The Country Has Become a Petro-State, Happily Drilling for Profits as the World Warms
What has happened to Canada? To the dismay of many Canadians, a country with an international reputation for its relatively progressive environmental policies (at least compared to the United States) is rushing headlong to dig up all the oil, gas, and coal it can. The country’s leaders can scarcely muster the effort to pretend to want to limit greenhouse gas emissions. And the Canadian media has largely gone along with the program. Put it all together, and you have a country that has become a full-blown petro state.
Photo courtesy Adopt a Negotiator
People are starting to notice. Last December at the UN climate talks in Durban, South Africa, Canada beat out tough contenders like Saudi Arabia and the US to be elected "Colossal Fossil" by environmental campaigners from around the planet. Canada had the dishonor of being the most uncooperative country out of 193 nations at the climate summit. It was the fifth year in a row that international environmental groups gave Canada their 'highest' award for its consistent efforts to block any agreement on reducing carbon emissions.
By contrast, the European Union managed to persuade the rest of the world to breathe life into the Kyoto Protocol, the only international agreement to reduce. Less than 24 hours after those very difficult climates talks ended, Canada declared it wanted no part of Kyoto, a treaty it had once championed.
During the two weeks following its announced withdrawal from Kyoto, Canada approved expansions of tar sands operations by oil giants Exxon, France's Total, and Canada's Suncor. Those multi-billion-dollar expansions are expected to increase tar sands oil output by one million barrels per day by 2020. That will result in an additional 220 million tons of carbon dioxide being emitted into the atmosphere annually from both the energy-intensive tar sands production process and burning the resulting gasoline and diesel. Well-to-tank greenhouse gas emissions from Canadian tar sands crudes are 72 to 111 percent higher than the conventional oils, according to a May study from the US Congressional Research Service.
Those three expansion projects alone will generate more climate-damaging emissions than the annual emissions of sizeable economies such as Argentina and the Netherlands.
"My early Christmas present to myself — and to Canada — was to exercise our legal right to get out of the Kyoto Protocol," Peter Kent, Canada's Minister of the Environment, said in a speech in Calgary, Alberta on January 26. Under the 1997 Kyoto Protocol, Canada promised to reduce its emissions six percent below 1990 levels by 2012. In 2010, Canadian emissions were at least 26 percent greater than in 1990.
"It really wasn't a tough decision," Kent said.
A Fossil Fuel Industry Takeover
What's happened to Canada is that it has experienced a steady takeover by the fossil fuel industry. Canada's is now the world's sixth largest crude oil producer and the biggest supplier of oil to the US. Canada is also the third largest producer of natural gas and one of the top ten miners of coal. This enormous boom in fossil fuel production has been underway since the late 1990s. Like Saudi Arabia, fossil energy is by far Canada's biggest export and has become the dominant economic and political focus.
Prime Minister Stephen Harper made this perfectly clear in 2006 when he proudly proclaimed Canada as "the emerging energy superpower" during a G8 meeting. Harper, the son of an oil company executive, heads the Conservative party that has pulled Canada sharply to the right. Prior to entering politics, Harper was the climate-change denying head of a right-wing lobby group. Not surprisingly, his government has done little to reduce Canada's carbon emissions, which are among the fastest growing in world. By contrast, US emissions declined in recent years.
Even as Canadian CO2 emissions rise, the Harper government is shutting down some of the country’s few remaining “green” programs. In March, the government cancelled a popular home energy retrofit program. The retrofit program reimbursed costs of up to C$5,000 for improving energy efficiency in homes. It was unexpectedly cancelled with more than half its budget — $200 million — unspent.
"Canada has become a 'petrostate'," says Alberta journalist Andrew Nikiforuk, author of the award winning book, Tar Sands: Dirty Oil and the Future of a Continent. A petrostate is a country where much of the wealth comes from oil. "The Canadian and Alberta governments now lobby on behalf of the oil industry and fight any restrictions on carbon emissions to combat climate change," Nikiforuk says.
Canada's federal government collects about $5 billion a year from the tar sands industry alone. From 1999 to 2008 Alberta received $10 billion a year in revenues from the oil and gas industry, according to the Parkland Institute, an independent research centre at the University of Alberta. The tar sands brought in less than $2 billion a year due to absurdly low royalty rates. Meanwhile tar sands producers averaged more than $10 billion a year in pre-tax profits.
