Sold down the river: How the oil sands are impoverishing Canada

In the talismanic foothills that envelop the northern B.C. city of Prince George, a visibly stunning shift has occurred in the nature of the local vegetation over the past two decades. For this boreal community, the process has manifested itself in a slow-motion fiesta of colours, particularly since 2004; predominantly dark-green pine trees transmogrified to a rusty red, before collapsing to the ground. Replacing some of the departed conifers have been deciduous birch, aspen and poplar, whose leaves shift from light green to dazzling yellow and orange in the fall, before they themselves flutter to the ground as winter approaches.

But this splendid transition is, at the same time, an emblem of a sinister force that has hampered much of B.C.’s hallmark industry, and led to widespread pine die-offs. And in turn, the trees’ decomposition has released tremendous quantities of carbon dioxide and methane gas into the atmosphere, further exacerbating the steady march of climate change that, incidentally, has been at the root of the problem from the start.

The mountain pine beetle is hardly a new arrival to our province, having played an integral role in the boreal forest ecosystem since time immemorial. But the ecosphere upon which human beings – and all non-human animals – depend for our well being exists in a delicate, precarious balance; even minor changes in the conditions to which we have become accustomed can portend drastic shifts in the natural world, our relationship to it, and our ability to cope with the results. The destructive proliferation of the mountain pine beetle, owing to a seemingly modest rise in average temperatures over the past 50 years (most climatologists have charted the increase as between half a degree and a couple of degrees centigrade), is a case in point.

The economic and social consequences of the mountain pine beetle epidemic for B.C. have been devastating; a 2012 provincial government study estimated that the phenomenon has already cost our province thousands of jobs, and that the northern interior of B.C. – long a hotbed of forestry activity – may see its long-term employment potential reduced by as much as half due to the pine beetle infestation and resultant damage to this key resource.

Sadly, however, where the economic, environmental and social costs of climate change are concerned, B.C.’s mountain pine beetle contagion is the tip of the iceberg.

Why, then, is our federal government so insistent on pursuing an economic strategy that promises to exacerbate the catastrophe we’re already facing?

Falsehood #1: The oil sands will bring us long-term prosperity

There are many reasons this statement is objectively nothing more than pure folly, a few of which I’ll touch on here.

First, as the global supply of readily available oil reserves ineluctably diminishes, demand persists or increases, and we are forced to resort to increasingly unconventional methods of procurement – like oil sands mining, offshore drilling and shale fracking – it is reasonable to anticipate that the cost of petroleum, over the long term, will continue on the same upward trend it has followed for the past 30 years and change. (West Texas Intermediate crude’s spot price in Cushing, Okla., – adjusted for inflation – has roughly quadrupled since December of 1985.) Considering that the supply of crude oil in the U.S. reached its highest point since 1978 just last week – in other words, its most abundant level since a year before the the 1979 Islamic Revolution in Iran – the appetite of our neighbours to the south for dirty Canadian bitumen is not exactly voracious at the moment. China, meanwhile, is fast developing its own energy resources in the form of coal mining, fracking, and offshore deep-sea drilling in the South China Sea, meaning that Canadian bitumen, even having reached the Asian market, will be competing for customers against numerous alternate suppliers, and is at a natural disadvantage over conventional crudes in terms of desirability, because of the additional expense and hassle associated with refining diluted bitumen, as opposed to the lighter varieties that lie beneath China’s national waters.

As any savvy businessperson will tell you, this is a dismal plan for the owner of an asset who is seeking a healthy return on a sale. If long-term financial prosperity is what we’re after, surely our approach should be to sit on our petroleum and allow it to appreciate, rather than liquidate it as rapidly as possible (which is a more approximate reflection of our present strategy).

Never before has the advice of the late Alberta Premier Peter Lougheed – “Think like an owner” – been more applicable to our circumstances. And never before has it seemed to fall on so many deaf ears.

