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Why the flow of oil cannot, and should not, be stopped

Editorial: Oil will find its way to market, even without a pipeline


 

Larry MacDougal / CP

Oil, like information, yearns to flow freely. That much hit home this week when it emerged that CN Rail was negotiating with Chinese-owned Nexen Inc. to move bitumen from the Alberta oil sands to the port of Prince Rupert. BC Rail officials believe they can get heavy crude to the West Coast at a rate equal to that of the proposed Gateway Pipeline and, though the economics of moving it by rail aren’t as attractive as sending it through a fixed conduit, CN’s enthusiasm points to an inescapable fact: Pipeline or no pipeline, the oil will find its way to market.

All 5.2 million barrels of it. That’s how much the oil sands are projected to be producing each day within about 15 years—fully 60 per cent more than the amount generated today by the entire country. The pressure to move the oil we have now has already reached a crisis point. On the same day that CN’s plans came to light, the Fraser Institute issued a report calculating the cost of transport bottlenecks to Canadian producers at $47 million per day, or $17 billion per year. That’s because Alberta bitumen hits an effective dead end when it reaches the U.S. Midwest. At that point, there are no pipelines to get it to coastal refineries, so it must be sold at a steep discount—currently about $37 per barrel.

The unsustainability of this arrangement is obvious. Foreign countries such as China need Canadian oil to continue the development of their economies, and they are willing to pay a premium to get it to market. Canadians in all walks of life have a stake in making that happen, because income from oil sands development powers the economy and pumps dollars into government coffers. (Alberta, for instance, is projected to receive $2.4 billion less revenue than expected this year, thanks in large measure to pipeline bottlenecks.) It would be better for the planet, were fossil fuels not the lifeblood of the global economy, and we must redouble our efforts to reduce our dependence on them. But that shift must be driven by fact, not by hyperbole, fear-mongering and misinformation.

Which brings us to the anti-pipeline movement. Led by opponents of Keystone XL, the proposed 2,400-km pipeline that would carry bitumen south to the Gulf of Mexico, a well-funded cadre of activists had persuaded some U.S. lawmakers (and possibly President Barack Obama) that the only way to head off “runaway global warming” is to keep Athabasca oil in the ground. Never mind that their most ardent advocate, Tom Steyer, is a former hedge-fund manager who divested his pipeline assets only after he’d made his billions. And never mind that the oil sands are responsible for only 0.15 per cent of global CO2 emissions. It is “dirty oil,” they insist, whose exploitation—more so than Kentucky coal, more so than North Dakota shale oil—will perpetuate the world’s dependence on fossil fuels.

In short, they have proven as proficient at jamming the transmission of fact as they have the flow of crude, and Canadians are paying the price. After five years of delay caused by half-truths and misdirection, Keystone XL today seems less likely to go ahead than it did 12 months ago. Meantime, the U.S.-based fanatics continue to sell the fantasy that blocking Keystone will prevent Canadians from fetching a fair price for their resource—though why this claim is working is a mystery. Maybe American leaders have been lulled by reassurances from Natural Resources Minister Joe Oliver, who speaks of Keystone as an “important project to both countries.” Maybe they think Canadians fear a rupture in their relationship with the U.S. too greatly to turn their backs on them.

If so, they should listen instead to the plain-speak of Gary Doer, Canada’s ambassador to Washington, who says flatly: “Oil will get to market. It will get to market with pipelines. It will get to market by trains. It will get there by trucks. It will get to India, it will get to China, and it will continue to have the opportunity to go to U.S. refineries.” Alternatives to Keystone, he notes, now include TransCanada Inc.’s planned Canada East pipeline to Quebec and New Brunswick, as well as the proposed Kinder Morgan expansion that would deliver bitumen to the B.C. Lower Mainland. The anti-pipeline activists will never acknowledge that their own activities risk cutting the U.S. out of an energy supply it needs. But they can’t keep a stopper on the truth forever—no more than they can on the oil.


 

Why the flow of oil cannot, and should not, be stopped

  1. Rah, rah, rah….sis boom bah.

  2. Full court press.

  3. After five years of delay caused by half-truths and misdirection, Keystone XL today seems less likely to go ahead than it did 12 months ago. Meantime, the U.S.-based fanatics continue to sell the fantasy that blocking Keystone will prevent Canadians from fetching a fair price for their resource—though why this claim is working is a mystery.

