipeline. And I think the Irvings also determined they could get crude oil cheaper elsewhere in the world than from Western Canada. I guess nobody wants to be a hostage to a single provider. I always hated being a hostage of the monolithic Irvings when I lived in New Brunswick.

I’ll get back to oil pipelines and where Quebec and Ontario stand, oil-wise, in a minute, but I want to round off the Atlantic Canada discussion first.

There is one other major oil facility in Atlantic Canada, the super port at Port Hawkesbury, N.S., created accidentally as a year-round ice-free deep-water port by the construction of the Canso Causeway connecting Cape Breton with mainland Nova Scotia.

The Canso super port, however, has virtually nothing to do with Canada. It is almost exclusively a transshipment point to move oil delivered from the Middle East and Africa by massive supertankers to smaller vessels that then deliver the oil to U.S. East Coast refinery ports that can’t accommodate the ultra-large crude oil tankers.

Now let’s move on to Quebec

As I said a little while ago, the Interprovincial pipeline was pushed through from Sarnia to Montreal in 1975-76 at the behest of the federal government.

At the time, the Montreal area had four oil refineries. That number dropped to three, then two and finally one when Shell ceased processing operations at its refinery at the end of 2010.

Now Montreal’s only refinery is the Suncor facility (Petro-Canada before it was absorbed by Suncor in 2009).

And where does the Montreal Suncor refinery oil come from?

It comes by pipeline, but not from Western Canada.

Liquidpipeline

Because the flow of more expensive oil from Alberta to Montreal had slowed to a trickle by the early 1990s. The eastbound pipeline was finally shut down in the mid-’90s and in 1999, the flow was reversed to carry overseas oil westward from Montreal as far as Sarnia.

Crude oil for the Montreal refinery and the westbound flow to Sarnia is from all the usual Mideast, African and South American suspect countries. The oil is delivered by tanker to the deepwater port of Portland, Maine, then pumped north through the Portland-Montreal Pipe Line.

The original Portland-Montreal lines were built during World War II when German U-boat activity in the Gulf of St. Lawrence was strangling the supply of overseas oil to Canada. Since Alberta’s major oil deposits weren’t discovered until after the war, the safe overland pipeline route from then-neutral  U.S.A. was the best way to feed the war industries of Quebec and Ontario.

But times change.

As Alberta oil has become more competitive economically — and definitely more secure — new pipeline reversals are the order of the day.

Enbridge (successor operator of the Interprovincial network)  is right now applying to the National Energy Board to change back the westward flow of oil from Montreal to Sarnia.

For starters, Enbridge wants to re-engineer its Line 9 pipeline from Sarnia to Westover, southwest of Toronto, to feed Alberta crude to Imperial Oil’s Nanticoke refinery on Lake Erie via Line 11 and to connect with U.S. markets through New York state via Line 10.

Take a look at this Enbridge map to see what I’m talking about.

enbridge-eastern-region-pipelines-map

Enbridge figures if it gets prompt approval, it can start work on the changeover this summer and have oil flowing east again by spring 2012.

Enbridge hasn’t applied for Phase 2 of its conversion yet, but that will follow as night follows day.

Phase 2 would see the oil again flow eastward on Enbridge Line 9 from Westover to Montreal. That will happen eventually and Quebec, at least, will no longer be totally dependent on foreign oil. But, like Ontario, it will suddenly become dependent on one or two pipelines feeding through the United States.

The biggest motivator for that change is that the Portland-Montreal Pipe Line oil flow can also be reversed. Thus safe and secure (if “dirty”) Alberta oil can then be pumped down to Portland, where tankers will carry it to U.S. East Coast refineries.

Who knows, maybe someday the Maritimes will finally get their own pipeline extension and finally get refined Canadian oil and gas from Alberta.

Better yet, why not let the rest of Atlantic Canada buy Canadian oil and gas refined in Newfoundland? What a concept.

There is currently a downside to these imminent changes.

And this is where we finish up on Quebec and move into Ontario

Despite everything, the oil and gas products refined from foreign crude at Montreal are still cheaper than the oil and gas products refined in Ontario from Alberta crude.

And that is why pump prices in eastern Ontario are lower than in the rest of the province.

Even as far west as Cobourg and Port Hope, pump prices are lower than in Toronto.

