To hell with Buddy Ebsen

The oil sands may be ugly, but our schools and hospitals depend on them

Canadian GDP by regionThe delightful thing about the Canada West Foundation’s new report on the national importance of Western Canada’s oil and gas sector is that it is less necessary than ever. The CWF was put together at a time when the West was politically and economically vulnerable; now, as the above chart from “Look Before You Leap” shows, it speaks for the largest of Canada’s regional economies—one that is underwriting frontline public services in the East and providing a disproportionate share of Confederation’s economic growth and federal revenue, not to mention a certain amount of pure remittance funding. (Are there any data at all on interprovincial remittances? Surely this is an underexamined aspect of our economy.)

And I think all this is now generally understood; indeed, not only understood, but felt in a way it might not have been in the 1990s. The last couple of years have witnessed a particularly concerted effort to publicize the ugliness of the Athabasca tar sands. NGOs, artists, and progressives have been willing to judge by what they see (and smell) and believe whatever tall stories they’re told. But in the polite liberal mainstream, the reaction to all this agitation has been sincere and curious and careful. One senses that people are aware of the uneasy truth of which the CWF is trying to remind them. Hey, the Syncrude site may look like hell on earth, but it’s helping to keep the lights on in my kids’ school and the MRI machine thrumming at the local hospital.

This new awareness of interregional interdependence looks inevitable in retrospect, a plain matter of irresistible economic currents. CWF CEO Roger Gibbins and his co-author Robert Roach have a table in the report showing that net interprovincial migration to B.C. and Alberta from 1972-2007 comes to just over a million souls. The emphasis there is on the word “net”: that’s a count of the people who came and stayed, and doesn’t include those who retired back to Magog or Glace Bay, or those who put in just a few years in the oilpatch and took their human and financial capital back east with them. Economic imbalance has made us more familiar with one another. If you wanted to learn about life in Fort McMurray from second-hand accounts, you’d probably be better off going to Newfoundland than downtown Calgary.

My own hope is that ultimately we’ll reach a point at which the oilpatch is no longer seen as having a status morally distinct from that of other businesses. I’m referring to what I think of as the “Beverly Hillbillies” concept. Remember the theme song? One day ol’ Buddy Ebsen was shootin’ at some food, and up from the ground came a-bubblin’ crude. People still think of oil and gas jobs and revenues as essentially unearned in a way that their own paycheque is not, and their leaders are perpetually tempted to make policy on that basis. This surely accounts for at least some of the contrast between our extreme concern over the environmental “impact” or “footprint” of oil and gas extraction, and our relatively blithe acceptance of the impact of manufacturing Camaros.

We shouldn’t let Ebsenism influence whatever judgments we make about regulation of the petroleum business. The oilpatch isn’t distinguishable from other kinds of mining or manufacture, or even service businesses, in the degree to which it involves risk, innovation, or scientific sophistication. This is particularly true of the oil sands, and still more true of the technical layers of the industry—the servicing and construction and supply businesses (and, yes, the environmental monitoring and remediation businesses too)—that surround and sustain the core enterprises of exploration and extraction. It would be nice if when the patch was mentioned, people thought not just of Imperial and Shell but Safety Boss and Packers Plus.

To hell with Buddy Ebsen

  1. If the view exists,it's more likely one that informs social perception than economic. And if the West keeps giving us politicians like Myron Thomson and Maurice Vellacotte, then what do they expect?

    • Westerners probably expect the same respect that the voters who elected Bev Desjarlais, Tom Wappel, Elsie Wayne and Cheryl Gallant got.

    • The west will give you the politicians it wants and you will like it or freeze your eastern butt off in the dark. Ontario and Quebec no longer have the power to push Alberta around. Don't forget it.

      • You've got my Ontario agreement on this. I dislike hypocrisy.

        However, at least until recently, we've been a plow horse like you pulling an increasingly heavy wagon of have not provinces, the worst being Quebec that keeps buying herself socialist candy with our money through the bogus Rube Goldbergian "equalization" fetish.

        This is basically like a family making their productive hard working kids share their income with a spendthrift lazy kid because he always comes up with less. They never tell the parasite to shape up and why would he under this idiotic system?

      • You've got my Ontario agreement on this. I dislike hypocrisy.

        However, at least until recently, we've been a plow horse like you pulling an increasingly heavy wagon of have not provinces, the worst being Quebec that keeps buying herself socialist candy with our money through the bogus Rube Goldbergian "equalization" fetish.

        This is basically like a family making their productive hard working kids share their income with a spendthrift lazy kid because he always comes up with less. They never tell the parasite to shape up and why would he under this idiotic system?

  2. My own hope is that ultimately we'll reach a point at which the oilpatch is no longer seen as having a status morally distinct from that of other businesses.

    Sadly, I don't think this will ever happen. There's too much knee-jerk resentment of "those lucky bastards who just happen to be sitting on all that oil".

    Terrific blog post! If only Alberta politicians could make the pro-oilpatch case to the rest of Canada as eloquently as you do here.

    • "Sadly, I don't think this will ever happen."

      Why should that happen? The entire World thinks of oil as a strategic resource, morally different from other types of business.

    • There's too much knee-jerk resentment of "those lucky bastards who just happen to be sitting on all that oil".

      Well, it comes in response to Alberta preening itself on its economic virtue, as though striking it rich with oil were some kind of reward for good behaviour.

      I don't get it. If I move to Alberta, I become an Albertan in some sense; not that I'd have been born there. But I'm not bringing the oil wealth with me: I'm going to join it. And if I'd been born there, i.e. if I were Albertan to the core, what sense is there on congratulating oneself on having been born in a province with nice natural resources? It's not "Alberta's oil," it's oil that's in Alberta that Canadians born across the country are working together to extract. It doesn't make you a better or economically wiser person to be working in the oil industry (or its derivatives) than in the car industry (or its derivatives). Yet guys like Colby Cosh write pieces like this about how super-duper productive the oil industry is as though a journalist had any role whatsoever in making the oil industry happen.