    A small percentage of the oil sands production is actually owned by Canadians. This report, prepared by a member of “the anti-pipeline movement” suggests much less than 100% ownership.

    Majority of oilsands ownership and profits are foreign, says analysis
    http://www.canada.com/business/Majority+oilsands+ownership+profits+foreign+says+analysis/6599547/story.html

    Of course, that report doesn’t take into consideration Canadian share ownership of the companies that own the US refineries benefitting from the lower prices.

    That being the case, why is this a pressing political and national issue? Looks more like a commercial issue.

    • SunCor and Syncrude are two of the biggest oil sands players, and they are both Canadian-owned. And then there are the benefits derived from foreign-owned companies investing in the oil industry (i.e. jobs, royalties, taxes, etc.). Arguing that oil exports don’t benefit us due to foreign ownership is nonsense. That assertion hasn’t been taken seriously since the Trudeau Sr. years, and for very good reason.

      • Ahhh, there you go misinterpreting my response. Almost all of these reports (including a blog Andrew Leach wrote) claim, specifically, that “Canadians are losing $15 billion, $17 billion, $28 billion” in an attempt to get public support for this “injustice”. This is simply factually incorrect.

        You mention Trudeau. Yes, the Canadian ownership of the O&G industry would be approaching those 100% numbers had the NEP remained in place, as it was designed to increase Canadian ownership of the resource. And, btw, provided guaranteed favourable prices for oil sands production.

        You can’t claim that we need lower taxes etc in order to attract foreign capital, then after the major influx of foreign capital, try to claim it is all Canadians that are losing money. Just be honest.

        • Canadians own the resource. Canadians get royalty and tax dollars based on the price of oil, not even counting supply chain, jobs or share ownership in oilsands corporations. Governments can reap up to about 50% of the net income from a barrel of oil sands when prices are high (half for shareholders, half for government). The structure of taxes and royalty mean that as prices go down the government take in both percentage and absolute dollars drops very quickly. So, Canadians do indeed suffer greatly and directly when prices are “unfairly” low.

  4. I almost expected to see a Canada Action Plan Symbol at the end of this piece.

  5. Surprised that there was no mention of Canada/Alberta doing more to mitigate carbon emissions from the oil sands. Also surprised no mention was made of Gary Doer’s classic line “We’re not holier than thou”. The title of the op-ed could have been entitled ” why a decent into dirty immorality cannot and should not be stopped”

    • Let’s go one further: when you extract hydrocarbons from the ground, regardless of how much or little CO2 is produced by extracting it, most of it is going to be burnt. Let’s not let anyone play the fantasy game card where, after extraction, it just vanishes from the environment. And let’s not buy the companion card ‘if we don’t do it somebody else will’ – first ‘they’ can’t and second that’s bad math (A+B is more than A).

  6. “CN’s enthusiasm points to an inescapable fact: Pipeline or no pipeline, the oil will find its way to market.”

    Who wrote this one sided blige? Ezra [ not hysterical or conspiratorial enough] …Ken Whyte[ feels like it]? It reads like an infomercial for Enbridge and co, or a press release for CAPP, but way less sophisticated.

    Inescapable my ass. When the FNs fully cotton on to the realization that these trains will be running alongside the Skeena for long stretches, the sh*t will hit the fan, again! They still have to get port facilities and loading facilities build in a town that already has voted against the NG pipeline. And they will still need tankers…game over.
    The original pipeine had a modest chance of succeeding if they had chosen PR in the first place instead of Kitimat. And if they had not tried to bully and demonize opponents of the pipeline. The wide boys in Ottawa and Calgary have no one to blame but themselves for the fiasco that is Keystone and Gateway. Seems like they still haven’t learned anything judging by this article.