Again, why?

Because Suncor gas stations there are getting their supplies from the Montreal Suncor refinery and are charging lower pump prices. Competing chains have to lower their prices to stay competitive, even if it means lower profit or an actual loss (not likely, but never mind).

Amazing but true. And, of course, it’s a situation that won’t last. So get your cheaper gas east of Toronto while the getting’s good.

Ontario is, of course, the biggest energy consuming province in Canada, followed by Quebec and Alberta.

Quebec fills most of its industrial energy demand with relatively cheap hydro-electricity, either from its own hydro grid or from the cheap Labrador hydro supply Quebec ripped off in an outrageously unfair but legally unbreakable deal it cut with the Newfoundland & Labrador government decades ago.

Alberta’s energy consumption has soared in the past two decades, partly because of the population boom but mainly because the oil industry — especially the tar/oil sands component — is immensely energy-eating. Alberta’s energy consumption is two-and-a-half times the national average … but when you’ve got all the oil, you’ve got oil to burn.

tarTrucks

Suncor-oil-sands-plant

Ontario, on the other hand, has no oil but uses a lot of it — about one-third of all the oil consumed in Canada. Most of that is used for transportation nowadays, because Ontario industry has moved substantially to electricity and natural gas, away from heavy oil, and the residential heating market is also almost weaned off oil.

But we burn up more than 700,000 barrels of oil a day in Ontario and produce zilch for all intents and purposes (although there are still a few low-output working oil wells in the southwestern part of the province).

With hydro production flat and nuke plants and coal-fired generators now considered pariahs, you can see why the McGuinty government pinned its hopes on optimistic and monumentally ill-conceived plans for development of a green energy economy.

Maybe someday, but not anytime soon and not ever based on the existing, fatally flawed Liberal government blueprint. The whole thing will have to be reworked from scratch — by somebody else with more competence and common sense and a more realistic, achievable vision.

Please don’t rule out next-generation nuke power. Bill Gates and Microsoft are currently working with Japanese partners to develop a new type of nuclear reactor that is fed by old spent radioactive fuel and is self-perpetuating. The whole package is sealed up and just feeds on itself for 70 or 100 years until it’s used up (and the radioactive residue is negligible). At least that’s the theory. Check back in 5-10 years when the first prototypes are supposed to be up and running.

(I know the above paragraph seems alarming in light of Japan’s earthquake/tsunami/nuclear disaster, but the next-gen reactors Gates & Co are working on are meant to eliminate exactly those meltdown dangers Japan is currently facing. Whether they actually work or not will be clearer a few years from now.)

In the meantime, Ontario lives and dies on its oil consumption. As I said before, some foreign oil imports make their way as refined product into eastern Ontario from Suncor’s Montreal refinery. Other foreign crude is still pumped (for the time being) westward from Montreal to Ontario’s refineries for processing.

The majority of our oil comes to four Ontario refineries through the two aforementioned Enbridge pipelines — Line 5 and Line 6A/B — that cross Alberta, Saskatchewan and Manitoba before dropping down into the U.S. at Superior, Wisconsin.

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When the Interprovincial Pipeline (Line 5, basically) was built in 1950, Superior was the land terminus of the pipeline and lake tankers then carried the oil to Sarnia.

Obvious problems with that system (the Great Lakes are impassable in winter) meant that the land pipeline was extended the full way to Sarnia in 1953. In 1957, the pipeline was extended to Toronto and in 1975-1976 to Montreal.

As a national pipeline, it should have gone north through Canadian territory around the top of Lake Superior, but for economic and logistical reasons it was decided to run the line south through the upper and lower Michigan peninsula, crossing the Strait of Mackinac underwater, south of Sault Ste Marie, and then on down to cross the St. Clair River back into Canada at Sarnia.

So that’s Line 5, considered the northern pipeline.

Line 6A/B, built later,  is the southern pipeline. It also starts at Superior, Wisconsin, but drops south to run around the bottom of Lake Michigan past Chicago, through Illinois and Indiana before heading north through Michigan (Michigan’s a strange state, geographically speaking)  to terminate finally in Sarnia.

