Canada's curse

Photo by JIRI REZAC

Europeans once regarded Canada as a decent ‘do-gooder’ democracy, celebrated for its vast forests, pristine waters and pleasant cities. But the rapid development of the tar sands, the world’s largest energy project, has not only blackened the country’s environmental reputation but dramatically undermined its political and economic character.

Oil, a politically corrosive resource, has unsettled the nation. Ever since Canada supplanted Mexico and Saudi Arabia nearly a decade ago as the number one oil supplier to the US, the federal government has become an increasingly aggressive defender of hydrocarbons and little else.

The nation’s dismal record on climate change, and minimal investments in green energy, simply reflects a growing dependence on oil revenue, oil volatility and petroleum lobbyists. As a consequence, Canada now shares the same sort of unaccountability and lack of transparency that marks fellow petro-states such as Saudi Arabia. Nowadays Canada is, as one Toronto Star political columnist pointedly put it, ‘a nation that doesn’t say much, doesn’t do much and doesn’t seem to stand for much’.

The bitumen boom

Canada’s dramatic transformation began with the rapid exploitation of the tar sands in the mid-1990s. This resource, a true symbol of peak oil, is neither cheap nor light. Bitumen, an inferior and ultra-heavy hydrocarbon that resembles asphalt, is so thick that it can’t move through a pipeline unless diluted with a solvent.

Bitumen also contains so much carbon (and so little hydrogen) that it must be upgraded into ‘synthetic crude’, a product with a higher sulphur, acid and heavy metal content than West Texas crude or North Sea oil. As a consequence, bitumen remains the world’s most capital-intensive oil at $60-80 a barrel; in contrast, US domestic crude can be produced at $10 a barrel.

Although industry studies claim that bitumen production is only 15 per cent dirtier than light oil, the facts speak otherwise. The US National Energy Technology Lab, for instance, recently calculated that jet fuel made from bitumen has a carbon footprint 244 per cent greater than that made from US domestic crude. While Statoil, Norway’s state-owned company, reports greenhouse gas emissions of 8 to 19 kilograms per barrel in the North Sea, production emissions in the tar sands range from 22 to 417 kilograms or higher. In addition, scientists report a disturbing lack of public transparency on tar sands emissions reporting.

Nevertheless, every major global oil company has joined the bitumen boom. To date, the $200 billion scramble has directly industrialized 1.4 million hectares of forest – the equivalent of 40 Denvers or 17 Berlins.

Environmental messes

The spectacle has not been pretty. Open pit mines the size of cities excavate shallow bitumen deposits in the forest, while steam plants inject deeper formations with as many as 12 barrels of steam to melt just 1 barrel of bitumen. Both recovery methods create dramatic environmental messes.

The mines generate extraordinary volumes of toxic waste, which companies store in massive unlined dykes. These geologically unstable ‘tailings ponds’ occupy 140 square kilometres of forest along the Athabasca River and contain a variety of fish-killers and cancer-makers including arsenic, cyanide, naphthenic acids and polycyclic aromatic hydrocarbons. Any breach of the impoundments would be catastrophic for the world’s third-largest watershed, the Mackenzie River Basin.

Federal and provincial standards for reporting the volume of pollutants in these waste sites, and for reducing mining waste, didn’t materialize until 2009. Even Boston-based Cambridge Energy Research Associates has decried the total lack of transparency on the reporting of tar ponds seepage into groundwater or surface water.

The steam plants have equally impressive footprints. These heavily subsidized enterprises are fragmenting a forest the size of England with wells and pipelines. A fifth of Canada’s natural gas demand goes into boiling the water to melt out the bitumen. This makes the energy intensity of steam plants so high that, at one joule of energy to make 1.4 joules of bitumen, there is little net gain in energy from the process.

The amount of groundwater pumped through these steam plants keeps growing, and threatens the hydrology of the entire region. Opti-Nexen, a large steam plant operator, initially calculated that it would take two barrels of steam to make one barrel of bitumen. Now the company boils up to six.