    • Who wrote this one sided blige?
      .
      Ahhh, you missed my cryptic guess. Let me try again:
      .
      -Mayor McCheese from Macleans’ Big Mac bureau
      .
      -Old Faithful from Elk Island (Canada’s Jellystone)”

      -Sing along, from the Guess Who:
      .
      Seventy five, eighty miles an hour
      She hollers “slow, slow, slow”
      “Baby I can stop right on a dime”
      I said “hey baby, give me just one kiss”
      She said “no, no, no”
      But how was I to bide my time
      I said “Hey baby, do you want to coo, coo, coo”
      She said “uh, uh, uh”
      Said I’m about to overload
      I said “you’re what I’ve been livin’ for”
      She said “I don’t want to know”
      “Oh, you thought she was digging you but she was digging me “

      • I applaud your creative spirit, but quite frankly i haven’t an f-ing clue what you’re on about. My lack of imagination i suppose. I’m not sure if this is an actual macleans editorial or what? Love to know who worked on it. Are they too shy to affix their name to the doc or what?

        • Man.

          Canadian Club is referred to as “CC”. Colby is a type of cheese. Elk Island National Park is north of Edmonton, towards Fort Mac. Colby is Macleans Edmonton bureau. Old Faithful refers to reliable and predictable performance. Those were the lyrics from Clap for the Wolfman. Someone on Macleans comments board once referred to him as the Werewolf from Northern Alberta (which he once had as part of his twitter description.

          He is also a member of Macleans editorial group.

          Btw, this is all a guess.

          • You’ll have to forgive me – i’m almost 56. That’s awesome…carry on as you were.

  7. Mr Steyer and his wife are co-owners of TomKat ranch, a livestock operation in California (source: Wikipedia). According to the FAO, livestock production accounts for 18 per cent of global GHG emissions. He could have an immediate impact on climate change, and greatly enhance his credibility, by shutting down the ranch and converting the land to a less environmentally damaging product, like lentils.

  8. There were many solid economic reasons for leaving most of the tar sand deposits in the ground pre-2000. Now exploiting that resource is inevitable, no matter what? Economists are funny.

  9. I didn’t realize MacLeans was so hard up for cash. Maybe you guys should start up a kickstarter next time you are feeling the crunch, rather than going out hat-in-hand to CAPP.

  10. Oil yearns to flow freely? I can hear the music swelling now over an image of caribou chanting, “Free the oil! Free the oil!” We’ve travelled a long way from Free Willy.

  11. Oil WILL always find a way to market. Witness TotalElfina’s backdoor purchases of embargoed Iraqi oil around the turn of the century (we won’t get into the discussion of one J. Chretien’s family connections to all that), which gives lie to the whole Iraqi invasion being about oil. The bottom line was that, in spite of the embargo, Iraqi oil was available to anyone who wanted to buy it- at a hefty discount no less. Why invade a country to get at it’s oil, when you could buy all the oil you wanted far below market value?
    To those who wish to sequester our oil under ground I ask a simple question: What free s*** from government, paid for with petro taxes, are you willing to give up today, in order to reduce our need for those tax dollars? if the answer is “nothing”, then I politely suggest you sit down and shut the f*** up.
    Case in point: For decades, we were told that cigarettes cost us more than we get back in tax dollars. This, in spite of the fact that governments earned more from the sale of cigs than the tobacco growers, the cigarette makers, the advertisers, transporters, and retailers COMBINED. Society waged war on tobacco users, supposedly for the good of even us non-smokers. Then one day, governments began to notice that the sharp decline in smokers was resulting in tax revenue shortfalls. The solution has been to tell us non-smokers that, due to the dearth of smokers, WE have to pay more taxes to make up for the shortfalls in tobacco revnue. Sorry, gang, but that dog don’t hunt. You can’t tell me smoking costs us non-smokers money, and then tell us that a lack of smokers is also going to cost us more money. One of the two is a lie.
    Hence, if you’re not willing to give up “free” education, or health care, or your government pension, or funding for natives, ad infinitum, just shut up.

  12. There’s plenty of misinformation here. To be sure there’s a lot of oil ‘trapped’ at the midwest hub including a lot of tight oil from the US, but, and it’s a big but, Keystone XL would simply increase flow of oil to the hub. Its main effect would be to further depress hub prices. The story above hopes that we are blithely ignorant of basic geography.
    At a time when the world needs to cut back on fossil fuels and Canada is on track to meet only 1/4 of the lame CO2 target established by the Harper gang, everyone needs to cut back. The de minimus argument doesn’t hold water either: the Alberta bitumen sands constitute about 23% of the remaining reserves of liquid hydrocarbon so releasing it as rapidly as humanly possible seems high impact and bad policy. If this stuff is worth something now it will be worth very much more in the future: the law of supply and demand is immutable -constraining supply is the well established way of increasing revenue, not the other way round. To say the opposite is, in simple economic terms, nuts.
    As we know, transporting liquid hydrocarbon has a high hydrocarbon cost – Enbridge spills an average 13,200 barrels per year with an average cleanup cost of of $8.4M plus consequential environmental damage. Keystone XL would increase their spill rate by ~!,000 barrels per year. Those who ignore history are doomed to repeat it.