Here’s the Enbridge map for Ontario again, showing where the pipelines go once they reach Sarnia.

enbridge-eastern-region-pipelines-map

Three of Ontario’s four remaining oil refineries are located in Sarnia. The Sarnia refineries operated by Shell Canada, Imperial Oil and Suncor (formerly Petro-Canada) churn out a combined refined product output of almost 300,000 barrels a day.

The fourth Ontario refinery is the Imperial Oil operation at Nanticoke (at the end of Line 11) on Lake Erie. It was built in 1978 by Texaco and became an Imperial Oil facility when Imperial bought Texaco Canada’s assets in 1989. Nanticoke adds another 100,000-plus barrels a day of refinery production.

The only other Ontario pipeline is Line 10, which runs down into the U.S. at Buffalo to service northern New York state.

The bottom line on Ontario oil is that we are right royally screwed in any kind of major international petroleum disruption or dispute..

Once the pipeline flow from Sarnia to Montreal is reversed to carry Alberta crude eastward through the whole system, we will be entirely dependent on two pipelines carrying “our” oil through the United States to a production and distribution bottleneck at Sarnia.

If, as has already happened, one or both of those pipelines is shut down by a leak or explosion or other calamity, we are fried.

Ontario could easily be looking at pump prices two, three  or four times higher than what is being paid in Western Canada or in adjacent American states (supplied by Canadian oil).

Bring on the solar power, wind power and electric cars — but do it fast — and do it a lot better than anything the McGuinty government has proposed.

I don’t mean to end on a downer, but that’s the only realistic conclusion one can reach about Ontario’s energy future.

We’re addicted to oil and we’ve got to kick that addiction — somehow — before it’s too late. It has to be a massive commitment by the Ontario and federal governments on a scale to rival the commitment that saw the creation of Ontario Hydro by Adam Beck and other energy visionaries more than a century ago.

The downside is that billions and billions and billions of taxpayer dollars can disappear down the drain if it’s done in the goofus, incompetent, wasteful, irresponsible way that is so far the pattern of Ontario’s green energy programme.

As a short aside, the U.S. is also divided into five oil-based regional units called PADDs. The Petroleum Administration for Defense Districts (PADDs) were set up in World War II and continue to this day.

PADD_Map

In terms of where Canadian oil is going, Newfoundland oil is going by tanker to PADD 1 on the U.S. East Coast.

Alberta oil is going to PDD 2 (the Midwest) by a network of pipelines that include Enbridge Line 5 and Line 6B that feed Sarnia and points east in Ontario.

PADD-3-Map

A separate U.S.-only network of Canadian-owned pipelines pump more Alberta oil Into PADD 2  and the proposed Keystone XL project will push Alberta oil right down to PADD 3 (the Gulf Coast).

If and when Enbridge gets approval for its Northern Gateway pipeline to Kitimat, B.C., Alberta oil will then also be feeding U.S. West Coast refineries in PADD 5.

With Canada already supplying more than half of American oil imports, that figure is only going to keep going up and up. And almost all of that oil will be coming from the “dirty” Alberta oil/tar sands.

The United States and Canada are locked in to using tar sands oil for  as long as we continue to use oil, so you just have to get used to it until we finally kick the oil addiction.

Personally, I’ve put my car in storage. But come summer, when the driving is fun and easy, I may pull it out again. We’ll see.

Our Dirty Little Oil Secrets

- September 8th, 2010

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Okay, okay, they aren’t secrets: There’s a glut of information out there — some true, some not true — about Canada’s petroleum industry.

And for every bit of information, there’s analysis, argument, spin and counterspin.

In the end, there’s just too much information about Canada’s oil business clogging our intake channels. We end up drowning in data and losing our grasp of what the big picture is, our grasp of what the real relationship is between Canada as a country and Canada as an oil producer, our grasp of just who really controls Canada’s oil supply, and our grasp of what the future will bring for Canada and its oil.

So there may not be many secrets revealed here, but I hope this blog post ends up giving you a clearer picture of what oil means to Canada — what the current situation is, what the potential benefits and dangers are — so we can better decide how we want our oil future to unfold.

(I think I’m going to have to break this thing up into three parts. Please bear with me.)

WE’RE BIG

Canada is one of the major oil producers in the world — No. 7, in fact — so we’re a big player, bigger in fact than we actually give ourselves credit for.

