Christy Clark has been in the local Vancouver news a lot lately. She recently laid out the BC Government’s ‘Five Requirements’ for consideration of an oil pipeline that will pump Alberta oilsands bitumen through Northern BC. From there it will be shipped to various markets around Asia, predominantly China. In this article I analyze the confluence of economic and environmental issues her decision raises.
Don’t underestimate the influence of the numbers in these debates. There is an anticipated $600billion of potential oil products sitting under the sand in Alberta, and Albertans, specifically the oil companies that work in the Albertan oilsands (read Tar Sands) want access to it; and to the markets that will unlock this vast ocean of wealth. Stephen Harper is a convert, he cannot wait to get his hands on some of that cash (they’ll be paying his wages for a long time when he retires), nor can Alberta Premier Alison Redford.
But there’s a cost, and those costs are significant, and what we’re witnessing in the press at the moment is the shifting of these risks from one group to another. Like a hot potato, no one wants to hold onto these for long, lest they get burnt. The biggest problem is that a lot of these risks cannot be accounted for, and some of them are so enormous that even pointing them out could delegitimize the fragile political process that is Canadian Democracy.
That’s why Christy Clark recently laid out her 5 requirements for the BC Government to be able to give the go ahead for the pipeline. 4 out of 5 of these requirements are window dressing. The only substantial point is that Christy Clark wants access to some the cash that Alberta starts making once the pipeline is up and ready, through increased taxation, fees or other mechanisms. You can read the 5 requirements for yourselves here, but what I want to draw your attention to are:
1. Political cowardice is a difficult place to return from and Christy Clark may have sealed her own fate
2. Climate change is a real risk but it is a struggle to account for it in political decision making about the economy
3. The make up of Canadian society is unusual and Stephen Harper’s insistence on the need for oil sands development is disproportianate to Canada’s need for economic growth
Why is it political cowardice to demand more of the money? Surely that’s a sign that Christy Clark is being sensible about the risks and wants to ensure some financial security before she commits to the project? The problem with this objective is that it implies that she doesn’t have any idea how much a potential spill could cost BC. If she were seeking a price, say a per annum fee for running the pipeline through BC, that was fixed and reflected the probability of the spill multiplied by the cost of clearing up a spill then she may realistically claim to be aware of the risks, and perhaps transparent about them with voters. But her problem with doing that is that there is no way that she does know what those risks are, or what the potential cost is. Which is why she is seeking some amount of the receipts from taxes. She is trying to hedge the fact that she doesn’t know the risks, against the very real possibility that she could make a decision that destroys some of BCs pristine coastline and interior.
Why doesn’t she know those risks?
Firstly, accounting for damage to wildlife is difficult when ‘wilderness’ itself is a complicated notion. But lets consider some of the definite risks: BC has a huge fisheries industry, an enormous tourist industry and relies significantly on the long term viability of tanker traffic in and out of Vancouver already. Processing the costs to these industries of a spill would set that fixed fee in the many hundreds of millions of dollars and there’s no point in asking for it over many years if the money is needed next year. That’s a very real consequence of a spill. Enbridge places the risk of a ‘marine’ spill (involving a tanker rather than a pipeline explosion or malfunction) at 1 in every 1500 years, but that 1 is just as likely to occur in the first year as the 1500th.
Lost salmon and tuna catches, reduced tourism and a backlash against all tanker traffic are all very real risks of a marine disaster. Christy Clark uses Enbridge’s own probability of a spill in her calculations of risk. However, her acceptance of this is based on reports that don’t take into account the increased number of tankers in this particular area, or the increased likelihood of a catastrophic event in the more complex environment of BCs coastline.
Secondly, BC would have to bear the costs of the spill. Not only the direct costs of the clean up which would almost certainly require extensive government and non-governmental clean up personnel but also the lost political capital and delegitimacy of government that would result. Tourist numbers may fall, huge numbers of small business owners in Vancouver and various other cities in BC would be affected and communities potentially destroyed. The long term fall in tax receipts that could follow would be disastrous and is rarely spoken about in debates about the pipeline. Not to mention that citizens will leave the areas they have built communities in over many years and potentially fall away from the democratic process all together. It is difficult to consider government legitimate if your security and claim to an economic existence or livelihood is stripped away from you.
But What About Climate Change?
In the news this week we saw a recent study, funded in part by the climate skeptic Charles G. Koch Charitable Foundation that found that earth surface temperatures had indeed climbed by 1.5 degrees Fahrenheit in the past 250 years and that this warming was likely caused by human activity.
General studies like this, particularly one’s that have convinced climate skeptics to change their mind about climate change give a crucial context to the debates on the Enbridge Northern Gateway Pipeline. What they also do is highlight the problem that Christy Clark faces. She wants this decision to be a limited only to the short term economic benefits of a pipeline. What she is trying to do is isolate that decision from the context of climate change. She doesn’t want to admit that taking money from Alberta is also means rejecting Climate Science and the impact on future generations that will have to inherit the problems that result.
Specific analysis of the impact of oil sands development is damning. With the most accessible deposits mined the oilsands (Tar Sands) still has the lowest Energy Return on Investment of any major fuel source. The figure of an EROI of 1:1, where as much energy is used to extract the oil as is returned when burning it for fuel, should be shocking to anyone. It suggests that in the long run Alberta’s oilsands are not only incredibly environmentally damaging, because they require so much energy to extract and return so little energy on that investment; they are also economically unsustainable in a complex interrelated democratic society.