    • The problem is that the debate over cause and effect of global warming is wholly moot.
      The warmists claim we need to immediately reduce our fossil fuel consumption dramatically in order to forestall the coming climate apocalypse. Okay, I’ll bite.
      Let’s say, for sake of argument, that we Canadians cut our total energy usage by 10%. What would be the impacts?
      First off, we’d see an instant uptick in unemployment. Transportation workers, obviously, would be among the first to fall under the bus along with energy workers. News media personnel would take a hard hit as the energy to power radio and TV stations would spike in cost, leading to mass layoffs in that industry.
      Restaurants would go belly up en masse, both fast food and sit-down establishments. Relatedly, off season foods would disappear from store shelves, as cheap diesel is what gets tomatoes from California to Winterpeg, along with lettuce, broccoli, and oranges. Kiss summer watermelon goodbye, along with any beer or wine not produced within 40 or 50 miles from your door. 100 mile diet? Try 50.
      Government workers and services would likely be hit hardest, albeit last. Hammer the economy with a 10% energy usage drop, and you’ll end up with a much larger drop in economic output. Knock a big shack of tax paying value adding jobs out of the marketplace and all Hell will break loose.
      Where do you suppose all the money to fund our vaunted social safety net will come from if you sequester billions of dollars in energy royalties and taxes AND destroy hundreds of thousands of private sector jobs?
      The political left was screaming at the top of their lungs for the federal government to to something- ANYTHING- to “help” the economy when only tens of thousands of jobs were destroyed by the onset of the 2008 recession. How you gonna to square that circle when hundreds of thousands of jobs get destroyed and tax revenues dry up like an Inyo County lakebed. The simple answer is “You ain’t.”
      You can’t magically reduce overall energy use by substantial amounts without dismantling the economy and, by extension, our society.
      You want wind and solar? Okay, but last time I checked, those two energy sources were gigantic memory holes for billions of tax dollars. Dry up tax revenue and wind and solar go down the memory hole. You don’t mind that dozens of corporations vanish overnight? Then you won’t mind when dozens of the necessities you take for granted suddenly vanish from the store shelves, or worse. (In 2009, certain chemotherapy drugs were in dangerously short supply because they only come into existence as chemical byproducts of the manufacture of certain automotive plastics). Repeat ad infinitum.
      As I’ve said before, global warming hysteria amounts to trying to convince our community that we need to hurl ourselves off a cliff simply because we think we’ve seen a lion in the tall grass on the village periphery, and committing mass suicide is preferable to being eaten by a lion despite the fact that we can survive rather well in the presence of lions.
      Hence my challenge; List ALL the things, necessities included, you’re prepared to do without TODAY, in order to do your part to combat global warming. If it doesn’t include California (or beer made from Alberta barley or German wine or Georgia pecans) grown lettuce, publicly funded health care, cell phones, AND the internet (Google’s server farms alone consume as much energy as the entire city of Calgary), then you’re just a poser.
      No matter how you slice it, the debate over global warming is largely moot because those who clamor loudest for action against it would be the first to clamor the loudest for action to mitigate the consequences of such action.
      Ergo, they should just shut up and move on.

    • I like big buts and I cannot lie.

    • KXL moves oil from the hub to the coast.

  13. It is a pipeline, there will be refineries, ports, industry, tax revenue, pollution control, jobs, future opportunity, spin off jobs, education, healthcare, infrastructure, economy, growth, responsibility…. Build it all SAFE, Strong and SOON!!! Work together and it will be better than if we don’t!!! Be part of the best solution!