      • Does Alberta really "preen itself on economic virtue"? I suppose you could point to specific politicians and individuals who are guilty of that, but on the whole I'd say that's an unfair caricature. Most Albertans are actually quite unhappy with the fiscal track record of the provincial government.

        I also don't think too many would congratulate themselves for being born in Alberta. Real people don't think this way. It's natural to root for the home team, but people are generally level-headed and don't ascribe their region's economic fortune to divine providence or some sort of reward for good behaviour.

        That said, a lot of people work hard in the O&G industry and it's natural for them to feel some measure of pride in the fruits of their labour and innovation.

        • If we're talking about real, actual Albertans like yourself, I withdraw the "preening" comment. But if we're talking about journalists and (especially) politicians, one literally never hears anything from Alberta except about how it's so generously propping up the rest of the country. Which goes to show how little one hears about Alberta, in large part thanks to the Torontocentric media; but just when a national magazine finally hires an Albertan journalist he goes and writes this piece of preening, the actual thesis of which in no way requires the graph or first paragraph — that's just thrown in as a bit of Albertacentric regional nationalism. Message to Alberta: people will learn to hate you as much as they hate Ontario if you persist in knocking other regions, as Ontario used to do.

          • Do you really think that Cosh is preening here? The way I read it, he's just making a point about the economic importance of the O&G industry to all Canadians, not just the West. He's also saying that the industry shouldn't be unfairly singled out for disparagement, nor should it be seen as something that is distinct (morally or otherwise) from other industries.

          • CR, I have many friends who work in the oil patch, some who have migrated to very senior positions within the corporations I criticize. And I can attest that Alberta has attracted some very qualified and innovative individuals. But they can't speak out on these issues. And I have no doubt that given the resources and regulations, they can solve these problems.

            Complaining about ill treatment and creating regional differences and victimization is a demonstration of lack of maturity and leadership.

            Go back and view Coyne's and Wells' closing comments at the end of the Calgary Macleans/CPAC panel discussion. it's on the CPAC site somewhere. They also make these points in a way.

          • Well, maybe I'm projecting, but I feel like I've done nothing but read articles about the vital importance of the O&G industry since I returned to Canada two and a half years ago. It's just not news anymore. It's like a scoop on the demise of the NL cod fishery.

            I don't see how the point about the economic importance of the oil industry (which by now one takes for granted) relates to its not being morally distinct from other industries. If anything, it seems as though its unique importance does make it distinct, though morality is another issue.

            Also, granted its importance etc., it does seem like it pollutes rather more than forestry, farming, or car manufacturing. I don't see why that characteristic disappears merely because it is vitally important.

      • Does Alberta really "preen itself on economic virtue"? I suppose you could point to specific politicians and individuals who are guilty of that, but on the whole I'd say that's an unfair caricature. Most Albertans are actually quite unhappy with the fiscal track record of the provincial government.

        I also don't think too many would congratulate themselves for being born in Alberta. Real people don't think this way. It's natural to root for the home team, but people are generally level-headed and don't ascribe their region's economic fortune to divine providence or some sort of reward for good behaviour.

        That said, a lot of people work hard in the O&G industry and it's natural for them to feel some measure of pride in the fruits of their labour and innovation.

  3. Ha! I was counting down the minutes after I saw in a Barbara Yaffe story yesterday reference to this study. SO PREDICTABLE, Colby. Spoon feed and reliable.

    I'll critique your comments later.

    • I'll critique your comments later.

      I'm sure Cosh will be waiting with bated breath.

      • Yeah, he might actually learn something. You too.

  4. It's a fascinating chart, isn't it? Hillbilly West keeps going up, and Grey Poupon Ontario and Quebec keep going down.

    However, should I be so surprised that Atlantic Canada has been so flat for so long?

    • Hillbilly West keeps going up, and Grey Poupon Ontario and Quebec keep going down.

      Comments like these make me wonder how long B.C. will keep allowing themselves to be lumped in with "the West" in contexts like this. If it's true that they don't like Grey Poupon as much in B.C. (and seriously, have you tried it? It's pretty good!) then probably the only reason is that it's not made with organically farmed mustard seed raised on a sustainable farm within 50km of where they live.

      Anyone have any polls on B.C. residents' take on the oil sands? Are the citizens of B.C. enthusiastically on side with "the West", or do they hold another opinion?

      I think when we talk about "the West" in a context like this, it's pretty clear that we're talking about Alberta. Which is fine, except that lumping Alberta in with some supposedly homogeneous "West" (which is to say as "homogeneous" as we're assuming Ontario or Atlantic Canada or Quebec are for the purposes of this argument) when what we're really talking about is Alberta can skew the argument. For one thing, it allows those making the argument to align themselves with 30% of the population in contrast to the other 70%, instead of with 11% of the population in contrast to the other 89% (or, heck, I'll give 'em Man. and Sask., so it's 18% vs. 82%).

    • You want to know why this line has always stuck in this Ontarian's craw (and btw, I'll take French's anytime over GP, but why burst your stereotypes)? The willful amnesia about our real history.

      Dennis_F, you go straight to the right-hand side of the chart to see that "…hillbilly west keeps going up". Did your browser not show what was happening throughout most of the 90s, and indeed for most of our history? Looks to me like Ontario and Quebec were driving the economy, and providing transfer payments to the west and the rest of the country without much complaint (setting aside Quebec nationalists).

