Oil sands bitumen exports undermine Canada's economic future

Canada is headed down the wrong economic path by exporting raw oil sands bitumen, former ICBC CEO Robyn Allan said in a stirring presentation a week ago at the West Coast Oil Pipeline Summit. Allan highlighted the economic danger posed by oil sands pipelines including Keystone XL, Northern Gateway and Kinder Morgan that the federal government has been promoting in the name of jobs and growth. Below are excerpts from her presentation, "Oil Sands Development and the Economic Consequences".

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In addition to sending meaningful jobs, wealth, and environmental standards down bitumen export pipelines, the oil industry plans to charge us more for essential petroleum products.

For almost two years, Enbridge told us the benefits from Northern Gateway would come from higher prices paid in Asia for our oil. Pipeline proponents and elected leaders like Minister of Natural Resources Joe Oliver, told us this would contribute economic benefits to Canada.

What they didn’t tell us, and what my evidence filed with the National Energy Board last year disclosed, was that they planned to apply higher Asian prices on every barrel produced and sold in Canada every year for not one year, or five years—but every year for 30 years.

The information on this slide comes from Enbridge. It was provided to investors and analysts at a recent investor conference. 

What Enbridge told investors is that when access to Asia is achieved, prices on all barrels of heavy oil will go up to $108 per barrel. 

When refineries pay higher prices for their feedstock, they pass these price increases on. That’s the primary purpose behind accessing new markets—get the highest price possible for one barrel and pass it onto all barrels.

According to the prices in this slide, Enbridge is telling us that when Northern Gateway is built, we can expect prices at Canadian pumps to go up by about 5 cents a litre—and the only reason they will go up by 5 cents a litre is because Northern Gateway is built. 

We all know that higher oil prices mean a decrease in family purchasing power.  As families adjust, they cut back spending or go deeper into debt.

We also know that when businesses face higher energy costs, they cut in other areas, like wages or postpone investment, leading to slower growth—or resort to downsizing and layoffs. 

So whenever we are told access to foreign markets secures higher prices for our crude and this benefits Canada, we also need to be aware that oil producers plan to charge those higher prices on every barrel they produce. 

And when they do, their refineries pass it onto us right here in Canada.

The market access Canadians need for western Canadian crude is getting it to eastern Canadian refineries.  That’s a demand of about 750,000 barrels a day. 

Quebec and the Atlantic Provinces are almost completely dependent on foreign crude oil imports from volatile and uncertain markets—the same markets we are told China is trying to protect itself from by importing our crude. 

Refineries in eastern Canada pay higher prices for their imports because they are priced off an international benchmark called Brent. 

But, most Canadian refineries, especially in the east, cannot process oil sands bitumen.  This means it needs to be upgraded in Alberta to Synthetic Crude Oil—into SCO where it becomes very close to Edmonton Light and can be used in eastern Canadian refineries.

TransCanada has just entered into an open season to see if oil producers want to ship oil on their pipeline from Alberta to Atlantic Canada. 

But if this pipeline transports diluted bitumen it presents the same economic problems as Northern Gateway, TransMountain’s twin, and Keystone XL. 

If diluted bitumen is shipped eastward its intended for export and Canadians will continue to be price-gouged at the pumps.

Trans Canada’s pipeline proposal becomes just another escape route out of Canada for oil companies so they can avoid upgrading bitumen in Canada. 

Instead of a Canadian upgrader, we get Keystone XL

Traditionally, Alberta upgraded about 60% of the bitumen pulled out of the ground.  In 2007 the Alberta government promised the rate would rise to 72% bringing with it the benefits of value added, meaningful jobs, and greater tax revenue. 

Then came the financial crisis and the upgrading projects were scrapped—in Canada. 

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