But the unfavourable nature of present market conditions is the tip of the iceberg in any thorough discussion of why liquidating the Alberta oil sands is worrisomely short-sighted. What our politicians, businesspeople and economists seldom seem to consider, is that the sale of non-renewable commodities is nothing more than a transfer of wealth from future generations to (primarily) moneyed members of the current generation. Surely we must recognize that by selling off our non-renewable resources, we are effectively stripping cards from the hand of our children and grandchildren. Can we not come up with a better means of creating jobs and prosperity now, than by eliminating the prospect of jobs and prosperity in the future? What’s the end game here? And where will Canada’s future energy supply come from if we don’t start making concerted investments immediately in renewables on a scale required to replace fossil fuels?

To invoke the analogy of the household, our politicians – among them Alberta Premier Alison Redford, Saskatchewan Premier Brad Wall, Prime Minister Stephen Harper, and even B.C. premier and bullish liquefied natural gas enthusiast Christy Clark – starved for revenue after offering a slew of untenable tax breaks to major corporations, are proposing to pawn off our precious family heirlooms at bargain-basement prices each month in order to buy groceries. That their plan is unsustainable is hardly a challenging concept to grasp; our family’s supply of heirlooms is limited, and every item we sell is an item of which we’re depriving future generations. If those who hold elected office in this country are unable to comprehend this, or simply unwilling to contemplate it, then they no longer deserve the confidence of the citizens they purport to serve.

But perhaps the most important consideration of all, is climate change.

As I alluded to earlier, the mountain pine beetle’s impact on the B.C. economy has been significant, costing us billions in future revenue from our forestry industry and thousands of jobs. And the beetle’s pernicious activity is almost indisputably linked to the steady alteration of our climate. But this is only one aspect of the phenomenon that’s upon us, and if we plan to make an informed decision about managing our resources, we’d better have some idea of the cost of maintaining the status quo.

There are, in fact, so many costs associated with climate change – and its hideous cousin, ocean acidification – that an effort to complete a thorough accounting of its impact on Canada alone would be far beyond my capabilities. But suffice it to say, climate change and ocean acidification together will cost our country at least hundreds of billions, but more likely trillions of dollars over the course of the next century. (And I haven’t even begun to mention the expenses our activities are imposing on Global South countries.)

Here are a few examples among a great many, in the province of B.C., of the sorts of consequences we can expect from climate change: Dike upgrades in Vancouver, in today’s dollars, by the year 2100, projected to set us back to the tune of $9.1 billion (and a similar fate awaits every coastal city, community and agricultural area across the country); severe and repeated damage to the agricultural and winemaking industries as summer droughts (like the 2003 and 2009 events) become more frequent and more intense; larger, more dangerous wildfires will decimate millions of dollars worth of property and threaten lives; increasingly severe weather, including floods in communities like Pemberton and windstorms in Greater Vancouver and Vancouver Island will topple old-growth trees and destroy homes; landslides exacerbated by the mountain pine beetle’s devoration of the trees that hold our mountain flanks in place will threaten whole neighbourhoods; diminished river flows into hydroelectric reservoirs in some areas of our province will force us to import electricity from other jurisdictions and turn increasingly to fossil fuels; the northward shift and decline of wild salmon stocks as marine and fluvial waters warm and grow murkier will severely undercut both commercial and aboriginal fisheries. Et cetera, et cetera.

And this dismal picture assumes 100% of the diluted bitumen in B.C.’s current oil pipelines makes it safely to its destination – no spills, no cleanup, and no financial, ecological, social or human cost associated with such a disaster – which, in reality, is impossible.

Given that, according to NASA climatologist Dr. James Hansen, the Alberta oil sands contain more total carbon than all of that which has been emitted into the atmosphere to this point in human history, and that the project is already the largest industrial endeavour on Earth and a major contributor to climate change as we speak, the oil sands liquidation strategy our governments are pursuing seems worse than ill-advised.

As a matter of fact, it seems downright treasonous.

Falsehood # 2: We need the oil sands in order to finance our social programs

Once we’ve finished paying through the nose and teeth for the mitigation, adaptation and disaster cleanup efforts climate change and leaky oil pipelines will require, once we’ve (invariably) suffered more than a few fatalities at the hands of our increasingly inclement atmosphere and contaminated environment, what will we have left to pay for the things we need?