      For more historical perspective, go to the oil sands museum in Fort Mac. Do you think that that industry would have been as able to survive from its initial development up until the early part of this century without a massive amount of federal support? Now that oil prices and federally-subsidized tech development have made the economics viable, time to ditch history and fact and pretend that it has always been about Western grit and know how.

      • For years and years we have heard complaints from Alberta about all the power centred in Ontario and Quebec. Not so much was said about the money coming from there, as if that didn't count. It was up to Ontario and Quebec to point that part out–or crow about it, I suppose.

        Now that the shoe is on the other foot, I am bothered by the fact that Alberta is crowing about all the money that comes from there, and notice that they seem to have all the power. Am I the hypocrite? Are Albertans? Both? Can something good come from all of this, such as a better understanding of each other?

        • Two comments talking about Quebec sending money to the ROC. In my life time it's been the reverse.

          a) How long ago did Quebec switch from a contributor to the "have not" that consumes the majority of equalization today?
          b) what happened to make the change? Is it all French nationalism and socialism?

  5. I think that it is the oilpatch, if anything, that is demanding to be treated differently. They do not want national standards (unless those standards are set low). They do not want the same sort of environmental reviews.

    And yes oil revenues are unearned, in the sense that no amount of policy can create an oil deposit. That being said, the status throughout all of Canada's history of Ontario as the engine of the economy was only created by the National Policy.

    Ultimately, as Roger Gibbins points out in his report, there is no moral superiority to being rich. Just as there is no need to be ashamed of it. But we have to accept the facts – that the west creates over 50% of our GHG. With teh same share of GDP as Ontario/Quebec, they produce much more GHG. That is not commentary, it is a fact.

    • And yes oil revenues are unearned, in the sense that no amount of policy can create an oil deposit.

      Moral preening by Quebec politicians about their lower GHG emissions is also unearned, in the sense that no amount of virtue can create ample hydroelectric resources.

      • It’s true. Hydroelectric resources create economic rent as well. Fortunately, though, the ecological effects of Quebec Hydro are local–they aren’t dumping their ecological problems in the world’s back yard.

        • they aren't dumping their ecological problems in the world's back yard

          Neither is the oil patch.

          And there are plenty of local environmental issues with hydro power.

          • I’m referring to carbon emissions. I don’t care that you don’t think CO2 is a problem. If I don’t believe that depleted uranium is a problem, would you mind if I moved Ontario’s spent nuclear fuel to Okotoks?

            I’d also say that in terms of local environmental impact, the oil sands still trump Quebec’s hydro developments. But at least that is in your own backyard.

          • I know you're referring to carbon emissions, and I'm referring to the fact that not everyone believes in the religion of global warming. If you believe that space aliens is a problem, then I don't feel the need to accomodate your fears and build a giant dome protecting Canada from space.

          • We all owe scf an apology – dude, we didn't know you were a climate scientist, and the smartest one in the world at that.

          • Apology accepted. I did not realize that you were a climate scientist either.

          • I'm not a climate scientist. I'm a scientist, but in a whole different field.

            My point, as you well know, is that you're claiming to know better than the world's climate scientists. And while that's kinda cute, it's really just sad. From scf to Rex Murphy to Rush Limbaugh, you're all convinced you're smarter than people who have spent decades studying climate.

          • See, that's where you're so wrong, again. There are thousands of scientists who hold my opinion, including some of the best in the world, such as Freeman Dyson and Richard Lindzen, yet every time I've pointed out this simple and obvious fact you seem to become illiterate.

            http://www.copenhagenclimatechallenge.org/index.p

            BTW, If you're a scientist, then I'm Elvis Presley.

          • Oh, you have a link to a "website". Well, please allow me to abandon all faith in climate science and listen to your grab bag of wankerific pseudo-intellectualism.

            BTW, Freeman Dyson may be a smart guy but he's not a freaking climate scientist. And you call *me* illiterate.

            Also, I'm a scientist like Stephen Harper is an economist. Only I spent more time actually working in my field than Harper ever did.

          • Freeman Dyson may be a smart guy but he's not a freaking climate scientist

            Yes, and for that reason, despite his genius, he was not included in the list of 165 Science and Technology Experts well Qualified in Climate Science that signed that particular petition. Shall I ask each of them to give you a phone call because you don't trust the internet?

        • Any idea how much methane was created by the flooding of the James Bay projects and the subsequent decomposition of the organic material beneath the reservoir? (bear in mind that methane is an order of magnitude worse for global warming than is carbon dioxide)

      • Mr. Logic, do you really understand what the issue is here? Colby has to make a living delivering this stuff, and he has a published track record, but I assume your livelihood is not based upon similar positions. Or is it? Care to explore with the fallacy of the Can West Foundation's arguments and this blog?

        • What fallacy?

          • Scroll down. New comment thread started.

    • And yes oil revenues are unearned, in the sense that no amount of policy can create an oil deposit.

      Cosh addressed this point already. A deposit in the ground is meaningless without the vast knowledge, expertise, and resources that energy companies develop and utilize in finding and developing them.

      • You realise that what you are saying is that the oil deposits are worth nothing. All the value is added when it is pulled out of the ground. This is not correct. Evidence: the oil sells for more than the cost of extraction. This is what we call ‘economic rent’.

        • I don't think I said such a thing. A deposit in the ground can even be undiscovered, so how can it be worth any dollar value then?

          • It has value whether or not anyone knows about it. Is a $20 bill you left in your coat pocket last winter and forgot about worthless because you don’t know its there?

          • It has a value to whom?

          • To whomever does your laundry or dry cleaning.

      • Particularly in the tar sands, where novel technologies and massive scale are required to produce synthetic crude at a competitive cost.

      • So to take the other tack, can we apply all that technology and expertise to, say, Northwestern Ontario and produce oil? Or do we need an actual deposit of oil?

