

Canadian energy

The sands of grime

To become an energy giant, Canada needs capital, people and pipes

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Readers' comments



Albertican in reply to kxbxo

What a load of garbage.
First your opinion on the American oil industry is absolutely childish. No, he doesn't "owe" them anything. But it doesn't matter if the oil industry likes him or he (or you) like the oil industry; oil, and energy in general, is incredibly important to the US, as it is to any industrial country, particularly one that's a large importer. And despite your spitefulness towards the industry, Obama seems to understand this. He didn't clamp down on shale gas and shale oil like many environmentalists pushed him to and before the Macondo blowout he encouraged greater activity in the gulf, and allowed drilling permits to start there again far sooner than many wanted. Partly as a result oil production increased under his tenure, a claim no American president can make since the late 60's.

As to Canada's politics, please. Your opinion is transparently and bitterly partisan with no backing other than opinion pieces that coincide with your own. The Conservatives haven't done anything that's unusual for a majority government. They won that majority with 38% of the popular vote, not an unusual amount in Canada's multiparty system, and in large part due the implosion of the Liberal party, not dirty oil money. Going by your logic, every majority (and minority) government in living memory has been formed "against the will of the great majority of Canadians" since the last time a party won with a popular majority was Diefenbaker's PCs in 1958.

Canada has had an economy based on resource extraction since its inception. Why has this corruptive element never come up before? Why didn't it come up in the 1970s, when Canada's conventional oil production reached its zenith and the loonie passed parity? Why is oil pointed out as killing manufacturing and not other commodity exports, like metals and agriculture? Collectively they make up more of Canada's exports and have seen similar price escalations in recent years. Could it be that these are "good" commodity exports because they benefit Ontario and BC, while oil is a "bad" export because it benefits Alberta, Saskatchewan and BC? And why is the Canadian auto-industry still alive and well despite having to operate at a parity dollar?

TLDR: I disagree with everything you just said.

Albertican in reply to Kouroi

What are the benefits other than to private companies (and their thousands of employees)? In a nutshell, employment, royalties and taxation.

As to Norway handling its oil wealth better than Alberta, I think there are a number of common misunderstandings on the issue. First, I agree to a degree - Alberta's Heritage fund should have been better managed, and Norway's sovereign wealth fund is impressive and deserving of praise.
But there are reasons Canada can't be another Norway.
First, Norway produces far more oil per capita than Canada does, almost 5 times as much.
Second, it is much cheaper (less capital intensive) to extract Norwegian oil than Canadian oil, in general. Say it costs $20 a barrel to extract from the North Sea. In Canadian oil sands assets it can easily cost $50 a barrel (highly dependant on project). That means if oil costs $80 a barrel, Norway makes twice as much money from its production, so 10 times as much per capita. It gets even worse for Canadian producers because Canadian synthetic oil trades at a discount to WTI (currently ~$85/barrel) while Norwegian oil trades at Brent (currently ~$108/barrel).
In short there is simply much more money to go around from Norway's oil. That is why it hasn't been possible to run fiscal surpluses in Alberta, never mind all of Canada, based on oil revenue in recent years. As Canada's production ramps up (and Norway's ramps down) and costs per barrel fall, however, it may well be possible to balance the books provincially and federally with oil in the future.


After reading the title, I was surprised how fair this article was. It avoided the standard knee-jerk opposition to the oilsands that seem to dominate media perception, even in The Economist from time to time.

Here's an article about what I see as common misconceptions about the oilsands and the impact of their extraction:



No industry worked harder, or spent more money, to defeat president Obama than the oil industry.

He owes them less than nothing.

As for Canada, the cost of the tar sands is far higher than the writer understands.

As it has done in virtually every country it has touched, the oil industry has corrupted Canadian politics. It is destroying Canada's manufacturing base. It's influence is destroying fiscal responsibility. It is steadily undermining Canada's institutions of democracy. Finally, it put Stephen Harper in power against the will of the great majority of Canadians.

No resource is worth that.

