Stephen Harper’s Petro-State Is Built On Tar Sands
This text first appeared within the Washington Spectator.
Late twenty first-century graduate students of business studying the growing problem of stranded assets will nearly certainly give attention to the history of Canada’s Athabasca Oil Sand (aka tar sands). The case studies they learn will either describe the gradual abandonment of the world’s largest reserve of bituminous crude or they may learn concerning the tar sands’ miraculous last-minute escape from changing into the world’s largest stranded asset. For either outcome, the turning level they’ll look again on is nearly now.
Of course, some of Alberta’s crude has made its strategy to market, but so much slower than it may have, or was projected to, that producers, refiners, shippers, banks and different traders in tar-sands development are starting to marvel whether they have backed a great play by investing over $160 billion to show tar into oil.
So the economic stranding course of has already begun. Five world vitality giants–Shell, Complete, Suncor, Statoil and Occidental–have reduce bait on main bitumen deposits in Alberta, by which they had already invested billions. Suncor has just slashed one other billion dollars from its capital spending program and $800 million more from operating expenses. And as oil costs slide decrease, commercial and investment banks are reconsidering future underwritings. An industry that not too long ago envisioned doubling production over the following 20 years is now taking a look at something closer to the alternative, a halving of manufacturing or worse in far fewer than 20 years.
American media coverage of the tar sands has targeted primarily on the approval of the Keystone XL Pipeline, which, if accomplished, would carry 830,000 barrels of Athabasca crude, day-after-day, to the world’s largest refining center near Houston next to a booming export hub. Because American and Canadian politicians and oil execs have lobbied so laborious for its approval, Individuals tend to consider that construction of Keystone will secure the future of the tar sands. Not true. To even strategy break-even, at the least 4 other pipeline routes will probably be wanted to hold bituminous crude to the world’s market: two to the Canadian west, one to the east and one north. If two or three of these lines are somehow stopped, and that is fairly prone to occur, the stranding of the tar sands will escalate, Canada will cease being a petro-state, and its enterprise leaders will begin their seek for yet another staple to drive its national economic system.
Staples Financial system
Canada has at all times been what economists name “a staples economy,” reliant almost utterly on one staple resource after another. Fur was followed by cod, then wheat, potash, minerals, timber, and hydropower. At the moment, Canada’s staple useful resource is carbon, some of which derives from coal however most of it from oil. Oil, in reality, represents 46 percent of Canada’s commodity production. Unfortunately, over ninety p.c of its reserves are bitumen, the expensive production of which nets only four % to Canada’s GDP. However oil represents 40 % of the nation’s exports. So the urgency to develop and export the tar-sands oil has turn out to be a nationwide precedence.
Canada’s tar-sands booster-in-chief is Prime Minister Stephen Harper, an Alberta-primarily based petrolero who rose to prominence in politics as Chief Coverage Officer of the Reform Celebration, Canada’s model of the American Tea Celebration. Based in 1987, Reform merged in 2000 with the floundering Progressive Conservative Occasion to type a brand new and nearly unbeatable national coalition calling itself the Canadian Conservative Reform Alliance (after adding “Celebration” to its title, it turned CCRAP, and was nicknamed “see-crap”). Harper turned get together chief of CCRAP, which has since gained two national elections. It is as if Ted Cruz became the Republican front-runner and won the White Home twice.
Map by Kevin Kreneck
As soon as a member of Canada’s Younger Liberals and a supporter of Pierre Trudeau, Harper went west as a younger man, worked in Alberta’s oil fields and adopted his father into employment with Imperial Oil, Canada’s second-largest petroleum firm (sixty nine percent owned by ExxonMobil). There, like so many different western Canadians, he grew to despise Jap Canada, moderately just like the scion of a prominent American household moving from Connecticut to Texas. In Calgary, he became an outspoken and eloquent opponent of Trudeau”s National Energy Plan, which seemed set upon nationalizing Canada’s last staple useful resource. Whereas there continues to be discuss of nationalizing oil and tar-sands oil in Canada, and in some polls a majority of Canadians support the concept, that could not presumably occur with Harper in power.