Due to its energy and water intensity the tar sands has become its own carbon-making nation within Canada. It now accounts for 5 per cent of the nation’s emissions and pollutes the global atmosphere with 40 megatonnes of greenhouse gases a year. That’s nearly double the annual emissions of Estonia or Lithuania. By 2020, the project will likely exceed the emissions of Belgium, a nation of 10 million people. These industry calculations do not include the burning of the oil in cars or the destruction of peat lands, forests and grasslands by the mines and natural gas drillers.

Political poison

The most poisonous legacy of the project has been its impact on public policy. Canada, once a global leader on tackling ozone pollution and acid rain, has no effective climate change policy. Canada is the only signatory to the Kyoto Protocol that has completely abandoned its targets. It now ranks 59th out of 60 countries on responsible climate action: only Saudi Arabia boasts a worse record. At the failed Copenhagen talks last year an almost invisible Canada, one of the world’s top ten emitters, gave a mere three and a half-minute presentation. Even Saudi Arabia managed a six-minute talk.

Canada’s Prime Minister Stephen Harper, the son of an Imperial Oil executive, hails from the tar sands-producing province of Alberta, where a third of the population conveniently does not believe in climate change. Like many of Saudi’s élites, Harper remains a bona fide climate change sceptic – if not an outright denier. He has also appointed climate change deniers to important scientific posts. One of his close associates, Ken Boessenkool, even works as an oil lobbyist. Many of his fishing buddies support the country’s pro-oil, anti-climate lobby group, Friends of Science.

Given that corporate taxes on tar sands production yield the federal government nearly $5 billion a year, steady oil revenue has trumped public interest. The country has opposed low carbon fuel standards in the US, while Canada’s Foreign Affairs branch says it ‘will resist efforts to label one form of energy as appropriate, such as renewables’. The nation’s environment minister, Jim Prentice, openly criticizes provinces such as Quebec for implementing green policies that reduce fossil fuel consumption.

Like Saudi Arabia, Canada has increasingly relied on foreign temporary workers, whose numbers (250,000) now exceed permanent immigrants, to develop its oil fields. In 2008 Alberta actually had 20 times as many temporary foreign workers (from places as diverse as China, South Africa and the Philippines) as the US in proportion to its population. Abuses by brokers and employers abound. A 2009 report by the University of Sussex concluded that Canadian authorities, much like Saudi politicians, view temporary workers as ‘stocks that can be bought in or out as required’. The Canadian and Alberta governments have also failed to consult local workers, unions and the general public about their temporary foreign worker programmes.

From dirt to oil

Tar sands oil is extracted in two ways

Photo by DAVID DODGE / THE PEMBINA INSTITUTE

1 - Open pit mining

First the ‘overburden’ is removed – this is the entire ecosystem including boreal forest and peat marsh (both major carbon sinks). Then giant electric shovels and the biggest trucks in the world dig up the deposits, going down 75m into the ground. It takes four tonnes of earth to produce one barrel of oil this way.

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Photo by DAVID DODGE / THE PEMBINA INSTITUTE

2 - 'In situ' mining

Around 80 per cent of Alberta’s deposits are too deep for strip mining. They are melted out of the ground by injecting pressurized steam at high temperatures. This resource-intensive method uses roughly twice the water and energy as strip mining.

Economic malaise

Although industry and government describe the tar sands as ‘Canada’s new economic engine’, the project has in reality given Canada a bad case of the Dutch Disease. This economic malaise, a form of deindustrialization, takes its name from a 1977 Economist article that detailed how a natural gas boom hollowed out the manufacturing base of the Netherlands. Gas exports inflated the value of the Dutch guilder which, in turn, undermined the ability of its manufacturers to export their goods.

Thanks to rapidly growing tar sands exports (from 600,000 barrels a day in 2000 to 1.3 million barrels today) the Loonie, as the Canadian one dollar coin is known, will soon be worth more than a US dollar. But the high-priced Loonie has made it particularly difficult for Canadian manufacturers to sell their goods, as noted in a 2006 report by Desjardins, one of Quebec’s largest financial institutions. A 2009 study by Luxembourg’s Centre for Research in Economic Analysis confirmed that Canada’s oil-priced currency has indeed hammered industries as varied as textile mills, electronics, fabricated metal and paper. It concluded that 54 per cent of the nation’s manufacturing employment losses (nearly five per cent of the workforce) were due to rapid tar sands development from 2002 to 2007.