The answer is, not much at all. In fact, the evidence suggests to me that if we proceed with the current pace of oil sands liquidation, the industry will leave Canadians even worse off 50 years from now than we are today.

If, as I’ve noted above, the menaces of climate change and the Dutch disease do indeed cost Canada and its economy hundreds of billions, perhaps trillions, of dollars over the coming generations (and there’s abundant reason to expect that they will), even the most optimistic revenue projections for the Alberta oil sands won’t be sufficient to recoup our losses – let alone finance healthcare, education, and all the other publicly funded bedrocks of Canada’s society and economy in the future.

As of April last year, the province of Alberta possessed about 171 billion barrels of proven oil reserves. In a 2011 study, the Canadian Energy Research Institute projected that Alberta could expect $350 billion in resource royalties over the next 25 years, while Canada’s federal government would accrue roughly $322 billion in total tax revenue from oil sands-related jobs and economic spinoff over the same time period. Viewed another way, this amounts to about $100,000 per Albertan in royalties over the next two and a half decades, plus a little under $1000 per Canadian, assuming the populations of those respective jurisdictions remain the same. (They won’t, of course.) At face value, this windfall seems like it should be additive – if our governments continue to fund public services at the present rate, and resource revenues are added to that funding pie, that pie will invariably grow, and program funding will increase. Right?

Not necessarily.

This assumption unfortunately ignores a fundamental reality of the manner in which our governments have operated in the neoliberal era: rather than parlaying resource royalties primarily into investments in public infrastructure and programs, by and large, our politicians have directed these revenues toward enabling increasingly generous corporate tax cuts. Since 1950, corporations’ share of Canadian federal tax receipts has diminished by nearly two thirds. Further, tax cuts for corporations formed the crux of the stimulus package our federal government proposed in 2008, in an effort to counter the effects of the sub-prime mortgage crisis. The problem is, corporate tax cuts are notoriously unhelpful at stimulating job creation, for reasons that are not difficult to grasp: the chartered corporation has a fiduciary responsibility on behalf of its shareholders to maximize profit, and eliminate superfluous expenditures. Given this, why on Earth would such an organization put more Canadians on its payroll unless it had absolutely no alternative?

The other obvious downside to the Harper/Flaherty “stimulus” and bank bailout, is that Canadians are still paying for them. Vital services and programs are being slashed left, right and centre, priorities transferred from the needs of Canadians and First Nations, to things like self-serving government propaganda, and civil service mandarins employed for purposes like the muzzling of taxpayer-funded scientists. This is what “fiscal restraint” looks like under the Harper regime.

If our provincial and federal governments continue their trajectory of corporate tax cuts every few fiscal years, and continue to propose deferral of taxation and the elimination of public debts through future resource royalties (think Christy Clark), this will likely mean no net gain over time in the financial welfare of the average Canadian. And to the extent recent history is a harbinger of things to come, we can also look forward to the further erosion of funding for our government services. Since development of the Alberta oil sands began in earnest in the 1970s, tuition for Canadian post-secondary students has rocketed, funding for Canada’s universal healthcare system is perennially inadequate, the national rate of homelessness has surged, particularly since the 1990s, and household debts now stand at a record high. Last year, a record number of Canadians made use of food banks. Meanwhile, government departments and their programs and services across the country always seem to be shortchanged, leaving them vulnerable to cutbacks, privatization, or outright elimination. And while none of this is the fault of the oil sands per se, our politicians’ malinvestment of the proceeds from the Athabasca project has indeed played a prominent role.

Of course, there will be plenty of temporary employment around the oil patch in the short to medium term, but nothing sustainable in the long term; once the oil sands have been liquidated, Alberta – and by extension, Canada – will be forced to seek wealth elsewhere, and will encounter severely diminished prospects of finding it. Meanwhile, the overzealous exploitation of the oil sands is undeniably producing a “Dutch disease” effect in our country; as foreign investment in Canadian bitumen drives up the value of our dollar, our manufacturing sector – relatively more sustainable over the long term than the oil sands industry – is hemorrhaging jobs to temporary oil-patch work, low-paid, low-skilled service positions, and niggardly-wage manufacturing headquarters overseas, like China, India, Vietnam, and Bangladesh.