On the 2012 World Financial Forum, in Davos, Switzerland, Harper announced that the expanded manufacturing and export of tar-sands bitumen was a nationwide precedence. Canada, he predicted, was set to grow to be an vitality superpower. In Ottawa, he took quick and aggressive steps to weaken environmental protections just like the Navigable Waters Protection Act, which was hindering pipeline development, and to quick-track tar-sands production.
But Harper’s focus remained on Europe, where in 2012 the European Parliament and member European Union governments had been debating terms of a revised Gas Quality Directive (FQD) and contemplating an official ban on the import of “soiled fuels” — oil shale, liquid coal and tar sands, all of which have high extraction impacts, releasing more greenhouse gas than conventional oil via their “nicely to wheel” life cycle. A Stanford College study that many members of the prediction for oil prices EU Parliament relied on projected a 23 p.c enhance of lifecycle carbon emissions from tar-sands production.
Harper and his advisers immediately noticed the danger of that research and the disaster a European ban on dirty fuel represented for Canada’s largest new staple. One vote in Brussels could leave the tar sands stranded instantly and ceaselessly, even when oil producers discovered a route to the Chinese market.
During the two years main up to the EU parliamentary vote on the problem, Harper mobilized Canadian oil executives and his cabinet behind a $30 million nation-to-nation lobbying effort. Their first goal was the Stanford examine, which they drove into the bottom with their own business-funded studies.
Week after week, planeloads of oil execs and PR flacks crossed the Atlantic, Harper aboard at any time when he may very well be, laterally threatening a trade conflict with Europe if the vote went the mistaken approach. Aspect journeys were made to Washington. And members of the European Parliament had been flown to Ottawa and Alberta for gold-plated junkets.
With out Harper’s effort, the Parliament in Brussels would virtually actually have voted to ban dirty fuels. After two years of intense lobbying, the measure lost by a 12-vote margin 337 to 325, with 48 abstentions. A number of months later, in the fall of 2014, the first shipment of tar-sands crude arrived in Europe, with many extra to follow, as a vote on the Fuel High quality Directive is not going to come up once more for at the very least four years.
In the meantime, if a couple of EU member nations condemn tar-sands oil, and ban its import, extra small nails might be driven into the tar-sands coffin. And if two of the proposed source-to-port pipelines on the drawing boards are blocked (see map and sidebar right here), extra producers and traders will abandon the sands.
If Canada’s tar sands do someday turn into stranded, the equivalent annual emissions of over 65 coal-fired plants and 50 million passenger vehicles will remain underground. And a whole lot of the credit (or blame) will go to environmental activists, aboriginal communities, litigious farmers and teams like Greenpeace, 350.org, who have added to their anti-pipeline advocacy a marketing campaign to pressure institutional investors to divest their “Big Fossil” holdings. Even earlier than divestment started, 9 of 10 tar-sands producers’ stocks had underperformed the market. So they are weak.
Strand Their Capital
Based on the Institute for Power Economics and Financial Analysis, a think tank in Cleveland, the campaigns of environmentalists and native communities have already price tar-sands producers $17 billion. But that has not stemmed the willpower of the North American fossil-gas business to move Athabasca crude to refineries prediction for oil prices all over the world.
Despite the insistence of American Republicans and petroleros that every little thing rests on completion of Keystone XL, the pipeline means little to the U.S. financial system. In Canada, nonetheless, economists estimate that U.S. rejection of the pipeline could value the country as much as $1.7 billion a 12 months, far more significant than the lack of two or three hundred permanent jobs the pipeline would create in the U.S. And by merely raising break-even greater than it already is for bitumen producers, stopping Keystone might place the tar sands in far better hazard of being stranded.
Whereas property just like the tar sands must be stranded, as a result of mining and burning them will raise the temperature of an already overheated planet a level or extra, they are more likely to change into stranded, as a result of they’re both unable to succeed in market or have misplaced market worth.
The sad irony is that before Canada chosen tar-sands crude to be its staple export, the nation was poised to change into a serious international contributor to clean power. It had signed climate treaties, promoted photo voltaic-vitality, developed hydroelectric power and had a affluent renewable-vitality business underneath sail, for which the nation possessed all the mandatory pure and monetary sources. Then one powerful neoliberal free-market zealot decided to double down on excessive-carbon fuels and announce to the world that tar sands would develop into prediction for oil prices the next nation-building staple for his country.