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Keystone critics defeating their own cause
The following editorial was distributed to Alberta weekly newspapers on Sept. 26.
To critics, the Keystone XL Pipeline is yet another crime committed against Alberta by our province’s most important industry, and they default to the same old rhetoric to try to convince us of that.
Jobs will move out of Alberta. Industry is too cosy with government. Royalties are too low. Ordinary Albertans in the most robust economy in Canada – if not the western world – are suffering. The environment is taking a back seat to profits.
Some critics – like those who gathered on Parliament Hill to protest Keystone on Monday – have even argued that Alberta would benefit from the Obama administration not approving the pipeline that would move oilsands bitumen to the massive refining hub of the Gulf Coast of Mexico. The bitumen upgrading debate lingers on largely because outgoing Premier Ed Stelmach made it a major part of his discredited and dismantled new royalty framework.
At the Wildrose Party, our default is to accept economic reality. An informed public demands informed public policy.
Here are some facts:
First, more than 60 per cent of all bitumen pulled out of the ground in Alberta is upgraded in Alberta. You would never know that listening to the critics. Nevertheless, upgrading bitumen into synthetic crude has been a key component of most major oilsands developments, including Suncor, Syncrude, Shell and CNRL. Readers may recall when Suncor’s Fort McMurray upgrader/refinery went down in the fall of 2008, all of Western Canada suffered a diesel fuel shortage until it went back on line.
Stand-alone upgrading projects continue to be built. Shell has completed its massive Scotford upgrader. Suncor, with new capital from Europe, has restarted its Voyageur upgrader across Highway 63 from its legacy oilsands plant north of Fort McMurray. Through a funding formula that has not been publicly disclosed, the Northwest Upgrader at Fort Saskatchewan is underway to process Alberta’s royalty share of bitumen production.
Again, critics would lead readers to believe there is no upgrading taking place in Alberta. This is simply wrong.
Upgrading bitumen can be good business, particularly if the plant already exists. On Sept. 20, synthetic crude fetched $98.14 a barrel, at a $13 premium to West Texas Intermediate in the rest of North America and $24 higher than a basket of western Canadian crudes. The economic viability of upgrading rests in the spread between bitumen and synthetic, which varies greatly from day to day and year over year. Not all bitumen is upgraded because the capital investment is not always profitable.
The single biggest job creation challenge the oil and gas sector faces is moving product out of our province and getting it to market. Production capacity has outstripped pipeline capacity. This is caused not only by the growth of bitumen production, but by large quantities of light sweet crude from tight oil reservoirs in Saskatchewan, Manitoba and North Dakota. North America’s plumbing is all wrong for the new sources of supply. As a result, Alberta’s oil is selling for much less than world price. Recently the spread was more than $25 a barrel. A lack of pipeline capacity is costing the Canadian economy $50 million a day. That’s millions in royalties for Alberta. What do the critics say about those lost jobs?
Keystone XL is one of the many transportation solutions necessary to ensure Alberta oil fetches the world price. Even if all bitumen was upgraded in Alberta, we would still need more pipelines to move synthetic crude to market. Upgraded or not, Alberta needs this pipeline and several others.
The Petroleum Human Resources Council of Canada estimates the oil industry will need 130,000 more workers this decade to build the projects already on the books and replace an aging workforce as it retires. That’s the next challenge, finding enough qualified workers.
It is in the context of economic realities like restricted pipeline capacity and a labour shortage that critics want to block Keystone XL.
Of course we would like to see as much upgrading capacity as possible here in Alberta. However, we must realize that government forcing the construction and operation of bitumen upgraders to create jobs will put further pressure on an already constricted employment market.
Critics oppose the construction of the pipeline space Alberta needs to get fair market price for its non-renewable oil resources.
The fact is the jobs will come if we can get our product to market, upgrading or not. By protesting Keystone in the name of saving jobs, the critics are actually defeating their own cause.