(Numbers 1 to 6 are: Saudi Arabia, Russia, U.S., Iran, Mexico and China. You understand a few geo-political dynamics now, don’t you?)

But we’re even bigger than that: Canada has proven oil reserves of roughly 180 billion barrels.

That gives us the world’s second largest confirmed, accessible oil deposits — right after Saudi Arabia.

That gives us well over 10% of all the known, feasibly exploitable oil in the world, if the U.S. government’s 2008 estimate of 1.4 trillion barrels of proven world oil reserves is accurate. (And it may not be: Some estimates place the Athabaska-Athabasca oil sands reserves alone at 1.6 trillion barrels — although only about 20% of that is accessible with current technology and methodology.)

REFRESHER: A U.S. barrel of oil is an industry standard. One barrel contains 42 U.S. gallons. It takes 7.33 barrels to make a metric tonne, which is basically the same thing as an Imperial/U.S. ton, so don’t worry about the chump change.

SOUNDS PRETTY GOOD. WHAT’S THE DOWNSIDE?

We’ll get to that in a moment.

First, let’s look at where the oil is.

Canada’s oil is found is three main geographic locations.

(Ontario isn’t one of them, despite the fact that Canada’s petroleum industry began here about 150 years ago and Ontario WAS the Canadian petroleum industry for the better part of 100 years. Tough luck, Ontario — you ran Canada for a century; now move over.)

The Alberta oil patch is, of course, the current Big Daddy of the Canadian petroleum industry, with a strong offshore industry in the coastal waters of Newfoundland, and the greedy gleam of potential oil riches sparkling like sun off a melting iceberg in Canada’s Arctic.

772px-TerraNovaOil

There are dribs and drabs of oil in other places like British Columbia, Saskatchewan and Nova Scotia, but in the long run they just don’t amount to a hill of beans compared to the Big 3: Alberta, Newfoundland, Arctic.

ALBERTA FIRST

Alberta’s got oil wells coming out the yin-yang: Up to 100 new wells a day are spud (that thar be oil patch language for “drilled” or, in my simple lexicon, “dug.”) in Alberta.

But here’s the big, dirty secret that isn’t so secret: The oil wells are nice, but they aren’t Alberta’s oil-producing future.

We all know about the Alberta tar sands/Athabaska-Athabasca oil sands up in the northern part of the province: We know the tar sands/oil sands are big, expensive, environmentally dirty, provide tons of jobs and are the subject of an attempted hip-store boycott in the U.S.

But I don’t think most of us realize just HOW BIG the tar sands/oil sands really are, both geographically and as the most important component of the Canadian petroleum industry.

Athabasca_oil_sands

The Alberta oil sands (okay, I’ve given up on the “tar sands” thing despite the fact that they really are tar mixed in sand — bitumen, a hydrocarbon semi-solid or semi-liquid substance somewhere between coal and crude oil) are Canada’s oil present and future — for the time being.

You want a real sense of just how big the dirty, expensive oil sands are in the Canadian oil picture?

I told you before that Canada has 180 billion barrels of confirmed oil reserves, second only to Saudi Arabia.

WELL, 173 BILLION OF THOSE BARRELS ARE IN THE OIL SANDS. THE REST OF CANADA — INCLUDING CONVENTIONAL ALBERTA OIL WELLS – HAVE 7 BILLION BARRELS. THAT’S IT. DIDDLY SQUAT.

HALF OF ALL THE OIL CURRENTLY PRODUCED IN CANADA COMES FROM THE OIL SANDS.

The oil sands are everything — all or nothing. You have to understand that before you understand anything else.

LET’S LOOK SOUTH

The Alberta oil sands exist because the United States eats oil like Popeye eats spinach (come up with your own damn analogy if you don’t like that one).

Almost all of the expensive, dirty oil dug or steamed out of the tar sands (I actually wrote “tax sands” the first time. Har.Har. Ahem. Har.) goes directly into the hungry American maw.

Now here’s where the glut of information out there becomes a problem.

Canada produces somewhere between 2.75 million (Canadian Association of Petroleum Producers) and 3.3 million (the U.S. Central Intelligence Agency) barrels of oil each day.

That’s a pretty broad range, but I know two things:

(1) Canada consumes roughly 2 million barrels of oil a day and the U.S. consumes about 20 million barrels a day — which makes sense since the American population is 10 times the size of Canada’s. We’re both still glutton nations, but at least we can diet together.

