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Four Harsh Truths for Canada’s Lovestruck Pipeline Politicians
A reality check for our bitumen-besotted leaders.
By Andrew Nikiforuk Today | TheTyee.ca
Canadian politicians of nearly every stripe seem united, at the moment,
in their adolescent professions of love for new pipelines. But love is
blind, and in this case, blind to four tough truths about Canada’s
dead-end relationship with bitumen.
Among leaders making their lovestruck pronouncements was Calgary Mayor
Naheed Nenshi recently, who flew into B.C. and declared in all sincerity
that pipelines shouldn’t be carrying the “sins of the carbon economy”
and that we need more of them.
In Saskatchewan, Premier Brad Wall has compared pipelines to economic
miracle workers even as his petro-province flounders thanks to the
overproduction of heavy oil in a glutted market.
(Wall’s subservience to petroleum interests, by the way, has taken on
Trump-like proportions. The province’s recent Throne Speech even dubbed
proposals to limit climate change as “misguided dogma.”)
Prime Minister Justin Trudeau, a Harper-lite politician with a surfboard
no less, preaches that Canada can build pipelines and erect wind
turbines at the same time and still fight climate change. What?
And Alberta’s New Democrat Premier Rachel Notley thinks the main
solution to the economic woes caused by low oil prices is to export more
of the world’s most volatile commodity and thereby keep or drive oil
prices even lower.
Someone has to break it to them. Here goes.
There are four obvious (and very conservative) reasons why more
pipelines don’t make any kind of economic, energy or climate sense.
These truths also explain the growing opposition to the corrupt National
Energy Board that still approves pipelines without due process and
ignores their impact on global pricing, let alone the science on climate
Truth #1. There is no way to clean up bitumen spills.
Basic science shows that neither industry nor government has developed
an effective spill response for conventional oil on the high seas. As a
consequence, marine oil spill response remains a public relations sham
that does not remove spilled oil or fully restore damaged marine
Yet our bitumen-besotted politicians would have British Columbia gamble
with its fisheries, tourism and coast on the bold lie that diluted
bitumen, a dirtier product than crude, can be cleaned up in a timely and
Because the low-grade heavy oil must be diluted with a gasoline-like
product to move through a pipeline, it presents an even graver
logistical challenge than a conventional spill.
Two dramatic bitumen pipeline ruptures in the U.S. (Michigan and
Arkansas) graphically illustrated how unprepared regulators and
companies were to deal with diluted bitumen. The Enbridge spill in
Kalamazoo, for example, caught the oil spill establishment sleeping and
cost an incredible $1 billion to “clean up.” In the messy process, the
company even purchased more than 150 homes.
A 2015 report by the U.S. National Academy of Sciences summed up the
nature of the dirty problem: “Spills of diluted bitumen into a body of
water initially float and spread while evaporation of volatile compounds
may present health and explosion hazards, as occurs with nearly all
crude oils. It is the subsequent weathering effects, unique to diluted
bitumen, that merit special response strategies and tactics...
“In cases where traditional removal or containment techniques are not
immediately successful, the possibility of submerged and sunken oil
increases. This situation is highly problematic for spill response
because 1) there are few effective techniques for detection,
containment, and recovery of oil that is submerged in the water column,
and 2) available techniques for responding to oil that has sunken to the
bottom have variable effectiveness depending on the spill conditions.”
In other words, industry has not developed “effective techniques for
detection, containment, and recovery of submerged and sunken oils in
Nenshi, Trudeau and Wall might want to reread the science agency’s
central conclusion: “Broadly, regulations and agency practices do not
take the unique properties of diluted bitumen into account, nor do they
encourage effective planning for spills of diluted bitumen.”
Why are Canadian politicians advocating for more pipelines when they
haven’t yet developed the capacity or the science to clean up diluted
bitumen on land or sea?
Truth #2. The economic case for pipelines has totally collapsed.
According to the lovestruck politicians, bitumen exports to China will
make Canadians rich, and the sulfur-rich crude will miraculously command
a higher dollar with marine access.
But bitumen will always require higher transportation costs and more
upgrading and processing due to its appalling quality. As a consequence,
it has always sold at a price differential of around $6 to $7 dollars to
This historic differential widened when the Alberta government
rubber-stamped so many projects that industry flooded the North American
market with bitumen between 2000 and 2008. The differential dropped
again to historic norms as more and more refineries in the U.S.
retrofitted to process heavy oil.
The Parliamentary Budget Office explained these elementary facts in
2013, but politicians beset by hydrocarbon hallucinations have trouble
reading. The PBO emphasized that eliminating the discount paid for
bitumen relative to conventional oil “is not realistic, as there is a
significant difference in the quality of these crude oil benchmarks that
is reflected in the price difference.”
Furthermore, the PBO added that, “both U.S. and Canadian production are
expected to increase at a faster rate than U.S. and global demand, which
can be expected to put further downward pressure on the price.” And how
would more pipelines help that situation?
Neither port access nor pipelines can turn a sow’s ear into a silk
purse. (If you want to make money with bitumen, do what the Koch
brothers do: import 300,000 barrels of raw bitumen a day and refine the
garbage into gasoline and jet fuel.
No country now pays Mexico or Venezuela more for their heavy crudes
just because they have port access. Yet Canada’s politicians live in
alternate bitumen realities.
These same pipeline advocates also argue that the price of oil will
rise again and all will be well. But most credible analysts dispute this
assumption and believe business as usual has ended in oil markets.
In the last six years, extractors of extreme and difficult oil in
Alberta and North Dakota have flooded the market with costly
hydrocarbons and generated a genuine oil glut.
