Recently the North American media and business world has been encountering movie stars and more acting as protestors drawing attention to the tar sands and the pipelines been planned to ship the raw bitumen oil from Northern Alberta.
One pipeline, the Keystone XL, has been proposed to carry the product to the southern USA for refining. The second pipeline proposed is to carry the product to Kitimat for shipping by Ocean tankers to China and other destinations.
The protests are two pronged. First the complaint is about potential pipeline ruptures and or tanker mishaps spoiling the environment. The second is about the Alberta Tarsands/Oilsands themselves; calling this open pit mining operation the worst on the planet. All of this is a seriously bad distraction from the core issue.
When looked at as an overall production it appears the protest groups and the media are being set up to look at these specific secondary concerns while the real game is being played unnoticed in the background. Looking at the primary issue is what I will address.
Pipelines are transportation systems only. The pipeline companies are not selling oil. The producers in northern Alberta, the open pit miners extracting the bitumen, are the sellers. In some cases the sellers also own refineries and they need a method of delivering this product to those refineries. Getting a company to construct and maintain a delivery system such as a pipeline is just one option.
Almost every oil company in the world is invested in the Northern Alberta Oil Sands project; whether they be independent owners or part of a consortium. And this is why the pipeline discussions are a clear diversion from what Canadians and Albertans should be considering; the production facilities.
A pipeline company will build their transportation system when asked by one or more companies to provide the service. In the case of the proposed Enbridge Northern Gateway pipeline to Kitimat BC, the pipeline is now called "fully subscribed'. This means a group of companies have agreed to take specific percentages of the total volume the pipeline will carry. There is nothing left for any other buyers, it is "fully subscribed' now.
This presents an entirely new problem to the potential of selling the product. The transportation system is, in essence, owned by foreign investors, not Canada; therefore these owners can restrict the sale or manipulate the price as they control the delivery system.
Currently the ownership of the Athabasca Oil sands is being consolidated into fewer and fewer owners with China making the most significant investments; taking over entire companies. If this were to continue without a proper forward looking plan, Canada might find its resources being extracted and sold at significant mark-ups without achieving any benefit for Canada. As an example, if China was to own the entire subscription of the Enbridge Northern Gateway Pipeline and end up owning a significant interest in the Athabasca Oil Sands they would not only control the production but also who the product was sold to, and at what price.
Canada's National Energy Board (NEB) has engaged in a review process of the Enbridge Northern Gateway proposal with a three person panel called the Joint Review Panel (JRP). This panel also represents the Canadian Environmental Assessment Agency (CEAA). The JRP has been instructed to look at various aspects of the proposal including the environment, the feasibility and the national Canadian interests. It is the environment most groups are focused on. The Canadian government however has expressed a greater concern on the financial benefits placing the environment as a secondary concern. This becomes apparent as the tankers, which will become necessary to carry the product away from Kitimat to foreign Pacific Rim ports, are not part of the JRP investigative mandate.
If the JRP were to truly consider the best financial benefit for Canada they would easily determine the fixed monopoly control position of the Enbridge Northern Gateway pipeline would benefit Canada in the least possible manner. The national Canadian interests can not be met with the sales from a pipeline controlled by a foreign government.
Even before this an overall look at the entire oil sands project needs to be taken.
Canada has not been taking a leadership role in managing its resources; letting industry take the lead. When the entire production, transportation and refining is segmented into numerous aspects the full picture gets confusing. Therefore it is necessary for Canada to take a step backwards and assess the future and the whole picture.
The initial assessment needs to be at the production itself;
1- Currently water is used in excessive quantities to extract the bitumen from the sand. This has raised numerous concerns regarding the Athabasca River in Northern Alberta and around the world.
2- The bitumen is not refined to fully extract the sand and silica leaving the product an estimated 16 times more corrosive to the pipelines.
3- Condensate, a petroleum thinning agent, needs to be imported and added to the raw bitumen so it will flow in the pipelines.
4- The waste/tailings ponds present an environmental hazard attracting international condemnation.
If we were to only consider these four initial concerns one might easily determine all the interests; Canada's financial, the environmentalists, the Athabasca River and the world communities, could be satisfactorily addressed, at least moderately.
First and foremost, there is more than one way to extract the oil from the sand. Water is currently being used as it is readily available and it was the first method tried. It is heated to steam the oil out and separate it from the sand. Condensate can also be used. Condensate however is currently being imported from foreign refineries to add to the bitumen to export it to these foreign refineries. Using condensate to extract the oil would therefore present a further importation expense.