(2) Canada exports more than 2.4-million barrels of oil each day (again, the source is CIA 2008 estimates), almost all of it to the U.S.

Figures (1) and (2) add up to roughly 4.4 million barrels a day, which is way over the 2.75 million-3.3 million barrels/day production numbers I was citing earlier. The difference is the 1.165 million barrels a day we import from other countries.

So we’re net exporters but we still import. Go figure.

(By the way, Canada’s oil industry tells us the Alberta oil sands have enough proven reserves to supply Canada for the next 250 years. What good is that hypothetical position if it all goes south of the border?)

Look, I know all these numbers are starting to make your brain shut down — and that’s what we’re trying to avoid … so take a deep breath and we’ll get through this.

LOOK SOUTH AGAIN

Everybody’s focused on the Gulf of Mexico right now, what with the Deepwater Horizon explosion/blowout/disaster and all.

There’s so much talk about how important the Gulf of Mexico deepwater drilling is to American oil security.

800px-Deepwater_Horizon_offshore_drilling_unit_on_fire_2010

Get this: The Athabaska oil sands give America as much oil as the entire Gulf of Mexico does.

The difference (apart from the fact that Canada is Canada and the Gulf of Mexico is under water and shared by the U.S. and Mexico) is that the oil sands’ dirty, expensive oil is almost limitless and the Gulf of Mexico is a dying oil source.

Yeah, the G of M oil is cheaper — but it’s getting more expensive every day as the oil companies have to go into deeper and more dangerous zones to find undersea oil.

Right now the U.S. imports 62% of its oil (almost two-thirds for the world’s third largest oil producer — that’s just wrong). Most of the imports  now come from Canada and Mexico as the U.S. tries to “secure” its energy sources. Only a dribble of U.S. oil still originates in the Middle East.

Here are some points of reference you should know:

(!) Gulf of Mexico oil production peaked in 2002.

(2) OPEC oil production peaked in 2004.

(3) Saudi Arabia oil production peaked in 2005.

(4) Worldwide oil production peaked in 2008.

(5) Athabaska oil sands production will peak somewhere between 2020 and 2050.

So that’s it. “Our” oil sands are environmentally devastating — correct me if I’m wrong, if you can do it with a straight face — but they are crucial to U.S. economic and security interests — and will become moreso in coming decades.

So the chic-store boycott, the U.S. political façade of blocking oil pipelines, and all the rest are either bullshit or doomed interventions.

U.S. House Speaker Nancy Pelosi is in Canada this week doing a dog-and-pony show about American concerns over Canadian oil, especially the ecologically tainted oil sands.

You can ignore whatever quacking Pelosi does here: It’s all just political posturing. Besides, she’s a lame duck who will have almost no clout in Washington after the November U.S. elections.

And U.S. Secretary of State Hillary Clinton holding up a proposed new pipeline to push oil sands oil into the heartland of America? Forget it — there will be more huffing and puffing, then the state department will approve the pipeline.

WHY?

The U.S. wants its oil like a junkie wants his/her hit. That sounds like a cliché, but if you can comprehend how impossible it is to stop a junkie getting his/her fix, you’ll understand how impossible it will be to stop the U.S. from sucking up every ounce of the expensive, environmentally damaging oil it can get from northern Alberta’s oil sands.

No matter what kind of earth-friendly game Democrats talk in the U.S., they will eventually go along with the oil (and water too in a decade or so) grab — regardless of the consequences for Canada.

Of course we’re whores for letting them have their way with us, but that’s another discussion.

I’m not saying the U.S. and Canadian opponents of oil sands development are wrong. I tend to agree with them, but I don’t live in Alberta.

As Albertans keep reminding us, it’s their oil and they’ll damn well do with it what they please. That includes selling off more and more control on the Canadian oil industry to the Chinese government (through one surrogate or another).

There’s probably more I’ve forgotten to tell you, but I hate all these numbers and the technical stuff — my mind is bruised and in pain.

IceberyLassoed

I can’t do it anymore now. I’ll tell you more stuff about offshore drilling in Newfoundland and the very scary prospect of Arctic oil development in a few days.

Ciao for now. Try not to use too much oil until then. Just in case.