        On my point, given a policy, can we produce airplanes in Northwest Ontario? Yes we can (it is not particularly desirable, but it is possible, given knowledge, expertise and resources of Bombardier and the like)

        • I'm still not sure what your point is. There is oil everywhere in the world. There are natural resources everywhere in the world. Industries deploy resources and technology to develop those resources — in Alberta, Ontario, or Peru. Sometimes these resources are not developed for wealth. Sometimes they are, as they are in Alberta, because of skill and expertise.

          You make it seem as though just having oil is a ticket to wealth. First, you have to find it. Second, you have to utilized it wisely. It's not a piece of cake. The success is earned, and used by non-oil regions like Ontario and Quebec.

          • Your premise is that every jurisdiction has hundreds of billions of dollars of profitably extractable resources. This is not the case. Please try again.

          • I find it interesting that you don't actually address my STATED claims and, instead, attribute PREMISES to them that I don't even recognize. lol

          • You don't seem to understand much about the nature of the oilsands. When it comes to oil production, the closest you can get to sticking a pipe in the ground and extracting money is Saudi Arabia. It tooks decades of research & development to figure out how to economically extract and exploit the oilsands. It has taken a massive amount of engineering and equipment manufacturing to start exploiting those oil deposits. You don't find oil deposits everywhere, true, but it's more apt to consider the oil deposits as a potential for economic development. That potential attracts talent and capital to exploit the potential; the potential doesn't happen spontaneously to the benefit of whoever happens to be living there.

    • And yes oil revenues are unearned, in the sense that no amount of policy can create an oil deposit

      So which particular policies put gold in the ground at Hemlo, or nickel at Sudbury? Is the iron ore at Schefferville due to federal or provincial policy initiatives?

  6. Colby, resource extraction income is, to some extent, ‘unearned’ in a way that say, a hairdresser’s income is not. Look up the term ‘economic rents’ on wikipedia. By virtue of having hundreds of billions of dollars in wealth just waiting to be dug up, Albertans are able to extract enormous rents. To turn your argument on its head, Albertans are not wealthier because of their superior moral rectitude, their hard work, intelligence, etc. Largely, they are wealthier because they are sitting on a mountain of gold.

    • The work ethic in the West helps though, speaking as a guy who grew up in the West and moved to Nova Scotia. You can certainly notice the contrast living in both places.

    • I'm not sure what percentage of primary industry revenue is rent. The part of the cost that relates to getting it out of the ground, processed and delivered to the consumer is definitely not rent, and a fair price paid to property owners or government to purchase the oil isn't rent.

      Determining exactly what is and isn't a fair price is the messy issue. "Rent seeking" or using profits from previous activities to lower your future purchase price is my biggest concern here, because it can distort the natural state of a market as much or more than subsidies and regulations.

      I don't think there is any doubt energy companies engage in rent seeking. I don't know what a definition of "reasonable profit" is, but if more than a reasonable profit is earned on a commodity, there is probably a major manipulation of the markets in effect. One of the main reasons the National Energy Policy was implemented was because of blatant rent seeking in the Alberta oil industry, although the Lougheed government had already started aggressive action at the provincial level.

    • By that argument, every single region that sits atop of "a mountain of gold" ought to be wealthy. Is that true?

      Ontario has a resource that, in large part, is just sitting there. It's called population. It has more of it than, say, Alberta. Doesn't that mean it should have more wealth than Alberta, too? China and India should be wealthier, too, by that argument, as well as other countries.

      Regions are blessed and cursed by all sorts of factors. Not sure why some on here want to keep bashing Alberta's.

      • Oy vey.

        “Doesn’t that mean [Ontario] should have more wealth than Alberta, too? ”

        It does. Unless you measure it on a per capita basis. Of course, having more people is no advantage in having higher per capita income/wealth. Beyond that, people are not comparable to bitumen. Ontario doesn’t have a reserve of people that we can dig out of the ground for pennies on the dollar, and we have no monopoly on people. Alberta could make more people if it liked, for very little money. Just throw open the doors. But good quality people (in terms of human capital) are expensive, and require a great deal of investment.

      • A while back, I read Peter Maass's "Crude World: The Violent Twilight Of Oil", which was a fascinating read. One of the central theses of this book is that sitting on top of vast oil reserves does not provide much economic benefit for a country.

        For one thing, the extracted wealth generally goes to the corporations that extracted the oil, not the places from which it is extracted. (It's the oil companies' oil, not Alberta's.) And the host country is often responsible for the environmental consequences.

        Another factor is that the oil industry is not particularly labour-intensive in many parts of the world: once the oil-production facilities have been built, they don't require many people to maintain them. (Things might be different in the tar sands.)

        One final factor is that oil revenues lead to currency appreciation, which leads to a decline in manufacturing (the so-called "Dutch disease"). If you look at the graph above, you can see that the lines for the West and for Ontario are almost perfect mirror images of one another.

  7. So, if I understand it, the thesis here is that people underestimate the technology development, risk, massive investment etc. sunk into the tar sands and assume it's basically unearned wealth. Unlike, say, building a billion-dollar manufacturing facility.

    I wouldn't call that a straw man – I'm sure lots of people believe that about all resource-based industries. But it's hardly core to the debate over the tar sands.

    On the other hand, you say: "NGOs, artists, and progressives have been willing to judge by what they see (and smell) and believe whatever tall stories they're told." Your link leads to a NP editorial that crushes a single anecdote about heightened cancer incidence. That's hardly the only instance of real or suspected health impacts of the tar sands, and you completely fail to address the overall issue.

    You also fail to actually address tar sands pollution, although you go to great lengths to dismiss people who are concerned about it. "One senses that people are aware of the uneasy truth of which the CWF is trying to remind them." In other words, 'they don't like the pollution, but they like money!'. Which seems consistent with much of the Alberta messaging these days.