Albertican in reply to Kouroi

Most Alberta production is from provincial crown land, so most royalties go to Alberta, yes. More than half the taxes (15%, compared to 10% that go to the province) go to the Feds. Net transfer payments from Alberta to the Feds then account for another $14 billion a year or so (see http://taxpayer.com/federal/federal-transfer-payments-end-dependency-trap). Being as that's something like $3,900 a person a year being transferred to the rest of the country, I don't think it's fair to consider only Alberta's population in the calculation.

I'm not sure what you mean by subsidies in Alberta, although I suspect you misunderstand them. Oil and gas companies pay huge amounts of money through tax and royalties. Tax breaks exist for encouraging the drilling of certain types of wells that would be uneconomic otherwise, such as very deep wells, or very sour wells. In situations like this, if these breaks didn't exist the wells just wouldn't get drilled. 5% of something is worth more than 10% of nothing, and that concept is how these tax breaks are justified. The oilsands follow a sliding scale royalty that depends on the price of oil and whether the operator has reached payout. They don't receive subsidies of the type you're presumably referring to.

As to Alberta needing a high oil price, there is some truth to this but not as the blanket statement you have made. There is a huge variation of operating costs and natural gas requirements between oil sands projects. A project like Christina Lake with a Steam Oil Ratio below 3 and high production rates may cost less than $20 a barrel to operate, one like Husky's Tucker with SORs over 4 or 5 may cost over $80 a barrel.

You have made a common mistake regarding the recent IEA report. It doesn't say the US will be oil independent, it says it will still be importing 3.5 million barrels a day, much of that from Canada. The report does predict the US will be ENERGY independent, meaning it exports more energy in the form of gas and coal than it imports as oil. It also predicts NORTH America will be oil independent, not the US on its own.

As to the pipelines, I agree, the NDP might well do something as short sighted as stopping Northern Gateway, although would probably change their tune if shale oil started production in north-eastern BC. I highly doubt, however, that Keystone XL will not get approved over the next year or so. That pipeline to the US could more or less relieve Alberta's transportation bottleneck for the for foreseeable future, and although it would be good to broaden Canada's export markets, continuing to rely on the US as the soul customer may have to do.


Great Article!

But I disagree that Canada is frosty towards foreign investment. We're frosty towards foreign nationalisations. Government owned firms can't be treated like they're just your run-of-the-mill market player.

Albertican in reply to kxbxo

You represent the very nature of a sore loser. I'm sure if it were up to you the Supreme Court would annul the 2011 election, and any following it that didn't happen to put your party of preference into power. But anyone with any degree of impartiality will agree that the suggestion that the 2011 election was illegitimate is totally bogus.

I was wrong, the Conservatives didn't get 38% of the vote that year, they got 39.6%, more than the Liberals got in the 1997 election where they also won a majority government. Was that an outrage against democracy as well? Turnout was 61.1% in 2011, higher than 2004 and 2008. I agree it's disturbing that more Canadians don't vote, but it's part of a long term decline, not Conservative interference with Election Canada. The robocall scandal, although disgraceful, does not appear to have had a significant effect on the turnout.

Cutting the GST was controversial, and there are good arguments both for and against. But it is irrelevant here, except that it turned out to be a net vote-winner for the Conservatives which you don't like. And no, they're not closing "every environmental monitoring projct", they have reduced the number of approval agencies from 40 to 3. They claim there was immense duplication and unnecessary bureaucracy. Environmentalists and opposition members claim it will reduce the quality of environmental assessment and monitoring. Time will tell who is right, but either way it will doubtless speed up projects like oil pipelines, which in my opinion is crucially important for Canadian economic prosperity.


If Canada gets a higher price if exporting to Asia, that will also raise prices for the Canadian consumers, eh?! Where is the benefit other than enriching private companies?

And Canada could have more cash to invest if it would adopt a Norwegian taxation model...But why get something for your resources when you can give them for free and add on top of that all the water and energy required?