Wither Canadian social democracy?

If our so-called leaders are truly concerned about the continuity of the Canadian social model – in which investment in assets like education, public healthcare, the sciences and the arts has traditionally been a priority – let’s just say they have a funny way of showing it.

Not only are they paying little more than lip service, in the form of an unwelcome and minimally helpful carbon tax foisted on Albertans, to the exorbitant costs Canadians will incur as a consequence of climate change, they’re also upholding an economic arrangement in which only a small fraction of the total revenue from the sale of oil sands bitumen ever reaches our public coffers. Indeed, much of this lucre simply lines the pockets of multi-millionaire oil executives.

Further on that score, oil company CEOs are some of the best-heeled in Canada. Of our country’s 10 largest oil and gas corporations – Suncor, Imperial Oil, Enbridge, TransCanada, Canadian Natural Resources, Cenovus, Encana, Talisman Energy and Nexen – nine boast chief executives among the 50 most handsomely compensated in the country, with an average take-home remuneration of about $7.5 million. (Rick George of Suncor was paid $14.9 million in 2011.) These individuals and their compatriots in the corporate suites all (presumably) pay income taxes in Canada, such that the federal and provincial governments, barring extraordinarily elaborate tax-dodging monkey business, are entitled to a considerable portion of their personal income. But if the oil sands belong to Alberta and Canada, the remuneration afforded oil company executives and higher-ups certainly takes a massive bite out of the total revenue the resource fetches at point of sale.

Furthermore, while the individuals employed by these firms pay taxes on their incomes, such is the nature of the lopsided tax relationship between limited liability corporations and the state, that the companies themselves pay taxes not on revenue (as a living, breathing income earner would), but on profits. Thus, only a puny fraction of the lucre these companies accrue – decisions over the expenditure of which are, needless to say, made beyond the glare of public scrutiny most of the time – ever makes its way to public coffers.

The regressive royalty regime

The province of Alberta is entitled to royalties from all sales of its bitumen under Canada’s constitution. In the province’s 2012 budget, this royalty share averaged $6.10 per barrel, according to blogger Andrew Leach, while the price of a barrel of Western Canadian Select (WCS) diluted bitumen averaged $84 per barrel over fiscal year 2012-13, according to Royal Bank of Canada data. In other words, about seven per cent of the revenue from sales of Alberta diluted bitumen makes its way directly to the provincial government; the rest swashes around for a while, lining the pockets of a few resource barons and investors, before the dregs trickle down to the respective federal and provincial administrations in the form of income tax.

If the goal of this regime is to fund social programs, in other words, it’s an extraordinarily inefficient method of doing so. And with Premier Redford’s government facing a large budget deficit, and increasingly reliant on royalties from diluted bitumen sales to finance its expenditures (as a share of Alberta’s total public revenue, diluted bitumen royalties are expected to double from 10 per cent to 20 per cent by fiscal year 2014-15, according to Leach again), the arrangement in place now is one of layered perverse incentives: the oil barons want to get rich(er) and maximize profits for their shareholders by increasing production and liquidating the resource as quickly as possible, Redford wants to balance her province’s budget without raising taxes, cutting services or alienating said oil barons in time for the next election, and our federal government has an increasing incentive to keep the dilbit flowing through an ever-expanding web of pipelines – albeit at a severe discount that none of our politicos seems terribly serious about mitigating, their vacuous musings over the short-lived Cushing oil glut aside – in order to maintain the popular delusion that our prime minister is a sound economic tactician.

A few politicians peddle four-year pro-corporate agendas through relentless, mendacious taxpayer-funded propaganda campaigns; a gang of male, white, sexagenarian multi-millionaires acquires another yacht or private jet or 10; a few moneyed investors see modest gains in their portfolios; and the majority of Canadians, faced with compromised, inadequate (if any) information from our mainstream media, and little (if any) say in how the oil sands are being developed, gets saddled with the impending reality of runaway climate change and its associated costs, the frittering away of an asset that we or our grandchildren may desperately need one day, and precisely zero measurable improvement in our overall standard of living in the long term – if we’re lucky, that is.

