15 June 2005

Alberta is about to get wildly rich and powerful

I met with the public relations co-ordinator from Leduc County this morning and she seems stoked to get me on-board as a design consultant, and eventually involved in the re-branding initiative for the community. If it flies, she is represented by a group of PR co-ordinators for all of Northern Alberta, which would go as far north as regions like Fort McMurray. With all the money that will be flowing through this province in the next 50 years, this is perfect. There was even casual talk of turning Fort McMurray into a northern equivalent of Las Vegas, which I found more than interesting (and more than amusing).

Speaking of which, this article featured in the current issue of Maclean's is all about the increasing disparity that is going to develop between Alberta and Canada in the oncoming decades. As they put it, "The province can control its own destiny more than any other because, in the years to come, Canada will need Alberta far more than Alberta will need the rest of Canada."

Suncor's extraction plant on the bank of the Athabasca River looks like a science fiction movie set -- hundreds of kilometres of steel pipe twisted into incomprehensible knots around hulking industrial buildings, storage tanks and smokestacks. The whole scene is bathed in a constant haze of steam and exhaust. Two other such plants are now operating within an hour's drive of here, and several more are scheduled to commence operations over the next few years, all to exploit what may be the biggest petroleum deposit anywhere in the world, a sea of oil-saturated soil covering an area the size of New Brunswick. […]

"The oil sands give Canada one of the single greatest advantages of any state in the Western world," says Paul Chastko, a University of Calgary historian who recently published a book called Developing Alberta's Oil Sands. "It gives Canada the ability to supply all of North America for the next 50 years without touching a drop of imported oil." It is, in short, an economic engine and political lever that any nation would desperately love to have. […]

If these estimates are accurate, Canada's oil reserves rank second behind only Saudi Arabia's 260 billion barrels. And there are many who believe the current oil sands assessments understate the true potential here. The AEUB has projected that rising prices and improved technology could ultimately push the oil sands yield close to 300 billion barrels, which would make it the richest petroleum field in the world. By 2015, the oil sands are expected to be producing roughly three million barrels of petroleum a day. Assuming prices will average US$40 a barrel (well below where they are today), that suggests annual revenues of close to US$43 billion. […]

For a province that already boasts zero provincial debt, comparatively low taxes and a budget surplus, the future is bright, and promises to provide even better services, lower taxes and an influx of migration to the new western tiger. And in Canada, that could pose a problem.

In August 2001, Jean Chrétien foreshadowed the coming tension over Alberta's blossoming oil wealth during a speech in Edmonton. "We have to make sure that every person in every part of Canada benefits from the potential and the wealth that belongs to the people of Canada," he said. With those words, Chrétien jabbed a stick into the hornet's nest of western alienation. The reaction in the oil patch was swift and indignant. For many Albertans, it was just another sign that Ottawa was intent on stealing their birthright.

It was also a familiar story. In 1980, Pierre Trudeau's government imposed the National Energy Program, which slapped hefty export taxes on oil shipments and capped foreign investment in Canadian oil companies, in part to ensure that eastern Canada's manufacturing base had continued access to cheap oil. The program was deeply resented in Alberta, and was eventually scrapped by the Mulroney Conservatives. But the bitter aftertaste of the NEP remains.

Barry Cooper wasn't surprised at Chrétien's audacity. A University of Calgary political science professor and staunch critic of the federal Liberals, Cooper fully expects that, as the oil sands continue to develop, they will become a flashpoint in federal-provincial relations. Alberta already pays far more in equalization transfers to other provinces than it receives in federal program spending. And as the gap grows between rich Alberta and the poorer parts of the country, the demands to spread the wealth are sure to follow -- especially if prices for gasoline and heating oil skyrocket, as many predict. It's guaranteed to fan the flames of western discontent, Cooper says. "It's Alberta's oil if you live in Alberta and it's Canada's oil if you live in Ottawa," he says. "Energy has become the basic fault line of federalism."

And in regards to the Kyoto Accord:—
So far, the oil industry and federal government are making soothing noises about the impact of Kyoto on development. After initial threats that some oil companies would shelve projects if Canada signed on to Kyoto, industry players are now saying they can cope with the costs without destroying their businesses. But many questions remain about how Ottawa will roll emissions back to pre-1990 levels and who will pay for it.

Although producers like Suncor are reducing emissions on a per-barrel basis with better technology, and are researching ways to cut the amount of gas and water used in the extraction process, the total environmental impact of oil sands development is sure to increase substantially over the next decade. That has many convinced Ottawa is on a collision course with industry. "If government decides to clamp down hard on CO2 emitters to meet the Kyoto commitments, or if they use Kyoto and the treaty-making power to confiscate income that belongs to the province, the anger generated by the National Energy Program would pale in comparison," says Cooper.

Paul Chastko agrees, and says the environment is just one of many potential conflicts. What will happen if we're heading for a worldwide oil shortage that will send prices shooting higher? Will the rest of the country, particularly manufacturing-reliant commuter cities like Toronto and Montreal, be content to let Alberta profit while their industries are crushed by higher fuel prices, or will there be renewed calls for government intervention, as there were in the 1970s?

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