    Finally, in this: "This surely accounts for at least some of the contrast between our extreme concern over the environmental “impact” or “footprint” of oil and gas extraction, and our relatively blithe acceptance of the impact of manufacturing Camaros" you make a solid point. No industry has perfectly clean hands and they should be assessed according to common criteria.

    Your point would be stronger if Alberta or industry were in favour of common criteria, rather than special status for the tar sands on GHG emissions.

    But "extreme" concern over the environmental impact of the tar sands? It's a bit precious of you to reach this conclusion (that "NGOs, artists and progressives" suffer from "extreme" concern) when you haven't even tried to make the case that the environmental impact is any less than extreme.

    Have you made some point that I've missed here?

    • Dude, the Fort Chip cancer claim is the keystone of the anti-oilsands health scare. Crushing that is like what exhuming and juggling Elvis' skull would be to the "Elvis is alive crowd" (and, similarly, some people would say it was a fake skull, etc.)

      The environmental impact for oil sands mines is just as extreme as for *any other open pit mining operation* in Canada. Just watch how fast Ontario declares a moratorium on the Ring of Fire, Quebec stops trying to export asbestos or Newfoundland gives up on Voisey's Bay.

  8. "it speaks for the largest of Canada's regional economies—one that is underwriting frontline public services in the East and providing a disproportionate share of Confederation's economic growth and federal revenue, not to mention a certain amount of pure remittance funding."

    Well, hey – when Ontarians complained that Canada's social programs were financed on the backs of Ontarians, we got told by the ROC that they were surprised we could see them, with our noses so high in the air. If the ROC was right then, then I most certainly hope the West is not going to try to draw on that same argument now. It certainly didn't fly outside of Ontario, and I doubt it has wings now.

  9. RegionPop %GDP%Seat %
    ON39%37%34%
    West31%38%30%
    QC23%19%24%
    Maritimes7%6%10%
    North0%0%1%

    • Wages in the north are high because of a high cost of living. In addition, a large percentage of that money comes in the form of transfers from the federal government.

      • I believe these figures are before transfer payments. Also, wages only figure into GDP calculations so far as they effect private consumption. "Private consumption" isn't usually broken down between individuals & corporations, so it's hard to find reliable inforomation.

        If you adjust GDP per capita figures for purchasing power parity, I think the differences level out somewhat.

  10. Did anyone check the figures? You know how little Colby isn't all that good at math. Notice as well the uptick in the last few years on the strength an economic bubble that has how now burst.

  11. Question for those who want to use the geography/luck argument against Alberta:

    How much of Southwestern Ontario's manufacturing, particularly in automotive, is due to the fact it is geographically close to Detroit?

    • Are you talking pre or post Autopact?

      • pre – specifically in the early days of the automobile. Or put more specifically – why did the Canadian automotive industry cluster near Windsor instead of near Montreal or Halifax?

        • Well, until Henry Ford developed mass production techniques to drive the cost of assembly down (any colour so long as it is black) and therefore gained a competitive advantage over other manufacturers that were sprouting up everywhere, Windsor was probably no different than elsewhere.

          Now, once Ford started to dominate, and transportation/shipping corridors were established, I would imagine the Windsor plants were built there to support Ford's assembly lines.

          So, I'd say due to the innovative skills of Henry Ford, and where he located.

          (As an aside, industry of this nature will typically locate where the population resides to cut down on transportation costs)

    • Being close to Detroit doesn’t mean that Ontario can sell cars for far more than it costs to make them. Cars can be built anywhere, including Alberta. Please tell me where in Ontario I can find billions of tonnes of readily accessible bitumen.

      • Except for the fact that industries tend to cluster and there's no automotive cluster in Alberta. Would be very difficult to open a single automotive assembly plant in Medicine Hat, given that all the part manufacturers are on a 250km strip of the 401.

      • You are dead wrong on this one. Industries tend to cluster (read Paul Krugman's stuff on this) in particular areas. There is a reason we see Silicon Valleys, the bay area biotech hub or the research triangle in Virginia. It is more efficient to cluster because a lot of the things firms invest in have local spillover effects. For instance, when you train a workforce, those workers can work for other firms (though the expertise is highly centralized). Local institutions, like universities and governments can also develop specialized programs that help the industry. That is in addition to the benefits of increased returns to scale, and lower transportation costs.

        • Clusters can be built. Enormous bitumen and natural gas reserves cannot.

          • Clusters can't be built anywhere – they exist because they exploit certain local advantages. For instance, the "rust belt" was close to major ports for shipping, close to coal/iron deposits, had abundant sources of immigrant labour, and was relatively close to major US population centers on the coast. You couldn't have built something like that in Alberta. Usually when states try those kinds of strategies (attracting a particular kind of industry into one area) it doesn't work because:
            1. It is hard to predict what the next big industry will be.
            2. The factors that are important for competitiveness in one industry today may not be so important in the future (eg. containerization/large ships have reduced the importance of distance).
            3. It is difficult to predict what kind of technological advances might impact an industry.
            4. Recipes for success drawn from other regions may not work in your own region.

  12. Ok, while I am waiting for the omnipresent frog to return and take up my offer to discuss the fallacy of the Canadian West Foundation's argument and Colby's predictable embracing of it, let me lay out what I believe to be the issues on this debate, and why these rhetorical techniques attempt to cloud the issue.

    1) Will the imposition of any sort of carbon tax/cap and trade SIGNIFICANTLY impact the pace of the tar sands developments?

    2) Can the tar sands companies afford to clean up their existing operations at the current high levels being earned for bitumen/oil.