But wait- isn’t there a better way to go about this?

To be frank, it appears to me that, as a country, we’re managing the Alberta oil sands almost as poorly as is humanly possible. The good news is, that leaves us plenty of room for improvement in our tactics. At the risk of raising the spectre of a deceased South American president, let’s compare the Canadian strategy to the manner in which Hugo Chavez parlayed revenues from the sale of Orinoco oil sands bitumen into a robust welfare state in his native Venezuela.

In 1976, just a few years prior to Prime Minister Pierre Trudeau’s proposal for a more redistributive National Energy Plan for the Alberta oil sands, Venezuela nominally nationalized its Orinoco oil sands operation. (Trudeau’s strategy incidentally met with militant resistance from the outset, predominantly from pale-faced Albertans who, in what the First Peoples of that province would rightly recognize as a flourish of irony, decried the notion that a distant, out-of-touch colonial regime would dare contemplate the “confiscation” of “their” newfound oil wealth.)

But the incipient years of nationalization for the South American petro-state brought little in the way of genuine change; many of the same managers who had toiled under the transnational corporations stayed on as members of the Board of Directors of Petroleos de Venezuela S.A. (PDVSA), and many of the familiar multinational corporate tactics unfavourable to the Venezuelan people – including commercialization contracts with the same multinational corporations that had controlled the nation’s oil resource prior to nationalization – persisted after 1976. This arrangement was also dismally inefficient, offering the oil companies steep discounts on Venezuelan crude, while affording a poor rate of dispensation to the government – all of which should sound familiar to us here in Canada.

It was not until Chavez came to power, that a truly radical shift occurred in the pathway by which Venezuela’s oil resource reached market.

In 1999, a new Venezuelan constitution placed the state firmly in control of the Orinoco oil sands. The law established to govern hydrocarbons in the Bolivarian Republic stipulates that oil exploitation occur in “the public interest” – with a view to support, in the words of the law itself, “the organic, integrated, and sustainable development of the country, paying attention to the rational use of resources and the preservation of the environment.” Thus, Venezuela’s oil resource is, by law, designated specifically for the purposes of developing the country, enhancing social welfare, and adhering to a coherent national energy strategy.

This approach, by contrast, should sound decidedly unfamiliar to us here in Canada.

In 2001, Chavez implemented a new royalty regime, whereby the state would take nearly a third of the proceeds from every barrel of oil sold. (Contrast that with the measly seven per cent Alberta royalty example I cited earlier.) The government’s rationale for this hike in royalty rates, contemporaneous with a reduction of income taxes on oil extractors, was that wealthy income tax payers have a nasty habit of hiring a top-notch accountant, playing arbitrage with the tax and revenue systems of different countries and shifting their activities abroad, especially with the ease of capital flows permitted in the modern global economy. Royalties, on the other hand, are far easier to snag by the tail – and this is precisely what Chavez’s government did.

Further, Chavez was able to leverage his country’s position of influence within OPEC to persuade its member states to adhere to strict production quotas, many of which had been abandoned. These efforts propelled the price of Venezuelan crude oil ever higher.

The Venezuela example is an imperfect one; significant differences exist between that country and Canada, and Venezuela is plagued by serious problems of violent crime, the erosion of foreign direct investment, government corruption and high inflation. Chavez himself was often criticized for an authoritarian leadership style, cronyism, and petulance on the world stage. But where his policies have succeeded, the successes have been impressive, even to many of his critics: among others, a decline in poverty by half and severe poverty by more than 70 per cent since he first took office in 1998, improved access to healthcare and a drop in infant mortality of more than 18 per cent between 1998 and 2006, the near-eradication of illiteracy, a social housing initiative that has built more than 250,000 homes for indigent Venezuelans.

The rising cost of petroleum and its derivative products helped Venezuela, and in turn, helped to drive up the price of Canada’s heavy crude as well – so we have Hugo Chavez to thank (blame?), in part, for the fact the oil sands have become more profitable since 1998. But higher petroleum prices serve another valuable purpose in a market economy: They oblige automotive firms, the energy sector and governments to develop and pursue new, more efficient and more environmentally friendly technologies, which is precisely what they’ve done, historically, in response to rising oil prices.