The environmental reality is that Oil Sands is still the most polluting of the major energy sources. Greenhouse gas emissions are likely to soar once the easiest deposits have been mined requiring more difficult deposits to be accessed and a greater energy investment (and hence more CO2) to be extracted.
Which leads us to the economic reality that Alberta oilsands are deeply reliant on external economic variables that narrow the conditions associated with its extraction.. Conditions such as a minimum dollar cost per barrel to be economically viable. If that dollar cost rises then the oilsands do become more economically viable; similarly if that per barrel amount falls, they are no longer economically viable.
Unfortunately for Canadians that implies that Alberta’s oil sands companies exist in a vacuum. When the transportation of oil abroad is your main focus, and the energy required to produce oil sands crude is taken into account, you have a situation where the biggest losers are Canadian consumers, particularly those outside of Alberta.
With an EROI as low as 1:1 Alberta must get its energy from somewhere and it does this in the domestic energy market. As they increase demand for the energy supplies required to extract bitumen, and export the crude they produce, they will push up the cost of fuel for consumers. Consumers will be competing for that energy with an industry that gets its financing from exported goods, but demands its energy inputs in the domestic market. Either some form of redistribution is required to make that work effectively, or consumers have to pay the extra price at the pump; or stop driving. Which is all fine if you live in Alberta where your wages are likely to increase as a result of the large amounts of export dollars, but terrrible if you live anywhere else and the Federal or Provincial government has to increase taxes to redistribute income to lower the costs of fuel.
A second influence, and one picked up by the NDP is that the value of the Canadian dollar is likely to soar. As foreign demand for the Canadian dollar goes up this will push the price of the Canadian dollar up and make it more expensive to purchase Canadian goods abroad. This means if you’re a Canadian manufacturer your exports are going to shrink. And so is your bottom line. It also means that in a country that protects its domestic producers with market distorting subsidies there’s a very real danger that the costs of living will increase dramatically but jobs and export focussed industry will suffer.
This is all complicated by the fact that the Alberta oilsands isn’t a major employer, in fact it barely employs 2% of the Canadian workforce. So the money that flows in won’t even go to workers, and tax receipts, though they may increase, are likely to be offset by the increasing number of foreign owners of domestic oil facilities and the implicit assumption that they won’t pay all the taxes they’re supposed to.
In many ways it’s a grim picture. Don’t get me wrong, some people are likely to get very rich because of it, I mean very, very rich and as with any society where a few get rich while the majority don’t: economic, social and political tension will increase and public health and satisfaction with Government will fall.
The Unusual Character of Canadian Society
The real question, and the one that must be posed by those against Stephen Harper and Alberta’s political and social agenda is: what’s the alternative?
That’s a question that some on the centre left must be screaming to themselves. It’s a howl of frustration all the stronger in a democracy where 37.65% of voter support is enough to gain a parliamentary majority so large as to allow the PM to push through unchallenged reforms on the social, economic and regulatory structure of the entire country.
Stephen Harper must be feeling pretty bullish. With that kind of majority he doesn’t even need to ask Parliament to debate his reforms. And that’s a pretty dangerous place to be in. The narrative of democratic failure isn’t currently owned by any single party. Conservatives and Liberals are both pro-business and relatively speaking promote (notice I say promote, rather than actually engage in) a reduction of the reach of the state. Yet they still haven’t grasped what they want from people, they can’t offer a meaningful economic vision of Canada and it’s people and that is a significant failure of theirs. It’s also a failure of the NDP who are most appropriately positioned to take advantage of this, but have yet to do so with coherent policy objectives.
So long as the Right is able to offer meaningless platitudes about the role of small businesses at the same time as they promote the establishment of enormous oil and gas companies (that won’t directly employ many more people than they already do) then the have got away with a real trick. There’s something missing, something unusual about this picture that needs to be tackled by the Left: real opportunities for entrepreneurs, particularly young entrepreneurs need to be established through government incentive and hard work.
These young entrepreneurs need to be given the tools to take on established businesses and industries at their own game and make a real difference to the whole host of sectors that underpin a successful, equality driven and prosperous society. Sectors like the farming industry, the technology sector, food and distribution networks that rely on heavy loading lorries, and urban transportation networks all need this incentive to change and get better. They are just some of the places that have relied for too long on oil as a fuel and that haven’t seen substantial modernization in years. For too long they have been protected from outside competition, propped up by market distorting subsidies and anti-competitive regulation.
These regulations actually hamper the modernizing influences that will reduce the environmental impact of these activities. They can also be a foundation upon which Canadians can be economically and ideologically attached to an economic vision that doesn’t require the extraction of bitumen from the Alberta oilsands. Yes: this will make Albertans unhappy and they won’t get as rich as they hoped, but it will make more Canadians prosperous and bring the future of Canada into line with the environmental realities of Climate Change.
There are many influences that need to be addressed for environmentalism to be incorporated into the political and economic agenda in Canada. We’ve seen some of the reasons Christy Clark doesn’t want to address them and is being distracted by the cash cow of Oil Sands. And we’ve also seen why the Oil Sands is definitely a disaster for the environment, but may also be a disaster for the Canadian economy. That leaves a space, and it is a real and open space, for a group such as the NDP to provide a real vision of Canadian prosperity that is environmentally sound, economically positive and democratically inclusive.