Art Berman, a reliable Houston-based oil analyst, calculates that
industry is pumping about half a million barrels a day more than what
the world can burn or afford. Most of this overproduction has come from
Canada, the U.S. or Iraq.
At the same time, demand is not really growing due to profound global
economic stagnation — a lasting legacy of incredibly high oil prices
from 2010 to 2014.
But overproduction has now depressed prices to the point that many
bitumen miners and American frackers continue to pump oil solely to
generate enough cash to service their increasing debt loads or keep
their creditors at bay. The world economy, as Berman notes, has become a
“The oil industry is damaged and higher prices won’t fix it because the
economy cannot bear them,” Berman adds. “It is unlikely that sustained
prices will reach $70 in the next few years and possibly, ever.”
So this price collapse is different than the others, argues Berman. “It
is more fundamental. Debt has pushed the economy beyond its limits.
Producers are on life support. Outlandish claims by companies and
analysts about break-even prices and efficiency are not based on this
When an industry supplies more of a product than the market demands,
the solution, say free-market economists, is to reduce production, not
“You never see mention of Canada’s role in contributing to world
over-supply or any mention of the role the rapid expansion in the oil
sands has played in contributing to ‘lower prices for longer’ in
mainstream media,” adds pipeline critic and economist Robyn Allan.
“All we hear is this nonsense that if they get access to tidewater they
will get higher prices. It makes no economic sense, but pipeline
proponents keep saying it, and the federal government keeps buying it.”
Truth #3. Bitumen cannibalizes the economy.
Nenshi and Wall aren’t likely to talk about energy returns, but this
important principle underpins the success of modern capitalism, and now
partly explains its dangerous malaise.
Cheap oil once offered glorious returns or surpluses that the economy
translated into piles of dollars, which, in turn, fuelled economic growth.
Nearly 100 years ago, it cost but one barrel of conventional crude to
find and pump another 100 barrels. Today those energy returns now
average about one to 20. In the U.S., they’ve fallen to one to 10 and in
the oil sands they have collapsed to one to three, or in some cases
close to zero. In simple terms, bitumen doesn’t bring home the bacon.
Our world was built on easy energy returns the same way, say, grizzly
bears once depended on easy salmon fishing for comfortable winter
living. Abundant energy returns from cheap oil fed the growth of
government, funded healthcare and encouraged much civility. Expensive
energy constricts that flow and shrinks the public sphere.
Unfortunately, mined bitumen and fracked oil aren’t easy, cheap or
carbon neutral. Companies extracting fracked oil from Texas and North
Dakota typically spend four times more than what they make. Bitumen
miners aren’t much better. They burn more energy and capital, and all to
deliver fewer returns and surpluses to society. It’s like cycling
Yet no one in Alberta or Ottawa talks about declining energy returns or
its political and economic implications. The consequences generally
include words like collapse, ruin and volatility.
Now here’s what the politicians should be jawboning. Jordan Larson, a
recent Quest University graduate, tracked changes in extraction
efficiency and resource quality decline in Alberta between 1990 and 2011
— something our regulators and university specialists have failed to do.
He found that as bitumen’s share of total oil production increased from
10 to 45 per cent of all petroleum mining, the energy invested increased
by 202 per cent while annual energy produced only increased by 64 per cent.
In other words, over two decades it has taken increasing amounts of
energy to produce petroleum projects in Alberta. In the animal kingdom,
that would be the equivalent of finding emaciated bears along rivers
supporting fewer and fewer fish. If the dismal trend continues, and
there is no technological solution in sight, “petroleum production in
Alberta will be unproductive by 2045,” Larson says.
Building pipelines to encourage that sort of energy debt is tantamount
to cultural suicide. It is opening the gate to barbarians.
Truth #4. Climate disruption and carbon anarchy aren’t a distant
threat... they’re here now.
Every day the science spells out some new horror: thinner Arctic ice;
acidic oceans; record hot spells; flooded cities; drought-stricken
crops. And every day, the economic costs grow dearer. The Fort McMurray
wildfire cost $3.5 billion and was determinedly fuelled by petroleum
production. The mega-flood that submerged Louisiana cost more than $8
billion and was also primed by oil extraction.
How many times must ordinary people be slapped in the face before our
politicians grasp the gravity of the insult?
Climate disruption, driven by oil consumption and forest destruction,
has become a global insurgency that can only be combated by rapidly
changing patterns of energy consumption. That means using less energy
and living locally. Pipelines and their political champions now look and
behave like horsemen of the apocalypse.
The emissions math on climate change in Canada is now pretty simple.
Environment Canada states it boldly: “Emissions of GHGs from the oil and
gas sector have increased 79 per cent from 107 megatonnes (Mt) in 1990
to 192 Mt CO2 in 2014. This increase is mostly attributable to the
increased production of crude oil and the expansion of the oil sands
Canada can’t meet any reasonable target to decrease its
climate-disrupting emissions by digging up more bitumen. Political
leaders who say otherwise are innumerates or liars.
So there you have it: basic supply and demand economics, as well as a
common sense appreciation of energy returns give a thumbs down to
pipelines. In addition, Canada does not have a credible or proven oil
spill response for diluted bitumen on land or water. Finally, climate
disruption warns that pipelines can only put our children’s survival at
To date, the nation’s bad case of pipeline blindness has sadly denied
any sane discussion about what really matters.
The oil price collapse is a sign of great unease and ill health in the
petroleum industry as well as the global economy. Cheap energy fuelled
global growth. Extreme energy seems to fuel only stagnation or contraction.
“The best path forward is to face the beast,” argues Berman.
“Acknowledge the problem, stop looking for improbable solutions that
allow us live like energy is still cheap, and find ways to live better
Where is that political debate? [Tyee]
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