Motorists will naturally feel irked by the additional expenses they incur in the short term, but improvements in vehicular fuel efficiency and the advancement of renewable energy sources are developments that benefit everyone in the long run, and realistically would be highly unlikely to happen – at least, not at anywhere near the current scale – if oil prices had remained relatively low over the past 15 years.

Much more work is required, starting immediately, to bring climate change under control. But it’s becoming increasingly clear that pumping out cheap oil as quickly as possible – as is Canada’s wont – is the opposite of what’s needed if we hope to make a concerted effort to tackle one the great ecological challenges of our time.

Sadly, on this score, Natural Resources Minister Joe Oliver hinted in a speech in April that Canada’s federal government has neither the sustainable development of the Canadian economy, nor the objective of fighting climate change close at heart.

“Venezuela may be a major supplier of heavy crude to the U.S. (read: the Koch brothers), but it has also threatened to cut supplies five times in as many years. That’s not a reliable partner. That’s not a stable source of oil. And that’s not how Canada will ever treat the United States (read: the Koch brothers),” Oliver remarked to a gathering of businesspeople and academics in Calgary at the time.

In other words, our federal government’s strategy for dealing with climate change is apparently to ignore it and pretend it goes away. Its blueprint for the development of the Alberta oil sands, meanwhile, is evidently to liquidate the sludge as quickly and cheaply as the current state of technology will allow, irrespective of the consequences. And as far as I’m concerned, the national interest of our country, and the universal interests of the human race, are both being thrown into jeopardy as a result.

Falsehood #3: the oil glut in Cushing, Oklahoma is driving down the price of Canadian crude compared to Brent and West Texas Intermediate (WTI) crude

This particular myth is of the most dangerous sort, since it contains a kernel of truth and is not easy to directly disprove. However, just as there has indeed been a glut of oil in Cushing that has had some impact (albeit short-lived) on the prices Canadian bitumen has fetched, there is likewise a glut forming in the quantity of evidence that, to say the least, casts doubt on this theory.

First of all, Canadian crude, abbreviated as WCS in Cushing, has clearly and consistently undersold WTI at Oklahoma’s famed refinery town for as long as figures have been kept, often by as much as one fifth. Why, you ask? The answer is simple: Canadian crude is more expensive and more labour-intensive to refine, which makes it less desirable for refiners. And in a market system, when one product or commodity is less desirable than others, its relative price will reflect that.

Supply and demand, folks.

But there’s another component to this pipe dream, if you’ll forgive the pun, which introduces an air of uncertainty its proponents cling to in hopes of pushing their extractive agenda, including the hairbrained Keystone XL project: If only we could direct our bitumen away from Cushing to other areas of the U.S., we might be able to command Brent or WTI-level prices for our oil sands sludge.

These people must hold an awfully low opinion of the intellectual capacity of our American colleagues.

The reality is, while Redford, Harper, Oliver et al. have been bleating about diversifying markets and constructing new pipeline infrastructure to divert Canadian bitumen away from Cushing, American oil firms haven’t merely been sitting on their hands, waiting for Canada to make the next move. Over the past few years, American resource companies have added substantially to the pipeline infrastructure that connects the Cushing oil hub to refineries in its surrounding states. In fact, as of May 2013, the vaunted Cushing glut we’ve heard so much about in the mainstream media, is now officially history, and the pipelines around Cushing are actually under-filled. What this implies is, if Canada does indeed manage to glean a higher price for its bitumen, this enhanced rate of return will almost certainly not be dictated by market forces – meaning that it almost certainly will not materialize. And to the extent that future oil gluts and instances of scarcity develop, the U.S. oil market appears to be fairly adept at correcting these disparities whenever it is necessary and/or profitable for its agents to do so, and without the need for the U.S. Department of State to approve proposals for new pipelines, like the Keystone XL, that would cross the Canada-U.S. border.

But I suppose there’s no discounting the good will of the Brothers Koch…right?