Photo courtesy The Pembina Institute
Hooked on energy dollars, the Canadian and Alberta governments only make decisions that favor growth of the energy industry, Nikiforuk says.
Most of that energy industry growth is in the tar sands located in pristine boreal forest and wetlands of northern Alberta. The industry likes to call them “oil sands,” though the oil is actually a tarry bitumen mixed into the sandy soil. Environmental activists call them "Canada's Mordor." No matter that they are called, the tar sands are the world's largest industrial project. Nowhere has fossil energy expansion or investment been faster or larger. Since 2001 nearly $300 billion has been invested by the oil and gas industry.
While the tar sands may be located in Canada, more than two-thirds of all oil production is owned by foreign entities. China alone has put $36 billion into tar sands development. Even “Canadian” oil companies like Suncor are predominately owned by non-Canadians, which means that a majority of the industry's profits are sent out of the country, according to a recent analysis of stockholdings by a Canadian conservation group.
In 1999 the tar sands produced 300,000 barrels of heavy crude oil a day. Now it’s up to 1.4 million barrels, and expected to increase to 2.4 million a day by 2015. Virtually all of the current production flows south to the US via existing pipelines. But to increase production, new pipelines such as the controversial Keystone XL are needed. That seven-billion-dollar project is designed to carry 700,000 to 800,000 barrels of tarry, unrefined oil every day 2,400 kilometres south through the US heartland to refineries in Oklahoma and Texas. Most of the refined oil is expected to go to non-US markets.
If Keystone XL and the Northern Gateway pipeline to the Pacific coast are built, or the newly proposed eastern route to Montreal, production is expected to reach 4 million barrels a day by 2020. And there's much more to come. An incredible $2.077 trillion is expected to be invested expanding and maintaining the tar sands over the next 25 years, according to the Canadian Energy Research Institute.
A Natural Gas and Coal Powerhouse
Although tar sands development gets most of the media attention, Alberta is also one the world's largest suppliers of natural gas from its conventional and unconventional gas reserves. In 2000 there were less than 100 gas wells that tapped "unconventional" natural gas fAlberta Environment, a provincial agency, counts 176,000ound in coal seams or in shale deposits. Today Alberta Environment, a provincial agency, counts 176,000 multistage hydraulic fracturing sites. US EPA estimates 35,000 wells are fracked in the US each year.
Next door to Alberta is the province of British Columbia. Some of Canada’s most pristine and rugged wilderness is found in northeastern British Columbia — and the region is also home to some of the biggest shale gas operations in North America. Shale rock formations there contain hundreds of trillions of cubic feet of natural gas that can only be tapped by fracking. BC's Horn River basin may hold 165 trillion cubic feet of gas while another region called Montney is estimated to have 49 trillion cubic feet, according to an April 2011 report by the US Energy Information Administration. This largely roadless region will require new roads and pipelines to bring the gas some 1,000 km across the Rocky Mountains and the Coast Range. "Northeastern British Columbia is a key habitat for grizzly bears, caribou and others. Fracking operations are moving into untouched areas, building roads, drill pads and wastewater ponds," says Tria Donaldson of the Western Canada Wilderness Committee, an environmental NGO based in Vancouver.
About 90 percent of the gas produced in British Columbia is exported to US or sent to Alberta, where it is used to boil the tarry bitumen out of the millions of tons tar sands. A massive expansion of shale gas operations is underway due to the recent approval to build a liquefied natural gas plant (LNG) on BC's coast, at Kitimat. Korea Gas, Shell, Mitsubishi Corp and Petro-China are involved in the $12 billion project to compress and liquify 1.2 billion cubic feet per day and load it on LNG tankers for lucrative Asian markets. Another LNG terminal owned by US companies has received permits to begin construction in the same area.
The massive increase in fracking will put new burdens on the region’s fresh water resources. "Fracking is using huge amounts of fresh water in a region that suffers water shortages," Donaldson says.
Millions of liters of water are needed for each well. The gas industry has obtained rights to take 275 million liters from local rivers, lakes and streams every day. Sixteen companies were fined last October for failing to account for how much water they were taking. According to media reports, the fines were less than $1,000.
Canada is also tapping into its significant coal deposits. The country is fifth in the world in terms of coal reserves, behind only the US, China, Russia and Australia. BC is also Canada's main coal export hub, with three coal export terminals including Westshore, the busiest coal export terminal in North America. Most of the nearly 30 million tons of coal exported each year is from BC and Alberta.
