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Stephen Harper’s Petro-State Is Constructed On Tar Sands

This text first appeared within the Washington Spectator.
Late 21st-century graduate college students of enterprise studying the rising problem of stranded property will nearly definitely focus on 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’ll read concerning the tar sands’ r&r petroleum equipment zebra miraculous last-minute escape from changing into the world’s largest stranded asset. For either end result, the turning point they may look again on is nearly now.

Of course, a few of Alberta’s crude has made its strategy to market, however so much slower than it may have, or was projected to, that producers, refiners, shippers, banks and other investors in tar-sands improvement are starting to wonder whether they have backed a superb play by investing over $160 billion to turn tar into oil.

So the financial stranding course of has already begun. Five world power giants–Shell, Complete, Suncor, Statoil and Occidental–have lower bait on main bitumen deposits in Alberta, wherein they had already invested billions. Suncor has simply slashed one other billion dollars from its capital spending program and $800 million extra from operating expenses. And as oil costs slide decrease, r&r petroleum equipment zebra commercial and funding banks are reconsidering future underwritings. An trade that recently envisioned doubling production over the following 20 years is now looking at one thing closer to the alternative, a halving of production or worse in far fewer than 20 years.

American media protection of the tar sands has targeted primarily on the approval of the Keystone XL Pipeline, which, if completed, would carry 830,000 barrels of Athabasca crude, each day, to the world’s largest refining heart near Houston next to a booming export hub. As a result of American and Canadian politicians and oil execs have lobbied so exhausting for its approval, Individuals tend to believe that building of Keystone will secure the way forward for the tar sands. Not true. To even strategy break-even, a minimum of four other pipeline routes shall be needed 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 one way or the other stopped, and that is quite more likely to occur, the stranding of the tar sands will escalate, Canada will cease being a petro-state, and its business leaders will start their search for yet another staple to drive its national economy.

Staples Financial system
Canada has always been what economists name “a staples economy,” reliant almost fully on one staple useful resource after one other. Fur was adopted by cod, then wheat, potash, minerals, timber, and hydropower. At present, Canada’s staple useful resource is carbon, a few of which derives from coal but most of it from oil. Oil, in truth, represents forty six % of Canada’s commodity production. Unfortunately, over 90 percent of its reserves are bitumen, the pricey production of which nets solely four % to Canada’s GDP. However oil represents forty p.c of the nation’s exports. So the urgency to develop and export the tar-sands oil has become a national precedence.

Canada’s tar-sands booster-in-chief is Prime Minister Stephen Harper, an Alberta-based mostly petrolero who rose to prominence in politics as Chief Policy Officer of the Reform Party, Canada’s version of the American Tea Get together. Based in 1987, Reform merged in 2000 with the floundering Progressive Conservative Celebration to type a brand new and almost unbeatable nationwide coalition calling itself the Canadian Conservative Reform Alliance (after adding “Social gathering” to its identify, it became CCRAP, and was nicknamed “see-crap”). Harper became party leader of CCRAP, which has since won two national elections. It is as if Ted Cruz became the Republican entrance-runner and won the White House twice.

Map by Kevin Kreneck
Once a member of Canada’s Younger Liberals and a supporter of Pierre Trudeau, Harper went west as a younger man, labored in Alberta’s oil fields and followed his father into employment with Imperial Oil, Canada’s second-largest petroleum company (69 % owned by ExxonMobil). There, like so many different western Canadians, he grew to despise Japanese Canada, rather just like the scion of a distinguished American household moving from Connecticut to Texas. In Calgary, he grew to become an outspoken and eloquent opponent of Trudeau”s National Energy Plan, which appeared set upon nationalizing Canada’s last staple resource. While there remains to be discuss of nationalizing oil and tar-sands oil in Canada, and in some polls a majority of Canadians support the idea, that couldn’t presumably happen with Harper in energy.

At the 2012 World Economic Discussion board, 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 develop into an vitality superpower. In Ottawa, he took speedy and aggressive steps to weaken environmental protections like the Navigable Waters Safety Act, which was hindering pipeline development, and to quick-monitor tar-sands manufacturing.

However Harper’s focus remained on Europe, where in 2012 the European Parliament and member European Union governments have been debating terms of a revised Fuel High 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 excessive extraction impacts, releasing extra greenhouse gasoline than conventional oil by way of their “effectively to wheel” life cycle. A Stanford University research that many members of the EU Parliament relied on projected a 23 % improve of lifecycle carbon emissions from tar-sands production.

Harper and his advisers immediately noticed the danger of that study and the disaster a European ban on dirty gas represented for Canada’s largest new staple. One vote in Brussels may go away the tar sands stranded instantly and endlessly, even if oil producers found a route to the Chinese market.

During the 2 years main up to the EU parliamentary vote on the issue, Harper mobilized Canadian oil executives and his cabinet behind a $30 million nation-to-nation lobbying effort. Their first target was the Stanford research, which they drove into the ground with their very own trade-funded research.

Week after week, planeloads of oil execs and PR flacks crossed the Atlantic, Harper aboard each time he could be, laterally threatening a trade battle with Europe if the vote went the wrong approach. Side trips were made to Washington. And members of the European Parliament have been flown to Ottawa and Alberta for gold-plated junkets.

With out Harper’s effort, the Parliament in Brussels would nearly 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 forty eight abstentions. A few months later, in the fall of 2014, the primary shipment of tar-sands crude arrived in Europe, with many more to follow, as a vote on the Gasoline Quality Directive won’t come up again for at the least four years.

Within the meantime, if a few EU member nations condemn tar-sands oil, and ban its import, extra small nails will 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 here), more producers and traders will abandon the sands.

If Canada’s tar sands do someday turn out to be stranded, the equal annual emissions of over sixty five coal-fired plants and 50 million passenger automobiles will stay underground. And plenty of the credit score (or blame) will go to environmental activists, aboriginal communities, litigious farmers and groups like Greenpeace, 350.org, who’ve added to their anti-pipeline advocacy a campaign to strain institutional buyers to divest their “Big Fossil” holdings. Even earlier than divestment started, nine of 10 tar-sands producers’ stocks had underperformed the market. So they are vulnerable.

Strand Their Capital
In accordance with the Institute for Energy Economics and Monetary Evaluation, a assume tank in Cleveland, the campaigns of environmentalists and native communities have already cost tar-sands producers $17 billion. But that has not stemmed the determination of the North American fossil-gas business to maneuver Athabasca crude to refineries world wide.

Regardless of 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, nevertheless, economists estimate that U.S. rejection of the pipeline may value the country as a lot as $1.7 billion a yr, far more important than the lack of two or three hundred permanent jobs the pipeline would create within the U.S. And by merely raising break-even larger than it already is for bitumen producers, stopping Keystone could place the tar sands in far higher hazard of being stranded.

While assets like the tar sands needs to be stranded, as a result of mining and burning them will increase the temperature of an already overheated planet a level or extra, they usually tend to change into stranded, because they are both unable to succeed in market or have lost market worth.

The sad irony is that earlier than Canada chosen tar-sands crude to be its staple export, the nation was poised to become a serious world contributor to clean vitality. It had signed local weather treaties, promoted solar-vitality, developed hydroelectric energy and had a prosperous renewable-energy trade underneath sail, for which the nation possessed all the required pure and monetary assets. Then one highly effective neoliberal free-market zealot determined to double down on high-carbon fuels and announce to the world that tar sands would turn into the next nation-building staple for his nation.