    3) If the answer to #1 is no, and the answer to #2 is yes, then are Alberta's and the Conservative parties policies on GHG emissions being dictated through protecting an industry that doesn't need protecting? And if so, at what cost?

    Yes, lumping the other three provinces in with Alberta and showing graphs of the regional GDPs starting at the introduction of the NEP (what a shocker for a Calgary based think tank!) to present time are all lovely and whatever, but the only purpose they serve is to cloud the issues, or divert attention – ie change the topic.

    Simply a repeat effort to create regional tensions. That strategy never tires. Want to know why Tom Flanagan's ex student Danielle Smith is being promoted and supported by Calgary/oil money? It wasn't just to get Ted Morton into Minister of finance in Stelmach's gov't to bash Feds on transfer payments.

    • The regional GDP thing is actually fairly apt. If you look at Canada's major exports, organized by energy intensity, there are three distinct groups:

      There is a more intensive group (the number is electricity use in – I think kilowatts – per dollar of value produced):
      Resin and Synthetic Rubber Manufacturing 14.24
      Pharmaceutical and Medicine Manufacturing 14.24
      Other Basic Inorganic Chemical Manufacturing 14.24
      Non-Ferrous Metal (except Aluminum) Smelting and Refining 15.11
      Alumina and Aluminum Production and Processing 15.11
      Iron and Steel Mills and Ferro-Alloy Manufacturing 15.11
      Paper Mills 15.47
      Pulp Mills 15.47
      Petroleum Refineries 31.47

      A medium group:
      Other Plastic Product Manufacturing 2.03
      Animal Slaughtering and Processing 2.45
      Sawmills and Wood Preservation 4.26

      And a low group:
      Navigational, Measuring, Medical and Control Instruments Manufacturing 0.559
      Computer and Peripheral Equipment Manufacturing 0.559
      Semiconductor and Other Electronic Component Manufacturing 0.559
      Automobile and Light-Duty Motor Vehicle Manufacturing 0.67
      Aerospace Product and Parts Manufacturing 0.67
      Engine, Turbine and Power Transmission Equipment Manufacturing 0.7

      Ontario and Quebec are major producers of high tech manufacturing goods, and in particular cars and planes. These products contribute heavily to C02 emissions, but the production process is a relatively small part of that.

      By contrast, the oil-related main industries in Alberta and Saskatchewan are intensive energy users. So too is the bread and butter of British Columbia however (lumber and pulp/paper mills). So yes, the regional picture painted by the Canadian west foundation is relatively accurate -though there are also parts of Ontario that are relatively energy-intensive producers as well (most notably the mining industry).

      Climate change is a tough issue particularly because it targets some regions more than others (it really isn't a case of Alberta vs. the rest).

      • It may be accurate, but it doesn't address the central issue.

        Alberta has been engaged in a circular argument on the pace of the tar sands development:

        We are a resource based economy. Therefore we are going to develop the tar sands as quickly as possible at the expense of diversification. But we have grown so rich through this uncontrolled development (look at us compared to the rest of Canada), we can't possibly control emissions because we are a resource based economy.

        • No, Alberta needs to develop the oil sands as fast as possible because alternatives to oil will probably make their bread and butter industry obsolete in 50 years. How do you get diversification in the long run? Good schools (if Alberta was its own country its students would rank in the top three according to PISA), good infrastructure and a business friendly environment. All three of those objectives are aided considerably by massive oil revenues.

          • Oil? Obsolete? That's absurd!

            Look at the thousands of offshore oil fields that have been held, undeveloped, for decades by oil companies just waiting for upward pressure on oil prices.

            "We must sell this resource as fast as possible" makes no sense at all for a resource that's increasingly scarce and valuable.

          • Oil is a commodity with a fixed supply, and yes, its value is likely to go up in the medium term. However as oil prices go up, the economies for alternative sources of energy also improve. Unlike oil, moreover, these are sources of electricity whose cost can be reduced over time through technological advances.

            1. Nuclear power plants have quadrupled their yield since the 1970's. The French consume under half as much oil per capita as Americans or Canadians, in part because they have gone nuclear.
            2. Solar and wind generation is not currently economical but is getting there.
            3. Brazil has already been able to fuel its growing economy with biofuels from sugar. The US is developing ways to get biofuel from switchgrass, which could make the American west a veritable Saudi Arabia.

            Between those four sources it is inevitable that there will come some day when oil is obsolete. In fact the Saudis are already demanding foreign aid if the world cuts consumption (http://www.msnbc.msn.com/id/33225373/ns/us_news-e

            It is estimated that there are 1.7 trillion barrels of oil in the Athabaska oil sands. Annual production in 2007 was about 265 million barrels – there is lots of room to expand production without peaking too soon.

          • Do you realize how far the world has to go before nuclear, solar, wind and biofuel could possible replace fossil fuels? Those three new sources, collectively, represent, what, 10% of *current* energy production?

            Oil alone represents currently nearly 40% of the world's energy generation for a reason – once it's on the surface, it's incredibly versatile and incredibly energy-rich. Combine that with related natural gas and we're talking about *60%* of the entire world's current energy consumption. Never mind future increases in energy requirements.

            Nuclear? Currently 6% of the world's energy consumption (and even that may not be sustainable)
            Solar plus wind combined: 0.8%
            Biomass: 4%

            I think we're going to see oil replaced by alternatives (most likely coal, god help us) progressively over the lifetimes of our children and grandchildren. But as you point out there's an ungodly amount of oil still available, and the economics of oil will support a massive price increase before alternatives become economical. The idea that oil would be available and ignored in favour of alternatives (a reasonable definition of 'obsolete', no?) is beyond anybody's horizon.

          • That's the Jethro Bodine/Mr Drysdale argument. Put all the eggs in one basket, fill it up to overflowing, and run like hell down the slalom course on a straight projectory. Awfully exciting and you'll probably be ahead in the short term.