Unlike Norway, the world’s most transparent petro-state, Canada has also failed to exercise any fiscal accountability over its non-renewable oil wealth. The country has no sovereign fund and has saved no wealth to date, much to the consternation of the Organization of Economic Corporation and Development (OECD), which concluded in a damning 2008 report that ‘other nations have shown much more restraint and foresight in managing their resource revenues to mitigate boom and bust cycles’.

In addition, neither Canada nor Alberta charge much for their bitumen. Alberta has even described its royalty regime as a ‘give it away’ scheme. Alberta’s share from a $60 barrel of oil is a mere 30 cents, one of the lowest royalties in the world. The province also permits corporations to deduct royalties for federal corporate income tax purposes.

Nevertheless, Alberta still garners nearly a third of its revenue from hydrocarbons. To date, much of it has been used to lower taxes, manipulate public sentiment and recklessly build infrastructure to fuel more tar sands development. Ruled by one political party for an astounding 38 years, Alberta’s government has been increasingly described as incompetent, authoritarian and corrupt.

Canada has yet to have a national debate about the pace and scale of the tar sands development. Until it acknowledges the project’s cancerous hold on national life, Canada will increasingly become an unstable petro-state marginalized by oil price volatility and global carbon politics.

Canadian writer Andrew Nikiforuk is one of the world’s leading experts on the impacts of the Alberta tar sands. He is the author of several books, including Tar Sands: dirty oil and the future of a continent, Greystone Books, 2008.

1. G Monbiot, ‘The Urgent Threat to World Peace is …Canada’, in The Guardian, December 1, 2009. See also A Nikiforuk, Dirty Oil: How The Tar Sands Are Fueling the Global Climate Crisis, Greenpeace, September 2009
2. C Goar, ‘Canada Invisible on World State’, Toronto Star. September 28, 2009
3. National Centre for Upgrading Technology, Oilsands Bitumen Processability Project, March 2006
4. R Dunbar, ‘Oil Sands Outlook: How will the Challenges Facing the Industry Affect Growth?’, Global Petroleum Conference, June 9, 2009. See US Energy Information Administration for conventional costs: http://www.eia.doe.gov/neic/infosheets/crudeproduction.html
5. For a critique of these studies see: Memorandum to Eddy Isaacs, Alberta Energy Research Institute from Joule Bergeson, University of Calgary, David Keith, University of Calgary and Heather L MacLean, University of Toronto, July 16, 2009
6. National Energy Technology Laboratory (NETL) Consideration of Crude Oil Source In Evaluating Transporation Fuel GHG Emissions, March 20, 2009 (DOE/NETL-2009/1360)
7. J Nenniger, ‘N-Solve: The Profits of Energy Efficiency vs the High Costs of Carbon Capture’, Presentation to PTAC Towards Clean Energy Production Forum, Calgary, Alberta, October, 2008
8. P Lee and R Cheng, ‘Bitumen and Biocarbon’, Global Forest Watch Canada, 2009
9. IHS CERA Special Report, ‘Growth In the Canadian Oil Sands: Finding The New Balance’, 2009, P. ES-6
10. Final Report GHGenius 2008 Update, Natural Resources Canada, August 15, 2008
11. http://money.cnn.com/news/newsfeeds/articles/marketwire/0585263.htm
12. GermanWatch, ‘The Climate Change Performance Index Results 2010’, December 2009
13. Alberta Federation of Labour, ‘Entrenching Exploitation: The Second Report of the AFL Temporary Foreign Worker Advocate’, April 2009
14. Desjardins Economic Studies, ‘PetroCurrency: Good or Bad for the Canadian Economy?’, October 11, 2006 
15. M Beine et al, ‘Does the Canadian Economy Suffer From Dutch Disease?’, Tinbergen Institute Discussion Paper, 2009
16. A Mourougane, ‘Achieving Sustainability of the Energy Sector in Canada’, Economics Department Working Paper No. 618, June 27, 2008
17. D Drache, ‘Canada’s Resource Curse: Too Much of A Good Thing’, Norteamerica, January-June 2009