  14. This hypocrisy and ignorence of many of the comments on this thread draws ample correlation to my favorite cinimatic diatribe.
    For effect and relevance i have replaced the following:

    WELL replaces Wall
    ENERGY replaces freedom
    HAMMER replaces weapon

    Col Jessep: “A Few Good Men”

    “You don’t want the truth because deep down in places you don’t talk about at parties, you want me on that WELL, you need me on that WELL…………………………………..
    I have neither the time nor the inclination to explain myself to a man who rises and sleeps under the blanket of the very ENERGY that I provide, and then questions the manner in which I provide it. I would rather you just said thank you, and went on your way, Otherwise, I suggest you pick up a HAMMER, and stand a post. Either way, I don’t give a damn what you think you are entitled to.”

    • I suppose your spelling errors were also “for effect and relevance”?

      • Wow, thought provoking contribution Simon. Not everyone can be among the linguistic elite.

        • Yes they can.

          • Yes, because that’s what matters.

  15. I was really disappointed by this piece on the flow of oil. Thought I was reading something from SunNews. In fact, I’m about to cancel my subscription. Not interested in supporting this sort of dangerous propaganda.

    • So….Global Warming Hysteria propaganda isn’t dangerous? Do you think the world will be a better place for humanity, or worse if the industrialized western world commits ritual hari kiri in the name climate dogma?
      Think about this: The warmists make much ado about the melting of the Greenland ice cap causing a catastrophic rise in sea levels. Okay…
      According to the best estimates out there, the Greenland ice is disappearing at a rate that will leave it bereft of glaciers some 2000 years from now.
      So, in order to grasp the significance of that, you need to think backwards by the same amount. Do you think the world might be a radically different place 2000 years from now, climate change or no climate change? Think back to the world in the time of the Crusades, or even the late Middle Ages, or the American Revolution. Has the world changed immensely since those times, or not? What would possibly make you think the world will not change dramatically in the next 100, 200, or 500 years AND in such a fashion as to make the discussion of climate change moot?
      It is folly to assume that the slow, inexorable grind of climate change- natural (likely, based upon evidence) or man-made- and our resultant adaptation wouldn’t be preferable to instigating a wholesale, mass economic collapse, and the resultant human misery. In fact, it’s flat out stupid. It also ignores the virtual certainty that sometime in the coming decades or centuries, a vast swath of humanity will be smote with some catastrophic, cataclysmic, or apocalyptic event either natural or man made that will render the discussion over climate change wholly moot.
      Ergo, it is in humanity’s present and future best interest for those nations that make up what we call Western Civilization continue to be the pinnacle of human achievement. They can only be bastions of political, economic, and social freedom by rejecting the Marxist infused mantra of global warming hysteria.
      Just as the Anglosphere of today is the product of Shakespeare, Chaucer, Smith, More, Locke, and Churchill, the world of tomorrow is better in every way if it is product of the Anglosphere regardless of what the future holds. The problem is that giving in to global warming hysteria will be the death knell of the world that we know, and the chances of that death being a positive thing for mankind 100 or 1000 years from now are thinner than piss on a flat rock.

      • “The truth is incontrovertible. In the end, there it is.” Winston Churchill

        • Yep, reality always wins in the end.

          Just that far too many people think they can ignore reality, then whine like freeloaders when it strikes.

      • “……thinner than piss on a flat rock”.

        Move over Shakespeare and Chaucer – there’s a new sheriff in town.

        • Zee keyboard, she ees mighty-air zan zee sword.

    • Funny, Canadian oil comes without blood and munitions in it. CO2 is recyclable, depleted uranium, plutoniums are not but your are not concerned about that.

      Its so sad so many Canadians are economically irrational looonatics, short sighted and dysfunctional. Maybe get off your ass and get a job.

  16. Ezra, is this your latest editorial? In any case, we’re not fooled by your arguments.

  17. The gateway is at least 10+ years off, as while Ottawa said yes, the conditions were very much impractical. Rail is getting this one.

    Should help revenues for companies and governments too as it moves to a market paying more than USA market does. Canada gets 10-20% less for its oil as its land locked with USA. Sort of liek NEP II, a hidden market constraint to lower the price of Candan oil.

    With first nations extortion and belligerences, best to use rail and ignore the bureaucratic mess of FN and Ottawa incompetences. Plus, it employs Canadians who want to work and get off the freeloader bandwagons.

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