Where is the profit for Alberta, when the provincial budget has been in the red for years and their Oil Fund is shrinking. Norway's has reached 600 billion and now they are buying into Alberta's resources, so that the profits would accrue for the Norwegian citizen...

David P Montgomery in reply to cjawson

I agree but that doesn't mean we should block state-owned companies out entirely. Canada needs to sort out what the definition of "net benefit" means so that both Canadians and foreign investors, state owned or otherwise, have a clear understanding of what to expect. A potential foreign investor should know whether they will be allowed to proceed or not before even making a proposal.

With state owned investors perhaps a limit should be considered on how much they can invest.

jude22 in reply to cjawson

Unfortunately, the foreign companies with capital are run by thugs of the Chinese Communist Party. Do we really want our country run by the Chinese. While I don't love the Yankees, at least it's a democracy down there as Obama's win shows. Even Karl Rove Crossroads, the US Chamber of Commerce to the Koch brothers PACS couldn't defeat Obama. Like the Americans or not, they are civilized and our big brother. That's not the case with the Chinese. Note I do think Canada should change our trade towards Asia and South America and not be dependent on American trade and investment only, but not all state owned enterprises are the same. Petrobas is owned by democratically elected Brazil government of Dilma Rousueff. The CCP is a bunch of thugs and stupid princelings, who should never be trusted. Remember what the PLA did to Vietnam and India during the 1960s and 1970s. NEVER TRUST THE CHINESE CCP!!!!



While I do not oppose development of the oil sands, I think that statements like the above need to be put in context. Your point about slightly higher emmissions is true if you consider the entire life cycle of a barrel of oil (from in the ground to burned in a vehicle's engine), but opponents to the oil sands are concerned about how much energy it costs to get that oil out of the ground. Yes, that is only a fraction of the entire cycle, but it is still significantly more GHG intensive to heat bitumen and pump it out of the ground than it is to stick a straw in the ground in Saudi Arabia. This stikes people as wasteful while there are still oil reserves in places that are less energy-intensive to recover.

Again, this is not to say that I disagree with the oil sands (some of my family members are among those who benefit from the bounty you are describing). But I do think there are legitimate discussions to be had without framing the critical arguments disingenuously.

As a side note, I think that trying to control GHG by stranding the oil sands without a way to pump the oil to market is an absurd strategy, similar to killing mexican drug smugglers in response to America's reluctance to legalize drug usage.


I have worked in the oil fields of Alberta for around five years . The luxuries provided to the people in the field , as mentioned in the article , are for the people working for the oil companies only . The conditions and environment for the workers working on the oil rigs are much more tougher , beyond the imagination of some one who has not been to that area .

Kouroi in reply to Albertican

Royalties accrue to Alberta only, no? Part of the taxes go to feds, and part to Alberta. Alberta has 3.6 mil and Norway about 5 mil people, so your calculations are wrong. Plus the subsidies that oil producers get in Alberta without any good reasons other than scary retoric.

The cost of extraction might go down a bit with improved technology, especially if water is going to become more expensive, but only oil price increases will save Alberta. However, since US is predicted to become energy independent and oil and gas prices will drop further, there might be a bust coming in Alberta in the next 10 years. Especially if NDP gets the power in BC and stops the pipeline...

So much wealth being squandered in Alberta that benefits only few...

kxbxo in reply to kxbxo

Clearly, I hit a sore spot.

"Why has this corruptive element never come up before?"

It has come up repeatedly, and is a recurring theme in Canadian history. It should have died with Maurice Duplessis.

The current federal government was elected on the votes of 18% of eligible voters, after a two year campaign of character assassination, and a five year campaign of vote suppression unprecedented in Canadian history.

They have been universally cavalier in their interpretations of electoral law - and have faced charges and convictions under the Canada Elections Act. They may face more.

If the Supreme Cort had gumption, it would annul the entire 2011 election under s. 3 of the Charter, and order new elections with very tough rules on what is, and is not, legitimate electioneering behaviour.