Falsehood #4: First Nations and environmentalist protesters are wasting their time, as Alberta bitumen will simply make its way to refineries near the U.S. Gulf Coast on trains if the pipelines don’t get built

This theory also contains a kernel of truth – of course, anyone who takes the time to read the news can discern that Alberta’s oil producers are increasingly turning to railroads to export their sludge. However, there is another crucial factor that must be considered here, and that is the relative cost of shipping by rail versus transporting bitumen through oil pipelines that traverse the continent.

The Athabasca oil sands have always been a pain in the arse to extract, to say the least. Over the years, industrialists have twisted their grey matter into pretzels trying to devise means of extracting and liquefying the sandy, sulphurous slop – subterranean nuclear detonations were even contemplated at one point. Decades passed before the extraction of the Athabasca oil sands could be performed at a cost that would enable oil firms to break even, and even now, the quantities of water, energy, natural gas, and environmental desecration required to turn a profit remain prohibitive.

According to data from the U.S. State Department, the cost of transporting a barrel of oil sands bitumen from Alberta to refineries near the U.S. Gulf Coast ranges from $15.50 to $31 by train, compared to roughly $7 by pipeline. As you’ll no doubt have intuited, this cost differential is enough to put an oil sands undertaking out of business. In other words, the blocking of pipeline construction has the effect of imposing an extortionate carbon tax on the oil sands – which, as most credible climate scientists will tell you, is precisely what’s needed to keep this project in check.

The shutdown of some oil sands mines and refineries due to economic shortfalls is more than a potentiality; it is happening already. In March, Suncor announced the closure of its Voyageur Oilsands Upgrader project, citing a change in market conditions that challenged the economic viability of the endeavour. Suncor can take solace in in good company, however: Canadian Natural Resources was forced to close a refiner and upgrader recently by dint of economic concerns, and the bankruptcy of Nexen last year made way for its takeover by Chinese state-controlled firm CNOOC.

The Tories are acutely aware of the threat to the viability of the oil sands that now exists, which accounts for the seemingly relentless campaign on the part of Canada’s federal government, and its allies among Canada’s power elite, to demonize the oil sands’ critics – from Sierra Club Canada, to journalist Mike de Souza, to New Democrat leader Thomas Mulcair. A confidential government memorandum addressed to Minister Oliver, and obtained by the CBC last November, warns that the breakneck pace of exploitation of Alberta’s petroleum reserves has, in a manner of speaking, converted the oil sands’ extractors  into their own worst enemy: the current speed of development and extraction is so frenzied, that firms have had difficulty recruiting enough workers, which, in turn, has driven up labour costs, and undercut profit margins.

And as the snake devours its own tale, opponents of the oil sands are only too willing to help, stalling pipeline projects and imposing ersatz production quotas on firms to whom the notion of a goalpost, other than “sell sell sell, more more more,” is seemingly as alien as the surface of Mars.

The evidence clearly suggests that demonstrations, blockades and general heel-digging by environmentalists and First Nations groups are indeed effective modes of intervention against further expansion of the oil sands project. The longer protesters delay the construction of pipelines, the more extractive endeavours will be left with no choice but to shut down, the economics of their continued operation rendered unviable.

In the near term, of course, the impact of these shutdowns of oil sands operations is unfavourable, at least in terms of GDP, to the Canadian economy. In Canada’s corporate and government-controlled news media outlets, you will note that border-line obsessive attention is devoted to quarterly earnings and GDP numbers, usually furnished by an economist at one of our country’s half-dozen or so systemically important (read: too big to fail) banks.

However, if we take a longer-term view of this question than, say, a month or two down the road, a vastly different story begins to emerge. Less development of the oil sands means less short-term financial gain, indeed. But it also means less desecration of the boreal forest, less voracious consumption of energy and water, less Dutch disease, less potential for devastating pipeline spills, less runaway climate change, less contamination of the Athabasca River and surrounding Treaty 8 territory that violates the spirit of the original pact signed between First Nations and our ancestors, and less liquidation of an asset for the sake of short-term profits that accrue to a few, at exorbitant expense to the rest of Canada, and the world.

That, my friends, is the epitome of a blessing in disguise.


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