Stephen Harper’s Petro-State Is Constructed On Tar Sands
This article first appeared in the Washington Spectator.
Late twenty first-century graduate students of enterprise learning the rising problem of stranded property will nearly certainly focus on the historical past of Canada’s Athabasca Oil Sand (aka tar sands). The case studies they read will both describe the gradual abandonment of the world’s largest reserve of bituminous crude or they will learn about the tar sands’ miraculous final-minute escape from changing into the world’s largest stranded asset. For both end result, the turning point they are going to look again on is just about now.
In fact, a few of Alberta’s crude has made its technique to market, but so much slower than it may have, or was projected to, that producers, refiners, shippers, banks and other investors in tar-sands growth are starting to marvel whether they’ve backed an excellent play by investing over $160 billion to show tar into oil.
So the financial stranding process has already begun. 5 international power giants–Shell, Complete, Suncor, Statoil and Occidental–have cut bait on main bitumen deposits in Alberta, during which that they had already invested billions. Suncor has just slashed another billion dollars from its capital spending program and $800 million more from operating bills. And as oil costs slide lower, business and investment banks are reconsidering future underwritings. An trade that recently envisioned doubling manufacturing over the subsequent 20 years is now looking at one thing closer to the opposite, a halving of production or worse in far fewer than 20 years.
American media coverage of the tar sands has centered totally on the approval of the Keystone XL Pipeline, which, if completed, would carry 830,000 barrels of Athabasca crude, every single day, to the world’s largest refining middle near Houston subsequent to a booming export hub. As a result of American and Canadian politicians and oil execs have lobbied so onerous for its approval, Individuals tend to imagine that construction of Keystone will safe the way forward for the tar sands. Not true. To even strategy break-even, at the very least four other pipeline routes can be needed to carry bituminous crude to the world’s market: two to 7 ways petroleum is used the Canadian west, one to the east and one north. If two or three of these strains are somehow stopped, and that’s quite prone to happen, the stranding of the tar sands will escalate, Canada will cease being a petro-state, and its business leaders will begin their search for one more staple to drive its nationwide economic system.
Staples Economic system
Canada has all the time been what economists name “a staples economy,” reliant almost fully on one staple useful resource after another. Fur was followed by cod, then wheat, potash, minerals, timber, and hydropower. 7 ways petroleum is used Immediately, 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 p.c of Canada’s commodity manufacturing. Unfortunately, over 90 p.c of its reserves are bitumen, the pricey manufacturing of which nets solely four % to Canada’s GDP. However oil represents 40 % of the country’s exports. So the urgency to develop and export the tar-sands oil has turn into a national priority.
Canada’s tar-sands booster-in-chief is Prime Minister Stephen Harper, an Alberta-based petrolero who rose to prominence in politics as Chief Coverage Officer of the Reform Occasion, 7 ways petroleum is used Canada’s model of the American Tea Celebration. Founded in 1987, Reform merged in 2000 with the floundering Progressive Conservative Celebration to kind a brand new and virtually unbeatable national coalition calling itself the Canadian Conservative Reform Alliance (after adding “Party” to its title, it grew to become CCRAP, and was nicknamed refinery “see-crap”). Harper became party 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 House twice.
Map by Kevin Kreneck
Once a member of Canada’s Young Liberals and a supporter of Pierre Trudeau, Harper went west as a young man, labored in Alberta’s oil fields and adopted his father into employment with Imperial Oil, Canada’s second-largest petroleum company (69 percent owned by ExxonMobil). There, like so many other western Canadians, he grew to despise Jap Canada, relatively just like the scion of a distinguished American household shifting from Connecticut to Texas. In Calgary, he became an outspoken and eloquent opponent of Trudeau”s National Power Plan, which appeared set upon nationalizing Canada’s last staple resource. While there remains to be talk of nationalizing oil and tar-sands oil in Canada, and in some polls a majority of Canadians assist the concept, that could not probably occur with Harper in energy.
On the 2012 World Economic Discussion board, in Davos, Switzerland, Harper announced that the expanded manufacturing and export of tar-sands bitumen was a national priority. Canada, he predicted, was set to turn out to be an power superpower. In Ottawa, he took rapid and aggressive steps to weaken environmental protections just like the Navigable Waters Protection Act, which was hindering pipeline development, and to fast-track tar-sands production.
However Harper’s focus remained on Europe, where in 2012 the European Parliament and member European Union governments have been debating phrases of a revised Fuel High quality Directive (FQD) and considering 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 gasoline than standard oil by means of their “properly 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 research and the disaster a European ban on soiled gasoline represented for Canada’s largest new staple. One vote in Brussels could go away the tar sands stranded immediately and perpetually, even if oil producers discovered a route to the Chinese market.
Throughout the 2 years main up to the EU parliamentary vote on the difficulty, Harper mobilized Canadian oil executives and his cabinet behind a $30 million nation-to-nation lobbying effort. Their first goal was the Stanford study, which they drove into the ground with their very own business-funded research.
Week after week, planeloads of oil execs and PR flacks crossed the Atlantic, Harper aboard every time he might be, laterally threatening a commerce struggle with Europe if the vote went the flawed way. Facet trips had been made to Washington. And members of the European Parliament were flown to Ottawa and Alberta for gold-plated junkets.
Without Harper’s effort, the Parliament in Brussels would almost actually have voted to ban dirty fuels. After two years of intense lobbying, the measure misplaced by a 12-vote margin 337 to 325, with 48 abstentions. A few months later, in the fall of 2014, the first shipment of tar-sands crude arrived in Europe, with many extra to comply with, as a vote on the Gas High quality Directive is not going to come up once more for not less than four years.
In the meantime, if a couple of EU member nations condemn tar-sands oil, and ban its import, more small nails will probably be pushed 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), extra producers and investors will abandon the sands.
If Canada’s tar sands do someday develop into stranded, the equivalent annual emissions of over sixty five coal-fired plants and 50 million passenger autos will stay underground. And numerous the credit score (or blame) will go to environmental activists, aboriginal communities, litigious farmers and teams like Greenpeace, 350.org, who’ve added to their anti-pipeline advocacy a marketing campaign to stress 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’re weak.
Strand Their Capital
In response to the Institute for Vitality Economics and Monetary Analysis, a think tank in Cleveland, the campaigns of environmentalists and native communities have already price tar-sands producers $17 billion. However that has not stemmed the determination of the North American fossil-gas trade to maneuver Athabasca crude to refineries around the globe.
Despite the insistence of American Republicans and petroleros that all the pieces rests on completion of Keystone XL, the pipeline means little to the U.S. economic system. In Canada, however, economists estimate that U.S. rejection of the pipeline might value the country as much as $1.7 billion a 12 months, way more vital than the loss of two or three hundred everlasting jobs the pipeline would create in the U.S. And by merely elevating break-even higher than it already is for bitumen producers, stopping Keystone may place the tar sands in far greater hazard of being stranded.
While property just like the tar sands should be stranded, because mining and burning them will raise the temperature of an already overheated planet a level or extra, they are more likely to develop into stranded, because they are both unable to succeed in market or have lost market worth.
The unhappy irony is that before Canada selected tar-sands crude to be its staple export, the nation was poised to change into a major global contributor to scrub power. It had signed local weather treaties, promoted solar-vitality, developed hydroelectric power and had a affluent renewable-energy trade below sail, for which the nation possessed all the required pure and monetary resources. Then one highly effective neoliberal free-market zealot decided to double down on excessive-carbon fuels and announce to the world that tar sands would develop into the subsequent nation-building staple for his nation.
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