One woudl hope that the Court would take special note of the infringement of the right of free speech that arises when politicians refuse to answer the questions of the press, or the effect on democrcy of one party having a tidal wave of money, of using gvernment advertising funds as a partisn piggy-bank, and of alloing third party "advocacy" advertising that partisan electioneering in all bt name.

Unlike the US, the right to vote is constitutionally protected under s. 3 of the Charter (which the Conservatives hate, anyway), and the Court needs to recognize that being deferential to political outcomes effectively rewards cheating in elections, and thereby undermines all of the rights guaranteed in the Charter.

The Court is the last defence of Cnadians aginst electoral cheating, and it needs to uphold electoral law with the highest possible level of fidelity. It is our core democratic instutitions that are at stake.

No federal government in modern (i.s., since WWII) history has come to power against such a background of electoral illegitimacy. There is a stench that hangs over the electoral tactics employed by the Conservatives.

The most irresponsible decision of any government since the war was the decision to cut the GST by 2%. That decision, driven by the political desire to obtain a majority government, for the benefit of the oil industry, has , to date, increased the accumulated federal debt by over $70B. Profligate.

But they are going to save $ 1B by closing every environmental monitoring projct and government watch-dog agency that might blow the whistle on them ...

The GOP tried very hard to succeed at the same anti-democratic game, and might well have done if the US had a multi-party system.

Kouroi in reply to Albertican

Thank you for clarifications.

The N gateway one is still fraught with risks that will never have sufficient contingency plans, even considering being lucky. However, it would be less costly and risky to push crude to the east coast and stop the imports there...


I am a veteran of our forest industry where vast land areas were transferred to encourage development(progress), research and development was tax-payer subsidised and the environment was and continues to be savaged. When the practice, in the forests known as high-grading, ended, communities, to say nothing about workers, paid dearly as these entities re-structured and spun-off the most valued assets(land). Those who forget their history are bound to repeat it.

Albertican in reply to guest-ljjjiln

I stand by everything in the article.
The article explicitly says how much of Canada's emissions are from the oil sands. Yes, it's significant and likely to become a larger in the future, although it's not going to double or triple which is what it would need to do to be as bad as some make it out to be. I do think a lot of Canadians elsewhere blame Alberta for the country failing to meet its Kyoto targets when it's really a relatively small part of the picture. I completely agree Alberta (and Saskatchewan) should move away from coal power plants.

I disagree entirely that a wells to tank approach is more appropriate - to me that doesn't make any sense at all. The ultimate impact of each barrel is what matters. Not going to sit and argue about it though, the article says what I think of the subject and it's not trying to hide anything.

Water is absolutely NOT the limiting factor in the oilsands. Its use IS going to be sustainable for the foreseeable future. Northern Alberta has far more water than it is ever likely to need from industry or agriculture. It is much more of an issue in southern Alberta, where fracking, agriculture and municipal use strain supplies. All of this is discussed in the article.

When I worked at Syncrude in 2003, about 1% of their mines were being reclaimed. Now it's something like 10%, so I'm not sure what you mean when you say no progress has been made. As to reclamation working on overburden rather than tailings ponds, that's true enough. Tailings ponds are going to be the last things reclaimed, and typically they will remain ponds even after that. Newer mines are using new methods that require smaller, faster settling ponds, but they can't be avoided entirely. Tailings ponds are not unique to the oilsands. Reclamation will take time, and trust that the companies have the best wishes of the stakeholders at heart.

Air pollution is not a significant concern in the area. Fort Mac and northern Alberta in general have cleaner air than any metropolitan area of Canada. Same for "land pollution", whatever you mean by this.

Fort Chip is hundreds of kilometres away. No one is claiming air pollution is a reasonable culprit in any supposed increase in cancer rates. The argument is that water is leaking out of the tailings ponds into the Athabasca and getting carried downstream in sufficient quantities to impact Fort Chip. To me, that's a bit of a stretch. The doctor who started the whole business was at best somewhat incompetent and at worst deliberately alarmist and obstructive.



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