And so the world's new energy superpower appears intent on condemning the planet to dangerous levels of global warming. With Canada pumping out four million barrels per day of tar sands oil by 2020 it will be responsible for dumping one billion tons of CO2 to the atmosphere every year (from tar sands extraction and burning of the fuel). Throw in Canada's natural gas production and that will add another half billion tons annually by 2020. And then at 2.86 tons of CO2 per ton of coal, millions more tons of CO2 from Canada's growing coal exports.
The world is supposed to be on a CO2 diet shedding 6 to 10 billion tons below 2011 levels by 2020. And then continue to decline every year thereafter. Failure to make those reductions means global warming will shoot above 2 degrees C putting the planet at serious risk of dangerous climate change. Canada and every nation in the world signed an agreement at the 2010 UN Climate talks in Cancun to keep global temperatures below 2 degrees C.
“Reckless Resource Capitalism”
With all of the fossil fuel investments and increased exports, Canada's GDP shot up from an average of $600 billion per year in the 1990s to more than $1.7 trillion in 2011. But GDP is only a measure economic activity. Little of this new wealth stayed in Canada as government revenues from other industrial sectors plunged, leading to enormous deficits. And what remained has gone to a very small percentage of the population, dramatically increasing the gap between rich and poor.
While energy wealth has virtually tripled Canada's GDP in 15 years, the country's poverty rates have skyrocketed. One child in seven now lives in poverty, according to the Conference Board of Canada, the country's foremost independent research organization. Income inequality increased faster than the US, with the rich getting richer and poor and middle class losing grounds over the past 15 to 20 years, the Conference Board reported last September.
"Most of Canada's increase in wealth went to the big shareholders in the resource industries,” says Daniel Drache, a political scientist at Toronto's York University. “It mainly went to the elites."
Drache argues that Canada has moved into a type of “reckless resource capitalism,” sacrificing innovation and creativity. Resource extraction industries like logging, mining or fossil fuel production create relatively few jobs, and most of them are short-term positions. Almost all of the equipment used in Canada for resource extraction is made by other countries.
Drache says Canada's economy has completely reversed from its high-tech days of the 1980s and 1990s and has returned to its colonial roots as a "resource-based economy selling rocks [minerals] and logs" — and now oil and gas.
The extraordinary wealth in one sector has been a disaster for the overall Canadian economy, according to a recent study. Up to 45 percent of job losses in Canada's manufacturing sector can be attributed to what economists call "Dutch Disease," wrote authors from Canada and Europe in a peer-reviewed paper published May 15 in Resource and Energy Economics.
Dutch Disease refers to the many examples where an increase in exploitation of natural resources coincides with a decline in the manufacturing sector. It was first documented in the Netherlands during its North Sea oil boom in the 1960s.
Canada's energy wealth has also exacerbated income inequality by spurring the cost of goods and services and making Canadian exports more expensive. Ten years ago, the Canadian dollar was worth about 65 cents of a US dollar. In recent years, the Canadian dollar has often traded at parity with the US dollar, or even exceeded it in value. The study in Resource and Energy Economics found that the "Canadian currency has been driven up by the prices of commodities." As the Canadian currency gained strength, manufacturing jobs plummeted 35 percent since 2000. In 2011 Canada lost industrial plants at twice the pace of the United States.
"This illustrates a negative side-effect of the oil-resource richness in Alberta," the study’s authors concluded.
That is a conclusion the Harper government does not want to hear even though the study was commissioned in 2008 by a government department. Applying the term "Dutch Disease" to Canada has Harper officials saying it is an insult to the hard-working employees in the resources sector.
Under Canada's multiparty, first-past-the-post electoral system, the Harper government can do almost anything it wants, even though only 40 percent of votes cast were for the Conservative Party. The next election will be in 2015 at the earliest (Canada does not have fixed election dates).
"Oil wealth has changed the culture of Canada, but there is no discussion about any of this,” Nikiforuk says. Canada's media have avoided the issue or acted as cheerleaders of the energy sector. The tar sands are already too big and have had enormous impacts on Canada's politics, economy and environment, he says.
Nikiforuk's hope is that growing concerns by Europeans and Americans about the tar sands and Canada's rogue status on climate change will shake Canadians up.
“That is what it will take for us to have a national debate on this.”
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