Thursday, January 18, 2007

Let's Just Forget It

Cancel the committee, enough with the announcements, let's just forget the whole exercise. Many bloggers have already commented on the oil sands expansion, but I would like to add my two cents.

First off, industry experts don't think you can increase production five-fold in the short term. Estimates range from 2.5 to 3 million barrels per day by 2015, so we could triple production in 8 years. I use the more "modest" estimates, lest anyone accuse me of fear mongering. I also use 2015 because it just so happens that the Tories are planning on introducing short-term targets:
Sources said the government will soon announce a short-term target of 2015, by which time companies will be required to reduce the amount of energy they use to produce every barrel of oil or megawatt of electricity.

What a farce! Baird plans to announce "intensity" targets, which will reduce emissions per unit. For arguments sake, let's be optimistic and say the government can reduce emissions by 25%. 100 megatonnes becomes 75, woohoo! Now, factor in the expansion of the oil sands, that 75 megatonnes now becomes 225 megatonnes. In other words, emissions more than double in the eight years. It is so ridiculous, I'm not sure if I laugh or cry?

No one argues that Alberta's economy isn't operating beyond full potential. No one argues that Klein had no plan to deal with the rapid growth and Albertans are having an difficult time dealing with the challenges. Water shortages, labor shortages, housing shortages, infastructure shortages, environmental damage, etc, etc, etc. I'm not an economist, but given the current situation, plus the fact that the tarsands are now a guaranteed revenue stream, is it not time for a plan that ensures solid growth, while addressing the problems. Is it really in Alberta's best interest to have such massive American investment for short-term gain? Is there not a way that tempers development, while still maintaining good growth? Why do we need a five-fold increase? What if development only rose 5-10% a year, is that not enough to keep Alberta humming?

What is in the best long-term interest for Alberta? Are we only interested in quenching the American appetite, so we can claim the "energy superpower" booby prize? Someone needs to be bold, and tie future development to environmental considerations and sustainability. In other words, someone needs to stand up to big oil. The problem, no one every steps up to big oil, hence the futility. Our current "debate" on the environment is a mirage. Who will really tackle the elephant in the room??

7 comments:

Kyle G. Olsen said...

First of all, it is barrels, not gallons. A barrel is 31 US gallons or 117.4 litres.

Also, is it fair to cap a developing sector like the oilsands? Would you ask for a 25% drop in carbon emissions from car factories(as in the entire sector) if car companies were planning to increase production three fold?

I don't think you would, and if you would voters would kill you at the polls next time.

There is no water shortage as you claim, in southern Alberta the water use of the bow is leased 100%. Too bad 35% of that lease is owned by the city of Calgary, who only uses a third of the lease, and returns all the water to the river. Just like most non agricultural users. On the Athabasca, flow volumes entering lake athabasca (the lake at the end of the river the supplies the oilsands) are down 10% from historical levels. That drop is less than the flow drops of other rocky mountain eastern slope fed rivers over the same time period.

The oilsands are in no way a guaranteed revenue stream, that is why the federal government put together an incentive package for developing the oilsands in 1997, spearheaded by our old Deputy PM. The plan was also to maintain Canada as a net exporter of oil, so that our currency would not be further depleted by oil purchases abroad.

In 1997, oil was at 7 dollars a barrel. Oil has been low in the past, and will be low again. Look at the close to $30 (US) drop in the value of oil since the peak in the past year.

These investments aren't short term. The early oilsands plants built in the 70s began to turn a net profit last year. The oilsands projects are not conventional, they are much more industrial in character compared to conventional oil recovery.

Remember, every time you (and voters) complain about the high price of gas, you will have to say you took a stand against development of a domestic resource to reduce supply problems.

Steve V said...

My bad on the barrels.

I guess the two-hour show on CBC radio, speaking to water experts in Alberta, concerning the problem was just my imagination. Sorry.

burlivespipe said...

I'd argue against Kyles thoughts suggesting oil is not a guaranteed revenue source, as he seems to believe it could fall down to $7 a barrel sometime in the future -- I can only picture one scenario that would produce that... Hmmm, because the air quality is so poor that people are forced to live in geo-domes, carbon-based fuels are spurned for more clean-operating options, like solar power.
The incentive package that encouraged the development to date proved very successful -- even if you believe the spin that its just now making a profit (sort of like those stickers on the pumps trying to tell you that the oil companies only make 5 cents on a litre -- no if you were to study the real info that is the profit of the station manager) a downturn is almost impossible, thanks to quenchless Americans, exploding middle classes in India and China, and our own constant consumption. But to force Big Oil to take the next step in development and refine the process to be environmentally responsible, as opposed to environmentally detrimental, would likely see a slowing of the growth rate from the tarsands. But the oil that was not being processed today would amortize tomorrow at a higher reward, therefore helping to elevate the extra costs of production. And yep, he's totally wrong on the water issue, but i'm betting he prefers to swim in crude anyways.

ottlib said...

Kyle and Big Oil remind me of a saying Mr. Fred Mercury stated a few years ago:

"I want it all, I want it all, I want it all and I WANT IT NOW!

ottlib said...

Oh yes Kyle:

Despite the massive development of the oilsands in the last decade the price that I pay at the pumps has gone up not down.

The oil companies ensure that they do not rock the boat with regard to retail prices so there really is only a precarious relationship between the amount of oil extracted and the price at the pumps.

Or to put it another way. Regardless of whether oil production increases at a hell bent for leather pace or a more sustainable pace the price at the pumps will continue to rise.

Steve V said...

Does anyone actually believe the oil companies would invest billions in the tar sands, if they didn't have complete confidence that the future price can support development?

Mark Dowling said...

my concern is that the expanded production of bitumen will be shipped to the US for upgrading rather than refined in Canada. That should not be permitted to happen. We have enough resource industries where low value product is exported and the value add is lost to Canada.