            But these arguments are simpy avoiding the real issues which I had attempted to spell out initially. Diversions.

          • So Alberta should curtail oil sands development, slowing its economic growth – leaving less money to maintain low taxes, Canada's best education system, zero debt (until this year), and also reducing immigration to Alberta (which is largely tied to oil sands development). Oil, sure, is a resource that will eventually run out, but you can invest those short-term revenues wisely (as Alberta has to some degree – I'm not saying they are perfect).

            In the immortal words of South Park, your plan for Alberta to develop is:
            1. Curtail oil sands development
            2. ???
            3. profit!

            Lots of countries have used the development of high-value resources to fuel broader-based economic expansion. Norway is one good example. Botswana is another – despite incredibly high rates of AIDs and other social problems, Botswana's government has used moderate resource wealth (namely diamonds), coupled with pragmatic economic policies to build one of the few middle income countries in subsaharan Africa.

          • Norway is a great example, where they do not count oil money as part of the regular budget. Would that Alberta did the same.

          • Although there is no exact parallel, check the differences between the performance of Peter Lougheed's Alberta Heritage Trust Fund and Norway's Government Pension Plan:

            http://en.wikipedia.org/wiki/Sovereign_wealth_fun

            Also, these excerpts and the article might give anyone pause for thought:

            To address concerns raised by the panel and provincial Auditor General Fred Dunn about flaws in the royalty collection process, Stelmach has also launched a review of current rules and enforcement procedures by former auditor general Peter Valentine, which is slated to be completed by March 31, 2008.

            Neither Mason nor Liberal Leader Kevin Taft have confidence that will address the concerns that billions of dollars owed to the government have gone uncollected in the past.

            . . .

            During the last five weeks of a province wide royalty debate, Dunn made the damning revelation that government officials knew for several years they could easily collect an extra $1 billion annually from the resources sector, but the province's leaders refused to do so.

            From:

            http://www.canada.com/topics/news/national/story….

            This excerpt and the article are also worth consideration:

            Well, heck, just forget everything you've heard and read in the last year about the lost opportunities and lost revenues occasioned by the Alberta government's failure to adjust royalties to keep pace with sharply rising oil prices. Forget everything you've been told by the auditor general and the Hunter report about our abysmal failure to keep track of how much money we were even owed under the current royalty regime. Peter Valentine doesn't see any such problems.

          • "During the last five weeks of a province wide royalty debate, Dunn made the damning revelation that government officials knew for several years they could easily collect an extra $1 billion annually from the resources sector, but the province's leaders refused to do so."

            Good! Why on earth should the Government of Alberta be taking more money from an industry just because they 'can'? Lost opportunities for the taxman is in fact gained opportunities from everybody else.

            One could decide to tax you, James Connors, at 100% along with your immediate family. In fact, I have suddenly developed extreme concerns that thousands upon thousands of dollars have gone uncollected. Stephen Harper deserves to control that money more than you do.

          • "1. Curtail oil sands development
            2. ???
            3. profit! "

            This is telling. Your only goal here is profit. You assume that environmental damage is free. Even your examples of Botswana and Norway talk about leveraging resource revenue to build new business. That's not a bad goal, but is it so unthinkable to invest current tar sands profits into the cleanup of the tar sands mess?

            I'm not going to throw a bunch of horror stories at you, but it's not hard to imagine lake-sized tailings ponds, for example, failing and wreaking environmental devastation. Or the economically-available bitumen being exhausted in an area, which is then abandoned as a deserted moonscape by the oil companies.

            What then? Who pays to clean up this mess? We're talking about (AFAIK) the largest industrial project in the history of humanity – do you see no parallel to the kind of devastation that led to establishment of the EPA Superfund?

            Business is business, and I have nothing against it. But the fundamental assumption here – that environmental damage is free – has been proven epically wrong. Alberta should either slow tar sands development until it can be proven that environmental damage can be mitigated, or it should reserve most revenues in preparation for undoing the damage.

            This is an environmental deficit, with obvious parallels to a financial deficit. In both cases we're borrowing against the future and leaving a mess for our children to clean up. We have to live within our means, not party on money borrowed against future generations.

          • I've often wondered about this, myself. Okay, on occasion. It's none of my business not being an Albertan and all, but it seems to me if you know the oil is going to run out, and you know the oil companies that provide today's jobs are going to cut and run, and you know the population will then dwindle faster than it grew as everyone goes back to wherever they came from, and you know you will have to start paying income taxes, and you know that since so many people left you are going to have to pay higher income taxes than if there were a larger tax base, why wouldn't you tax the people who are benefitting from the oil, the jobs, the growth–at least a little bit, to put into a prudent investment for when you can't get at them anymore? I hadn't even thought about cleaning up the mess once the party's over.

  13. If you look at export figures, oil is doing great, while the auto industry is not. That would suggest to me that Colby's figures pass the smell test.

    • "Smell test?" Interesting use vocabulary for a hyper-rationalist such as yourself.

      Amusing as usual, Friedman4ever.

