Friday, March 28, 2008

Bitumen, and plenty of jobs, heading south to U.S.

Bitumen, and plenty of jobs, heading south to U.S.Tories making a huge mistake not upgrading more, and 'scraping off the topsoil'
Diana Gibson and David ThompsonMonday, March 24
"Our product is steel, our strength is people." So goes the motto of one Canadian steel company.
What would Alberta's motto be? "Our export is oil; our other export is jobs."
And now it looks like even more jobs will be flowing flow south to the U.S., along with Alberta's non-renewable resources.

The U.S. State Department has just given its approval to the Keystone pipeline, which will eventually ship 590,000 barrels per day of Alberta oil to the U.S.

It's already been given the nod by Canada's National Energy Board, which also recently approved the Alberta Clipper pipeline which can carry 800,000 barrels per day.
This is enormous capacity. To give a sense of scale, these two pipelines alone will exceed Alberta's total 2006 oil exports -- all of it. They have more capacity than the current total production of the tarsands.

Those pipelines can export either bitumen from the tarsands, or upgraded product. And American refineries are already retrofitting to receive and upgrade Alberta's bitumen -- along with all the jobs that would entail.

Exporting raw resources means exporting jobs. In fact, according to a consultant's report for a recent Energy Board hearing, even one 450,000 bpd pipeline can send 18,000 jobs south along with that bitumen.

Those well-paid jobs are critical to families, communities and the province. Without the job-creating, "value-added" processing, oil and gas extraction is one of the lowest jobs-per-output industries in Canada.

Many Albertans know this is a problem. And they've been speaking out about it for some time now. So much so that in 2006, one Tory party leadership candidate made a promise to address it, saying: "Shipping raw bitumen is like scraping off the topsoil, selling it, and thinking we have a rich farm because we have cash in the bank."

He even pointed out the obvious, "Once it's gone, it's gone for good."
While campaigning, he talked about increasing the amount of bitumen upgraded in the province. That candidate's name was, of course, Ed Stelmach.
But when he became premier, nothing happened on the raw bitumen exports file. Then value-added processing was included within the scope of Alberta's recent royalty review.

The government's own hand-picked panel surprised everyone with its recommendations, which included a rebate on royalties for processing in-province.
However, Premier Stelmach's government chose to ignore that recommendation, instead promising vague action sometime in the future. Still, nothing happened on the raw bitumen exports file.

Then the news came out last month that the Clipper pipeline was approved, and possibly 18,000 jobs would flow down to the United States. Many voices said the government should do something.

Still nothing happened.

Instead Stelmach claimed that 72 per cent of bitumen would be processed in Alberta by 2016 with upgrader plans already on the books. So obviously, there would be no need for government to act.

Wrong. Without government action, there is no guarantee that those upgraders will be built in Alberta. Quite the contrary. The lack of government regulation, in conjunction with runaway inflation -- also caused by government-without-a-plan -- has already resulted in some upgrader projects being shelved. More will likely follow.

Instead of those upgraders being built in Alberta, U.S. based refineries are installing upgraders, which will create thousands of long-term, well-paying jobs -- in the U.S.
And every time the capacity for upgrading and refining bitumen is stepped up in the U.S., the job loss in Alberta is permanent. When facilities are built elsewhere, companies have no incentive to build them here. And NAFTA makes it hard to bring those jobs home.
As Stelmach said, once it is gone, it's gone for good.
Few premiers have been courageous enough to make value-added jobs a priority. Perhaps only one has.

Peter Lougheed created an Alberta-first employment policy. He required natural gas exports to contribute to building the petrochemical industry in Alberta. This value-added strategy built that industry -- an industry with good, family-supporting jobs.

Sadly for many Alberta families, Ralph Klein rolled back the value-added processing rules, and good jobs started flowing south again.

And Stelmach has put himself squarely in Klein's camp. The recent oilpatch calls to slow the pace of tarsand leases (calls that are supported by broader public opinion) were rebuffed by Stelmach, who said his government will not "control" the economy. This is consistent with the laissez-faire approach that has allowed raw resources and jobs to flow south.

In other words, nothing has happened to curtail that flow, and now it looks like nothing will happen.

Pipelines will continue to take bitumen to the U.S., and soon there will be more of them. Upgraders will continue to be built -- in the U.S. And sadly, good Alberta jobs will continue to flow south.

Diana Gibson is Research Director for the Parkland Institute.
David Thompson is an independent public policy consultant.

The Parkland Institute is a charitable, non-partisan research network based at the University of Alberta

********************************************************************PARKLAND INSTITUTE - website http://www.ualberta.ca/parkland Edmonton Office: 11045 Saskatchewan Drive, T6G 2E1Phone: (780) 492-8558 Fax:(780) 492-8738 email: parkland@ualberta.ca Calgary Office: 2919 - 8 Avenue NW, T2N 1C8 Phone: (403) 270-9669 Fax (403) 283-6480 email: parkcalg@ualberta.ca
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