  14. Interesting link to the O'Connor/Fort chip story. It's dissapointing he didn't fact check or make s many wrong assumptions in making his case [lying if yo prefer] I''ve heard the guy interviewed – he sounds sincere.But I note the post article fails to mention the AC of P's initially tried to shut him up him, and only public pressure produced a decent inquiry – not altogether surprising from the post when you think on it.__Care to mention more recent developments Colby? O'connor isn't the only source of criticism. The oil patch has recenly conceded that their tailings ponds are leaking rather more into the river than they claimed. There have been follow up investigations into this involving Dr Schindler [ hardly a paid up leftie] from Uof A, using newly acquired sensitive testing equipment not possessed by the AB gov't. I believe he's stated the industries/gov'ts claims that the levels of detectable polution in the river are acceptable, are way, way off.__What i most object to in the post and your coverage is the underlying assumption that because the Fort chip story was badly hyped, we should therefore take the gov't/industries word and motives as gold. _

    • You have to look at Colby's writing from an ideological/geographic bias. While he is quick to link up to a National Post story about Fort Chip, he naturally avoids talking about reports such as these:

      Oilsands study slanted toward Big Oil: report
      Environment Canada documents take aim at assessment by natural resources department

      Newly released federal documents have revealed some potentially inconvenient truths about the environmental impact of Alberta's oilsands industry, along with the risks and economic costs of the Harper government's climate change strategy.

      The documents take aim at a government assessment of the oilsands sector prepared by the natural resources department.

      Officials from Environment Canada who reviewed the original package, warned that it reflected the views of oil companies instead of the facts.
      http://www.vancouversun.com/technology/Oilsands+s

      Or this equally edifying piece:

      Prentice leads way in contact with lobbyists
      Analysis shows environment minister nearly matched by calls to Clement

      …With the environment near the top of the public agenda this year, Prentice's door swung open the widest for lobbyists, with 136 face-to-face or telephone contacts reported in the year, the data show.

      Of these contacts, the majority — 81 of 136 — were with lobbyists representing oil, gas or other energy companies, including EnCana, Suncor, Shell Canada and ConocoPhillips. Prentice met to discuss energy issues with Imperial Oil on 14 occasions, more than any other company or organization.

      In the same period, he took just two meetings with environmental group the David Suzuki Foundation and another two with the Pembina Institute.
      http://www.ottawacitizen.com/news/Prentice+leads+

      There is a pattern…

      • Thanks Dot. Interesting! Dissension in the ranks at EC, yes,no? 4 meetings out of a 136 odd for environmental orgs with Prentice…pathetic! Over to you Colby!

  15. _When there's this much money on the table i always defer to that old and wise adage: When someone claims it aint about the money, it's about the money. __._When there's this much money on the table i always defer to that old and wise adage: When someone claims it aint about the money, it's about the money.

    • Oops…there appears to be an echo in here.

  16. "To hell with Buddy Ebsen"…and by "hell" I assume you mean the Tar Sands and the "dark satanic mills" one finds there

  17. the whole argument is just crap. Hospitals and schools DO NOT depend on the Oil Sands. The funding levels might depend on a certain amount of economic growth, but that's about it. Miraculously, schools and hospitals did just fine before the oil sands. Imagine that. This is a bullshit article by a hack writer and a garbage province that should be boycotted by everyone else in canada.

  18. the whole argument is just garbage. Hospitals and schools DO NOT depend on the Oil Sands. The funding levels might depend on a certain amount of economic growth but that can be provided by anything including green energy and pig toe nail sales. Our schools and hospitals survived just fine before the oil sands, and will do just as well when the government finally wakes up to this nightmare. Until then, all Canadians should boycott Alberta.

  19. Ron, if you had actually lived in Ft. Mac as I did for amost 10 years you would know that the hospital & schools up there DO depend highly on the companies such as Syncrude, Suncor & others for supporrt. Keyano College would probably not even exist without the Oil Companies initial & continued support. I have a niece who works there & she knows this first hand.

  20. Why do Maclean's writers insist on constantly turning potential eight page articles that actually explore a topic into weakly argued one page opinion pieces. Am I the only one that feels that as one of the few National magazines they have a (mild) responsibility to help inform and enlighten Canadians? They should change their banner to read: Maclean's — Scratching the Surface of Canada…

  21. As addendum to above: to be fair, Colby, with the current periodical market issues you probably are doing the work of three writer's.

  22. What is the point of the Canada West Foundation?? And what is a think tank any ways? It seems like it is just a breeding ground for ivory tower pontificators. so sad. get a real job boys – maybe in the oil patch – where you can experience first hand what a real job is and not just books, books, books!!

  23. Fascinating. I thought Canada was a confidant unified nation-state. It seems it is a loose confederation of warring tribes.

    I hope it turns out better than Afghanistan.

  24. The Buddy Ebsen effect is not the only phenomena at work here. The other way of describing this, is that Albertans should not be so cocky about an economic benefit founded on a geographical fact they had no control over. In addition Albertans should try to remember that there are about five times their number who live in Ontario and Quebec and who polute the atmosphere making Hummers to drive in Calgary. Albertans should expect other Canadians to share an undeserved natural treasure when there are so few of them.

    • So Quebec should be sharing its "undeserved" hydro electric power with us wretches out west then?

      • I agree that Quebec should share the benefits the province derives from their hydro developments and that is exactly what they do. The revenue they obtain from hydro is used in the equalization calculations in the same way as Alberta's revenue from tar sands is taken into consideration. The problem is that many Albertans act like the resources that happen to be under their feet gives them the right to tell the rest of the counrty how things should be run. In addition, the positive environmental benefits of using Quebec's hydro are available to all Canadians free of charge, while the negative impact is in Quebec only. On the other hand there is no positive environmental benefit from the tar sands and most negative impacts are dumped on all Canadians whether the like it or not. Several years ago Peter Lougheed warned Albertans that this mightier than thou attitude about their wealth combined with a cavalier attitude about the environment would cause the country much damage and he was right.

  25. "it's helping to keep the lights on in my kids' school and the MRI machine thrumming at the local hospital."

    With short-sighted, self-absorbed views like that and a blatant uncertain for the future of the planet, it seems that time may be right to bring back the NEP (National Energy Program). If you folks can't be responsibility in your actions perhaps the federal government should provide the oversight you lack (and I am referring to the new Liberal government that will be elected in the next election).

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